Australian junior Jade Gas has come up trumps with its recent production drilling campaign on the Red Lake coal seam gas (coalbed methane) field in the South Gobi region of Mongolia, and is eyeing near-term commercialisation opportunities via a compressed natural gas (CNG) project.
Jade on Friday said that horizontal drilling successfully completed at second gas production well intersected an 800 metre-plus net coal reservoir resulting in a combined 1500 metres of “gassy coal”.
Both wells are now being equipped for production and are expected to be online and producing within the next three to four weeks. Total gas measured in the second well by the gas detector and observed in the drilling mud encouragingly indicated higher gas levels than was measured in the first production well, noted the operator.
Jade expects to complete an agreement with a midstream manufacturer of fully integrated CNG equipment which will enable it to commercialise the gas from these initial two wells.
These CNG facilities are easily transportable and are able to take lightly processed gas and convert into a saleable and marketable form which, Jade said, would enable it to potentially deliver volumes to various markets in the immediate vicinity. These markets are in need of a cleaner and more secure fuel source including the displacement of diesel, which currently powers the large coal haulage truck fleet in the South Gobi, noted the ASX-listed operator.
The second production well on the Red Lake CSG asset was drilled to a total measured depth of 1507 metres with a lateral section of approximately 902 metres. Within the lateral section, 802 metres of net coal was intersected in the target seam, resulting in 88.9% net coal pay.
As with the first production well, a 5 ½-inch pre-drilled liner staged cementing tool and 5 ½-inch casing string are being set in the well, with the stage cementing packer located just above the entry point to seam IIIb in the heel of the lateral.
Activities will now focus on completion of these first two wells and production testing. After the pumps and production equipment are installed, the water and gas flow will be analysed and used to continue to refine the planned development operation of the Tavan Tolgoi (TT) CBM field.
The TT CBM project has a 2C gross unrisked contingent resource of 246 billion cubic feet of gas.
"Production drilling results confirm our confidence in the Red Lake gas field being a future world class gas producer. We will complete these first two production wells and bring them online as soon as possible. We then eagerly await confirmation of gas flow rates,” commented Jade’s executive chairman, Dennis Morton.
Mongolia’s Tavan Tolgoi basin is located within an area with high energy demand for electricity, fuel for engines and as a base load energy supply to underpin intermittent renewables, noted Morton.
“We are not too far away from gas production and gas sales in some form. Our gas commercialisation plan is built around a modular and scalable LNG project, but we are also canvassing other, nearer term, and lower capex opportunities in the form of CNG, a product that is also utilised in displacing diesel in coal haulage trucks and which we expect will be under great demand."
Jade last year partnered with Yan’an Drilling Wellking Energy Technology Service (DWK) to expedite the development of its Red Lake CBM resource.
"When drilling the first production well, and our first well in Mongolia, we took a little more time so as to understand the coal seam during the lateral part of the drilling process. After the success and understanding of the first well, it allowed us to complete the second well quicker,” said Elton Dong of DWK.
“This second well outshines the first well with higher gas readings supporting the company's desire to quickly commercialise the gas. As with similar wells we have drilled in the Qinshui Basin in China, we will now look to put these two wells into production within the next few weeks and move on to drilling the next wells."
BY Amanda Battersby
Asia Bureau Chief Singapore

Published Date:2025-04-14