Jade Gas partners with DWK for Red Lake CBM project in Mongolia

Australia’s Jade Gas has signed a non-binding term sheet for a gas production partnership with China-based drilling services provider DWK to develop Jade’s Red Lake coalbed methane (CBM) project in Mongolia, it announced on July 15.

Under the partnership, Jade and DWK intend to negotiate a binding agreement with key terms including DWK funding the next 20 production wells at Red Lake, conditional on the successful drilling of the current four production wells and regulatory approval. The agreement will also cover an appropriate revenue share arrangement on gas sales from the 20 Red Lake wells, with Jade retaining project ownership and requiring minimal company funds for these next production wells. The initial four-well production programme will commence shortly.

“Given DWK’s experience in CBM production wells in the Qinshui Basin, the company sees close similarities between the rapid development at Qinshui in recent years and Jade’s Red Lake project,” Jade said.

In addition to the initial four-well production programme, Jade expects that a further 171 production wells will be completed during the next phase of the Red Lake development.