Jade Gas has inked a non-binding deal with a Chinese consortium to fund the first phase of its Red Lake CBM project in Mongolia, unlocking a potential game-changer for regional energy supply.
- Non-binding A$1.1bn funding agreement signed with PT Beijing Energy Linking consortium
- Phase 1 development includes 175 wells and a scalable LNG liquefaction facility
- Funding covers 100% of capital expenditure with repayment via gas sales revenue sharing
- Drilling mobilisation targeted for early 2027 with up to 10 rigs deployed
- A$11m placement at premium supports strategic initiatives including potential HK listing
Strategic Funding Agreement Accelerates Red Lake CBM Project
Jade Gas Holdings (ASX:JGH) has taken a major step towards commercialising its flagship Red Lake Coal Bed Methane (CBM) Project in Mongolia by signing a non-binding Collaboration Agreement with PT Beijing Energy Linking (PTBEL) and its consortium partners PetroChina and Hunan Geology & Mining Technology Co Ltd. The deal aims to secure approximately A$1.1 billion to fully fund Phase 1 of the project, covering 175 wells and associated infrastructure.
This funding arrangement, if formalised into binding contracts by the end of the current quarter, would mark a significant acceleration of Jade Gas’s development timeline. The consortium’s commitment includes deploying up to 10 drilling rigs, with mobilisation expected between February and March 2027, weather permitting. The scale and speed of this planned development reflect the consortium’s technical expertise and financial strength, drawn from their extensive experience in China’s Qinshui and Ordos Basins, considered the closest analogue to Red Lake.
Revenue Sharing Model Preserves Jade Gas Ownership
Under the proposed collaboration, PTBEL will fund 100% of the approved capital expenditure for Phase 1, estimated at US$762.5 million (A$1.1 billion). Jade Gas retains full ownership of the project, with the consortium to be repaid through a revenue-sharing mechanism linked to future gas sales. Initially, PTBEL will receive 80% of gas sale revenues (after statutory payments) until its costs are fully recovered, after which Jade Gas’s share increases to 70% for the producing life of the wells.
Phase 1 represents just about 20% of the drilling planned across the 60 km² Red Lake Development Area, itself part of a broader 665 km² permit. The consortium has indicated the field could support up to 1,400 wells, suggesting substantial upside potential beyond this initial phase. Further agreements may be pursued for subsequent phases, which could add hundreds more wells.
Infrastructure and LNG Facility to Support Monetisation
The funding also covers supporting infrastructure, including an expanded camp facility capable of housing 500–750 personnel, roads, communications, water handling, and battery energy storage systems to power drilling operations. A scalable LNG liquefaction facility is included, with an estimated cost of US$150 million (A$215 million), designed to enable initial monetisation of the first 40 wells and expand modularly as production grows.
This LNG facility aims to open high-value markets for Mongolian gas, supporting the country’s energy transition by reducing reliance on imported fossil fuels like diesel. Jade Gas’s Executive Director Joe Burke emphasised the strategic importance of the partnership, highlighting the consortium’s backing by some of China’s most formidable energy players and their proven track record in unconventional gas development.
Capital Raise and Board Changes Signal Growth Ambitions
Alongside the collaboration announcement, Jade Gas revealed a placement raising A$11 million at A$0.12 per share, a 14.3% premium to the last closing price. The raise will support commercial and strategic initiatives, including preparations for a potential listing on the Hong Kong Stock Exchange. Participants in the placement will receive attaching unlisted options exercisable at A$0.18, providing further capital upside potential.
The company also appointed Dr. Ian Wang as an Executive Director, recognising his technical expertise and critical role in securing inbound interest from Chinese energy sector participants. Dr. Wang’s experience in CBM exploration and development across China aligns with Jade Gas’s ambitions to fast-track the Red Lake project.
Trading in Jade Gas shares was reinstated on the ASX immediately following the announcement, ending a voluntary suspension that allowed the company to finalise this material partnership and funding update.
Bottom Line?
Execution of binding agreements and regulatory approvals will be pivotal to transforming this non-binding framework into a funded, operational reality for Jade Gas.
Questions in the middle?
- Will Jade Gas secure the definitive agreements within the targeted timeframe?
- How will the consortium’s revenue-sharing model impact Jade Gas’s cash flow and profitability post-recovery?
- What are the prospects and timelines for subsequent development phases beyond the initial 175 wells?