January 4, 2024 [Proactive]- As the energy mix transitions to meet decarbonisation demands, natural gas and hydrogen are expected to play major roles.
The contribution of natural gas in terms of capacity and generation is crucial for the decarbonisation of the electricity sector. This is true as we move towards zero emissions and on reaching that target.
However, the degree to which natural gas can be effective depends on several vital factors including the design of relevant policies, the availability of technologies for carbon removal, the effectiveness in reducing methane emissions from upstream sources and the risks associated with transitioning to new technologies.
Hydrogen is equally important in the mix.
The New Climate Institute states, “Hydrogen is expected to play an important role in the decarbonisation effort to keep global warming at 1.5 degrees. Net-zero models foresee its share in final energy consumption ranging between 3-20% by 2050.
“For hydrogen technologies to fulfil this role, sizeable investments need to be made to reduce production costs and improve end-use applications.”
Elixir Energy Ltd (ASX:EXR) has a foot in both camps.
The company is focused on an exploration and appraisal program targeting natural gas in the form of coal-bed methane (CBM – known as coal seam gas or CSG in Australia) in the South Gobi, Mongolia and Queensland, Australia. It has also been developing the Gobi H2 green hydrogen project and solar project in Mongolia.
Elixir has built a strong foundation of multiple-level government and other energy stakeholder relationships that are now being used as a platform to grow cleaner energy options.
Elixir’s energy mix
Elixir is focused on three main projects close to important infrastructure in Mongolia and Queensland.
Its projects include:
- The 100%-owned Nomgon IX Coal Bed Methane (CBM) Production Sharing Contract (PSC) Project in the South Gobi region of Mongolia.
- The Grandis Gas Project in Queensland covers an area of 1,000 square kilometres located close to existing gas transmission infrastructure centred on the Wallumbilla gas hub. This hub is connected to domestic and international markets.
- A Mongolian natural gas business run via wholly-owned subsidiary, GOH Clean Energy LLC, that pursues renewable energy ventures, including hydrogen and solar.
The projects
Grandis Gas Project
In August 2022, Elixir Energy expanded its portfolio by acquiring a 100% interest in the petroleum exploration permit ATP 2044 in Queensland.
This was achieved through the acquisition of the special-purpose vehicle EnergyCapture Pty Ltd, now rebranded as the Grandis Gas Project.
Spanning 1,000 square kilometres, the Grandis Gas Project is advantageously located near the Wallumbilla gas hub, which is connected to domestic and international markets. The site, part of the long-established Taroom Trough oil and gas province, benefits from easy road access to well locations.
The project could also benefit from market factors driving new rounds of drilling in the Taroom Trough, including by majors.
Elixir, along with these majors, hopes to capitalise on the growing demand/supply gap in the East Coast gas market, spare capacity in Queensland’s LNG plants and international buyers’ requirements for reliable supply – especially given the Ukraine War and other geopolitical factors.
The Taroom Trough has been described as an emerging energy super basin. Wood Mackenzie described the concept of the super basin as “basins with the co-location of upstream hydrocarbons, clean electricity, standalone and/or hub-scale CCS”.
Currently in the Taroom Trough are Shell, Santos (with whom Elixir recently executed a Data Sharing Agreement) and Omega.
Santos CEO Kevin Gallagher recently said of his company’s presence: “If the play works, then we believe there is multi-Tcf potential”.
A recent milestone for the Grandis project was drilling of the Daydream-2 appraisal well, which reached a total depth (TD) of 4,300 metres on December 7, 2023. This depth exceeded the initial plan by about 100 metres due to higher-than-expected gas levels and provides greater operational flexibility for future appraisal phases.
The drilling process encountered a rapid increase in well penetration rate associated with a gas influx, leading to an estimated 50,000 cubic feet of gas being flared. Following standard drilling practices, this influx was safely managed, and the well was drilled to its final depth.
This discovery, deep within the well, indicates potential for substantial reservoirs, though further work is needed to fully understand its implications.
Nomgon CBM PSC
Elixir’s most mature asset is the Nomgon IX Coal Bed Methane (CBM) Production Sharing Contract (PSC) project in Mongolia’s South Gobi region.
The 100%-owned foundation asset is located on the Mongolian/Chinese border with excellent infrastructure, mines and planned pipelines.
The project is being managed by a highly experienced CSG team and is a first mover in taking Australia’s industry-leading skills to Mongolia.
Exploration started in 2019 and the first CBM discovery was made in 2020. The Production Pilot Project will continue through 2024.
Elixir aims to dewater coals and flow gas from the Nomgon CBM discovery; provide proof of concept for commercial development; conduct its first extended production test in Mongolia and continue to grow cooperation with other operators in the region.
Varied flow rates are typical of a first pilot in the region and measured up to 200,000 cubic feet per day.
Water and gas production will continue into 2024.
Gobi H2
Elixir’s green hydrogen project, Gobi H2, in the Gobi region of southern Mongolia, represents a significant venture into renewable energy, specifically hydrogen produced from renewable electrical sources.
Leveraging its extensive experience in Mongolia’s energy sector and robust stakeholder engagement with governments at various levels, communities, and customers, Elixir has laid a strong foundation for the development of the Gobi H2 business.
The project’s potential was highlighted in mid-2022 when Elixir announced the signing of an MoU with Japan’s SB Energy Corp, which later became Terras Energy following a takeover by Toyota Tsusho. This partnership underscored the viability and strength of the Gobi H2 concept.
To further solidify this venture, Elixir commissioned a pre-feasibility study (PFS) from the global consulting firm AECOM earlier in the year. The positive and encouraging results of this confidential PFS led to a significant advancement in February 2023.
Elixir and SB Energy expanded upon their initial MoU by executing a term sheet. This crucial document set forth an exclusive framework for both parties to work towards establishing a binding 50/50 joint venture later in the year.
The project’s relevance and potential are further amplified by the development of green hydrogen infrastructure projects in neighbouring China. These include the creation of a regional hydrogen pipeline transmission network.
The strategic location of the Gobi H2 project positions it to benefit from these developments, as the network could be expanded northwards to harness the Gobi region’s exceptional renewable resources. This expansion presents a unique opportunity for Elixir’s Gobi H2 project to play a pivotal role in the broader regional green energy landscape.
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