Jade Gas Confirms Strong Gas Potential, Nears Production at Red Lake Field
Jade Gas Holdings has successfully drilled two production wells at Mongolia’s Red Lake gas field, confirming significant coal bed methane potential and preparing for imminent production. The company is advancing commercialisation talks with CNG manufacturers to capitalise on early gas flows.
- Two lateral coal seam wells drilled with high methane content and strong gas shows
- Wells being equipped for production, expected to start this quarter
- Negotiations underway with mid-stream CNG manufacturers for early commercialisation
- A$8.8 million drawn from A$11 million convertible note facility
- Cash balance of A$740,000 with A$1.49 million spent on exploration and evaluation
Successful Drilling Confirms Gas Potential
Jade Gas Holdings Limited (ASX: JGH) has reported a significant milestone in its Mongolian coal bed methane (CBM) project with the completion of two lateral production wells at the Red Lake gas field in the South Gobi region. Both wells intersected thick coal seams with exceptionally high net coal pay, 98.6% in the first well and 88.9% in the second, accompanied by strong methane gas readings and visible gas in drilling mud returns. These results validate the company’s resource estimates and highlight the promising gas potential of the Tavantolgoi basin.
The first well reached a measured depth of 1,567 meters with a 711-meter lateral section, while the second well extended to 1,507 meters with a 902-meter lateral. Both wells targeted the coal seam IIIb, a key reservoir for methane extraction. The drilling program employed advanced casing and cementing techniques to ensure well integrity and production readiness.
Imminent Production and Commercialisation Plans
Following drilling, both wells are currently being equipped with pumps and production infrastructure, with gas and water flow measurements expected shortly. This data will be critical for refining development plans and scaling up operations. Jade is actively negotiating with mid-stream compressed natural gas (CNG) equipment manufacturers to deploy portable processing facilities. These units would enable the company to convert lightly processed gas into marketable CNG, facilitating immediate commercialisation and supply to nearby markets.
The focus on CNG aligns with Mongolia’s energy transition goals, aiming to reduce reliance on diesel fuel and coal-fired power, particularly in heavy vehicle transport. Jade’s strategy to supply cleaner, domestically produced gas could improve energy security and environmental outcomes in the region.
Financial Position and Corporate Updates
On the financial front, Jade drew down A$8.8 million of its A$11 million unsecured convertible note facility, leaving A$2.2 million available. The company ended the quarter with A$740,000 in cash and reported A$1.49 million in exploration and evaluation expenditure, primarily related to the pilot production program. Operating cash outflows and investing activities reflect the ongoing development phase, while a recent capital raise contributed A$1.26 million in financing cash inflows.
Jade’s board remains confident in its funding capacity to support near-term operations and potential capital raises if required. The company’s Annual General Meeting is scheduled for 30 May 2025, where shareholders will receive further updates on progress and strategy.
Strategic Outlook
Jade Gas’s progress at Red Lake marks a pivotal step toward commercialising Mongolia’s coal bed methane resources. The combination of robust well results, imminent production, and active commercial negotiations positions the company to capture early value from its gas assets. Success here could pave the way for expanded development across Jade’s portfolio, including the adjacent Baruun Naran project and other CBM permits in the Eastern and Shivee Gobi basins.
As Mongolia seeks to diversify its energy mix and reduce environmental impacts, Jade’s gas production could become a cornerstone of the country’s cleaner energy future. Investors will be watching closely for production data, commercial agreements, and funding developments in the coming months.
Bottom Line?
Jade Gas’s transition from drilling success to production and commercialisation will be critical to watch as it seeks to unlock value from Mongolia’s coal bed methane resources.
Questions in the middle?
- When will the first gas flows be measured and reported from the new wells?
- What are the terms and timeline for the commercial agreement with the CNG equipment manufacturer?
- How will Jade manage its funding needs given the modest cash balance and ongoing development costs?
