A&D marketing for the oil and gas industry

Mongolia

Mongolia

Onshore Appraisal, Development and Exploration

Petro Matad Ltd, the London AIM listed company, has commissioned Envoi to identify a strategic partner to join in the appraisal and development of two discoveries made in 2019 with the northern part of their 100% owned and operated Block XX Licence in the Tamtsag Basin of NE Mongolia and historically the most productive part of the country. The Licence is situated at the southern end of the basin where Petro Matad’s successful Heron-1 was essentially an appraisal of an existing discovery immediately to the north (T19-46-3 made in 2009) which lies in the southern part of Block XIX operated by PetroChina. This Cretaceous play is itself an extension of the proven Hailar Basin that has been producing oil across the border in Chinese since the 1980s following exploration dating back to the 60’s. Formed in the Late Jurassic and Cretaceous, the Tamtsag Basin is filled with an estimated 4 km of continental sediments and volcanics. The complex tectonic evolution with rifting and later inversion resulting in the horst and grabens responsible for the 10 sub-basins identified today.

Block XX covered 18,956 km2 when originally awarded to Petro Matad in July 2006. The completion of subsequent G&G work programmes managed through several renewals, extensions and relinquishments, included the acquisition of both 2D and 3D seismic and gravity and led to a series of wells being drilled between 2010 and 2011. These were all targeting what had been interpreted as paleo-valleys cut into the Davsan Tolgoi High in the north eastern part of the retained 10,366km2 area of Block XX, where the crestal area of a rotated fault block forms the south-eastern shoulder of the Tamtsag Basin. Although the initial wells found significant shows in sands of the Lower Cretaceous Tsagaanstav and Zuunbayan formations deposited over the high, subsequent appraisal and well testing confirmed insufficient reservoir quality for commerciality.

New management has since switched the exploration focus to the immediate extension of the proven-producing area of Tsagaantsav and Zuunbayan plays where better developed in the Toson Uul Graben. Following receipt and interpretation of the PetroChina’s 3D that extends into Block XX, the Heron-1 and Gazelle-1 discovery wells were drilled in 2019. Only the northern part of the Heron closure is covered by the 3D, however, where the 2D data to the south suggests the closure extends into a large undrilled hanging wall trap. This lies immediately updip of oil recovered on test from Petro Matad’s DT-4 well, now interpreted to have been drilled on a fault terrace. The Heron closure alone is now estimated capable of containing between 160-200 MMbo STOIIP.

The discoveries now require a southerly extension of the 3D seismic to fully map the structures and optimally locate additional appraisal and development wells.  Following award of an Exploitation Licence (EL) covering the area, the initial plan, however, is to drill several production wells within the existing 3D footprint targeting first oil in 2021 while at the same time acquiring a new 250km2 3D survey  over the southern area costing US$ 4-5 million. Once merged with the existing data, advanced interpretation would be employed to locate additional drilling locations.  Full field development will establish cash-flow ahead of near-field appraisal and exploration to define the overall size of the project, which could easily double.

Existing oil production from the region, including Block XIX, is currently trucked to a rail terminal further south that feeds refineries just across the Chinese border.  A new Mongolian refinery is being built, which in time will have sufficient capacity to refine all foreseeable Mongolian production.

Petro Matad would like to identify a strategic partner interested in joining them in the next phase of their development programme and earn material equity in the new EL Licence area by contribution to the planned 3D seismic and subsequent drilling programme. Wells can be drilled for around US$ 2 – 4 million each. A deal for Block XX could also then lead to involvement by an incoming party in Petro Matad’s other acreage covering the largely unexplored Taats and Tugrug basins in the central part of Mongolia and other opportunities being targeted.