Assets Overview

  • Holds 100% interest in 2 Production Sharing Contract(PSC) Blocks (XX and VII) totaling more than 41,355km2 
  • Focussed on production operations at Heron-1 and further development operations in Block XX and the initial technical evaluation of Block VV
  • Exploitation Licence over Heron discovery awarded in July 2021 covering an area of 214 km2  with the remaining acreage relinquished
  • Legal issues related to accessing land in Block XX finally resolved late May 2024 allowing operation to commence following a 4 year hiatus. Block XX Special Purpose Area status obtained January 2025
  • Completed Heron-1 as a production well and installed production facilities, drilled one wildcat exploration well Gobi Bear-1 and one appraisal well Heron-2 in 2024 in Block XX
    • Heron-1 formation stimulation and downhole completion as a production well and installation of production facilities successfully completed. Heron-1 first oil achieved in October 2024′
    • Gobi Bear-1 encountered good reservoir sands and indications of the presence of migrated oil.  Well suspended without testing for potentially further evaluation
    • Heron-2 encountered 5m oil pay in same reservoir but which did not flow at commercial rates on test. Well suspended for evaluation and potential further operations to improve well deliverability
  • Participation in the MRPAM Tender Round for new exploration acreage launched end 2022 resulted in the application and successful initial award of 2 blocks.
  • Block VII new PSC signed January 2025
  • Block IV relinquished in August 2020
  • Block V exploration term expired 31 July 2024 and block fully relinquished

Petro Matad has been one of the most active exploration companies in Mongolia since 2005. The Company holds a prominent position in the frontier and emerging hydrocarbon basins of Mongolia. Following the full relinquishment of Block V and IV and the recent award of Block VII the Company now operates two Production Sharing Contracts (PSCs), Blocks XX and VII, covering a total area of 41,355 km2.  The Company initially established a foothold in the country through its active exploration campaign in Block XX where the development of the Heron-1 discovery has been completed following the award of the Exploitation Licence in July 2021.

 

Blocks IV and V 

Both Blocks IV and V have now been fully relinquished with all commitments (financial, work programme and environmental) fulfilled. Petro Matad was the first exploration company in recent times to explore this part of the country acquiring 4,400 kms of 2D seismic, 200 km2 of 3D seismic, 11,000 km2 of airborne acquired FTG and HRAM, the first acquired in the region; performing numerous field surveys and collecting and analysing hundreds of field samples and drilling of 2 deep stratigraphic holes and 3 exploration wells between 2009 and 2024.

 

These efforts proved both the presence of active petroleum systems and good quality reservoir sections in these blocks. Unfortunately, no commercial volumes of hydrocarbon were identified before the expiry of the exploration terms of both blocks. Block IV was fully relinquished in August 2020 and Block V in July 2024. The regional geological knowledge gained by the work performed on these blocks have been used to review and evaluate acreage across Mongolia leading to applications for and award of new blocks in the 2022 licensing round with the first of these, Block VII, signed in January 2025.

 

Block XX

Block XX is adjacent to the main oil producing region of Mongolia, the Toson-Uul Graben of the Tamsag Basin in Block XIX, operated by PetroChina. The main proven and producing petroleum system is the Upper Jurassic-Lower Cretaceous play. The Heron-1 well proved the extension of commercial volumes of oil into Block XX and following approval of a Reserves Report and Plan of Development, a 214 km2 Exploitation Licence was awarded in July 2021 which covers the full extent of the Heron discovery, the area up-dip of the Gazelle-1 discovery and undrilled exploration targets having significant upside and has an initial term of 25 years with two additional five year extension periods available. Upon the award of the Exploitation License, the rest of the exploration area was relinquished.

 

In July 2023, the Mongolian Cabinet approved Block XX exploitation area to be certified as special purpose area which allows for the final agreements to be established with local governments to fully legalise access to the acreage for operations to proceed. However, due to a very complex bureaucratic process Special Purpose Area status was not achieved until January 2025. Prior to that in May 2024 an agreement was made with the local government to access specific areas of the block which allowed operations to start in mid-2024.

 

Operations in 2024 commenced with the completion of Heron-1 as a production well involving reservoir stimulation, installation of a downhole production string and surface production facilities. First oil at Heron-1 was achieved in October 2024 after only 5 months of access to the land being granted. At the same time drilling operations at Heron-2 and Gobi Bear-1 were completed with both wells being suspended for potential further operational activity following a detailed review of the acquired data.

 

Despite the very high rates achieved during the well testing of Heron-1 in 2019, production rates at Heron-1 are kept between 200 to 300 bpd to reduce the risk of damage of downhole equipment due to sand production and to ensure the surface equipment is being operated at design specifications. Produced fluid is stored in elevated heated storage tanks prior to being transported on a daily basis to production facilities located in Block XIX ~20km to the north from which, after processing and mixed with Block XIX crudes, the oil is shipped to refineries in China. Additional production operations at Heron-1 are being considered to optimise production rates and overall facilities performance.

 

The Heron-2 well located some 800m to the south of Heron-1 was spudded on 8 September 2024 and reached Total Depth of 2,908m seven days ahead of schedule on 26 September and encountered the primary target Cretaceous Lower Tsagaantsav Formation on prognosis. Oil and gas shows were observed from the top of the formation and an 18m thick interval of sandstone was penetrated in a similar stratigraphic position to the sandstone in Heron-1 but structurally 16m shallower. Petrophysical evaluation of the wireline logs indicated a 5m pay zone and production casing was run to Total Depth in preparation of reservoir stimulation and testing operations which commenced on 9 October 2024 and an 8m interval straddling the pay zone was stimulated. Testing operations commenced on 25 October 2024 but were deferred after only a few days as the test rig suffered a major engine problem but repairs were completed and operations resumed after 7 days. By end of the test, the well was producing a mixture of oil and what is interpreted to be stimulation fluids with productive potential estimated at ~30 bpd. This is significantly lower than the rates observed in Heron-1 although it is in line with flow rates reported from some other wells in the basin. The low production rate achieved is attributed to this reservoir section having a much lower permeability despite having the same porosity at the Heron-1 reservoir from log analysis. The well was suspended with operations completed on 24 November 2024 at the limit of the operation window. Evaluation of all data acquired will conclude if additional operations are warranted to attempt to improve reservoir deliverability.

 

The Gobi Bear-1 exploration well located c. 12km southwest of the Heron-1 oil discovery well was spudded on 21 September 2024 and was drilled by DQE International using a smaller rig than that used for Heron-2 well. The well was targeting reservoir quality sandstones in the Cretaceous Lower Tsagaantsav Formation, proven to be oil bearing nearby and structurally down-dip in the Heron-1 and Gazelle-1 wells, within a large combination structural/stratigraphic trap at the southern end of the Toson-Uul sub-basin. Top reservoir was anticipated at a depth of c. 1,400m with a planned Total Depth at 1800m.

 

Well Total Depth at 1805m was achieved within 11 days on 2 October 2024 as planned with the top reservoir section penetrated at 1,425m just below prognosis. Drilling gas shows were seen throughout the Tsagaantsav Formation and faint oil shows were also observed. Wireline logging confirmed a total of 34m of reservoir quality sandstones within a gross interval of 70m between 1,558m and 1,628m. From logs, the sands are computed to have 13% average porosity which is consistent with the productive reservoirs in the basin. Detailed log interpretation concluded that the sands may contain a hydrocarbon charge but the absence of good oil shows whilst drilling led to some uncertainty and it was decided to run casing to Total Depth and suspend the well, completed by 5 October 2024, to allow time for additional studies. Subsequent initial geochemical analysis on five reservoir samples again suggests the presence of migrated oil in the reservoir but further studies are needed to be more definitive and these are planned. Once completed the Company will then determine the forward programme, which may be well test, likely being the best way to definitively determine the fluid content of the reservoirs in Gobi Bear-1.

 

Initial Campaign

Petro Matad’s initial exploration campaign in Block XX consisted of re-processing existing seismic data and acquisition of 2D and 3D seismic surveys and drilling 11 wells (2010/11) on the Davsan Tolgoi structural high with hydrocarbon shows being encountered however no commercial discovery was made.  Re-processing of 2D seismic data and access to the overlap of PetroChina’s acquired 3D seismic data into the northern part of the block significantly reduced the uncertainty on possible extensions of discovered oil in Block XIX into Block XX and matured potentially commercial drilling prospects which become the focus of Petro Matad’s 2019 drilling campaign.

 

To the southwest, prospective but frontier basins had been identified on coarse 2D seismic and gravity data on trend and with a similar stratigraphic and structural style to the proven systems in adjacent Erlian Basin of China. Of particular interest was the furthest south basin, the Asgat Sag, where the Red Deer Prospect was matured for drilling during the 2019 drilling campaign.

 

At the southern end of the prolific Toson-Uul Basin and targeting an extension of a PetroChina oil discovery in Block XIX, Heron-1 well was spudded on 19 July 2019 reaching a Total Depth of 2960m MD within the Lower Tsagaantsav Formation and below last observed oil shows. Well data and analysis of wireline logs identified 70m of oil shows within which three zones across a 40m interval were clear candidates for well testing. Testing operations across two of the three zones were completed on 31 October 2019 with commercial rates achieved prompting the application of an Exploitation Licence across the northern part of the block for the development of this discovery and definition of possible upside potential.

 

A few kilometres west, the Gazelle-1 wildcat exploration well was spudded on 18 September 2019 on a separate structure but immediately updip of another PetroChina oil accumulation. Total depth of 2550m MD and reached in sediments of the Sharilyn Formation and good oil shows were observed at the top of the targeted Lower Tsagaantsav Formation. Wireline logs identified the presence of two oil bearing zones and the well was suspended on 18 October 2019 for potential future testing.

 

Within the Asgat Basin in southern Block XX, Red Deer-1 wildcat exploration well reached a Total Depth of 2000m MD on 14 September 2019 having encountered oil shows across much of the objective Zuunbayan and Tsagaantsav Formation targets. Log analysis however did not identify any intervals for testing and the well was plugged and abandoned and the rig released on 20 September 2019.  Geochemical analysis of the oil show samples indicates the presence of a mature and active petroleum system in this basin too. The Asgat and surrounding basins are now available for relicensing and consideration is being given to this.

 

Block VII

Petro Matad signed the PSC with the Government of Mongolia on 16 January 2025. The Company holds this acreage through its Isle of Man registered subsidiary Petro Matad Energy Limited which was established specifically for this purpose.

 

Block VII comprises a very large area of some 41,141 km2 and is located in southern Mongolia adjacent to the Yin’e Basin and other basins across the border in northern China where oil and gas have been found in several plays. Importantly, in addition to the Jurassic/Cretaceous play already well known in Mongolia, oil has been found in older Triassic and Permian reservoirs that so far have not been explored in Mongolia. The extension of these oil-prone basins into Block VII makes this block very attractive from technical perspective. Previous exploration efforts by other operators in Block VII have been very limited, with some 2D seismic coverage and limited well data. Geological outcrop information is plentiful.

 

In the first two-year phase on Block VII, the agreed work programme comprises field mapping and related studies designed to mature areas for future seismic acquisition and/or drilling at the Company’s discretion in the following phases of the exploration term.