TMK Faces Execution Risks in New 1MW Gas-to-Power Partnership

Strategic Partnership to Secure Reliable Power

TMK Energy Limited (ASX:TMK) has taken a decisive step toward commercialising its Gurvantes XXXV gas project by signing a Memorandum of Understanding with Dashvaanjil Group LLC, Mongolia’s largest LPG importer and distributor. The agreement sets the stage for a 1MW gas-to-power generation facility, designed to provide TMK with a stable power supply for its Pilot Well Project and demonstrate natural gas’s potential as a domestic energy source.

Dashvaanjil’s established infrastructure and local market knowledge are crucial to this partnership, allowing TMK to leverage a partner with a proven safety culture and operational expertise. This collaboration aims to reduce TMK’s reliance on the local electrical grid, which currently depends entirely on Chinese electricity imports, and to introduce a more reliable, cost-effective energy solution to the region.

Phased Project Approach with Clear Milestones

The MoU outlines a three-stage framework: engineering and design, procurement and construction, and commissioning with power generation. Engineering and design work has already begun, with Dashvaanjil covering downstream engineering costs while TMK handles upstream field activities. Completion of this phase is expected by the end of Q2 2026, with construction and commissioning targeted for Q3 2026.

The initial 1MW power plant will operate on a dual fuel system, utilising gas produced from TMK’s Gurvantes XXXV Pilot Well supplemented by Dashvaanjil’s LPG imports until production scales sufficiently. The modular design promises scalability to accommodate future gas production increases, aligning with TMK’s strategy to expand operations and increase gas output, which recently saw a 13% rise in April 2026, supported by an Independent Technical Review and ongoing pilot well drilling preparations April gas production up 13%.

Commercial Potential Beyond TMK’s Operations

Beyond powering TMK’s pilot operations, the project is expected to generate surplus electricity that could be sold to local industrial users, such as coal mining operations. This could mark a significant shift in Mongolia’s energy landscape, reducing dependence on imported electricity and fostering local gas utilisation. The commercial framework agreements, to be negotiated after the engineering phase, will define investment returns and risk-sharing between TMK and Dashvaanjil.

This initiative builds on TMK’s recent milestones, including record gas production rates exceeding 1,350 cubic meters per day and securing $6 million in funding to expand pilot drilling activities Record daily gas rate surpasses 1,350 m³. The partnership with Dashvaanjil complements these achievements by addressing a critical operational need: reliable power supply.

Local Expertise and Infrastructure as a Competitive Edge

Dashvaanjil’s footprint extends across all 21 provinces of Mongolia, with a workforce of around 600 employees and a comprehensive LPG distribution network. The company also operates a certified LPG training centre and maintains a fleet of delivery trucks, underscoring its capacity to support large-scale energy projects. This local presence and expertise provide TMK with an advantage in navigating regulatory requirements and accessing Mongolia’s power grids.

The MoU allows both parties to proceed with their respective workstreams at their own risk and cost, accelerating project momentum without immediate commercial commitments. This pragmatic approach reflects TMK’s broader strategy to progress gas utilisation initiatives in a practical and scalable manner.