Product sharing agreement

Erdenes Mongol LLC’s subsidiary Erdenes Methane LLC and Australia’s Jade Methane LLC are working together on a project to estimate coal seam methane gas reserves and use the mineral as an energy resource. Since establishing an investment agreement for the project in May 2019, the sides have been exploring coal seam methane gas at Tavantolgoi coal deposits.

They drilled 500-900 m deep wells in eight locations and coal samples were tested for methane gas composition. On April 22, 2020, the Cabinet authorized Erdenes Methane to conclude a production sharing agreement for coal seam methane gas sites at Tavantolgoi coal deposits, making it possible to commence exploration, reserves estimation, and feasibility studies.

On May 6, Director of the Mineral Resources and Petroleum Authority Kh.Kherlen and Executive Director of Erdenes Methane D.Amar signed a production-sharing agreement for the exploration and exploitation of coal seam methane gas at Tavantolgoi’s XXXIII exploration site, where methane gas has been detected. The exploration site has estimated coal reserves of over 100 billion tons. Erdenes Mongol CEO P.Gankhuu expressed his hope that the exploitation of the mineral will play an important role in the country’s economic growth and reduction of air pollution.

It was also noted that Jade Methane coped with the difficulties faced in the first phase of the project alone without burdening the country’s budget, and carried out methane gas exploration at Tavantolgoi coal deposits.

Erdenes Methane is the first state owned company to be allowed to establish a production sharing agreement.