Jade Gas Faces Financing and Production Risks Despite New LNG Contract

Operational Milestones Achieved

Jade Gas Holdings Limited (ASX – JGH) has reported significant progress in its coal bed methane (CBM) project at the Tavantolgoi basin in Mongolia. During the September 2025 quarter, the company brought two horizontal production wells online, achieving continuous gas flow consistent with expectations. This operational milestone marks a critical step towards commercial production, with the wells currently powered by a combination of grid electricity and on-site diesel generation, and plans underway to transition to gas-fired power generation once stable flow rates are established.

First LNG Sales Agreement Secured

In a landmark commercial development, Jade signed its first LNG Gas Sales Agreement with UB Metan LLC, Mongolia’s largest importer of natural gas products. The agreement commits Jade to supply a minimum of 20% of its LNG output from the Red Lake Gas Field to UB Metan over an initial five-year term, with pricing linked to a reference price discounted by 20%. This contract not only validates the project’s commercial potential but also positions Jade as a key supplier in Mongolia’s growing natural gas market, particularly in the capital city, Ulaanbaatar.

Capital Raising to Support Growth

To underpin its transition to commercial operations, Jade successfully raised $5 million through a placement to sophisticated and professional investors, with an additional $2.1 million targeted via a Share Purchase Plan. These funds are earmarked to support the company’s initial commercial revenues and ongoing development activities, including the finalisation of the Field Development Plan (PDO) and project economic studies. The capital injection also strengthens Jade’s balance sheet as it explores further financing options, including debt and vendor financing.

Strategic Initiatives and Market Positioning

Beyond immediate operational and financial progress, Jade is actively engaging with potential partners and industry participants interested in various forms of collaboration and investment. The company is also considering a dual listing on the Hong Kong Stock Exchange to enhance liquidity and broaden its investor base, leveraging the proximity and strong trade ties between Mongolia and China. This strategic move aims to tap into Asian capital pools and support the company’s long-term growth ambitions in the LNG sector.

Outlook and Next Steps

Looking ahead, Jade expects gas flow rates from its wells to continue increasing, with commercial flow rates anticipated shortly. The completion of the Field Development Plan will enable the booking of reserves and facilitate the development of a larger drilling program targeting 175 wells in phase one. Additional seismic surveys and core hole programs are also planned to enhance reservoir understanding. Collectively, these initiatives position Jade to play a pivotal role in Mongolia’s energy transition by providing a cleaner, more reliable gas supply to the region.