Jade TTCBM Model as of 2022/10/11
This post and attachmentsshould not be regarded as investment advice and posters should do their ownresearch & check all documents carefully before making any investmentdecisions.
The calculations in the Model are based on the estimatesand assumptions shown in the printouts and are intended to be used as aframework for investors need to do their own independent research.
If the PDF’s hyperlinks are working properly, youshould be able to click on the hyperlinks to open the web pages associated withmost of the reference documents used in the model.
As you can see, trying tocome up with a basic model starting with the Gobi Desert involves a lot ofguess work and that is why I emphasize that published model should be used onlyas a framework for further research.
I would honestly be lostwithout it however, because it has been an invaluable tool to get my headaround the potential economics of the whole TTCBM tenement/s.
Although the model has grownorganically, I try to keep the format relatively constant so that it can ultimatelybe used for a direct comparison between the various CBM/CSG tenements inMongolia.
Although I have done my bestto lay out the model logically, I sympathize with HC readers that find it hardto understand particularly if they do not have an O&G background.
At this stage, I am tryingto keep format relatively unchanged in the hope that long term readers will becomeincreasingly familiar with it.
A simplifiedoverview of the modelling process:
· 2U RISC Net Risked Prospective resource is usedas the starting point.
· The Prospective Areas are transferred to the GoogleEarth tenement area and the net drillable production areas estimated and totaled.
· The published Langmuir desorption curve coalthickness Etc. are used to determine the available volume of desorbed gas/CubicMeter of Coal and compared with the published numbers.
· A further in situ recovery factor (Typically20%) is applied to allow for factors such as the drainage profile between wells,which is a series of overlapping hyperbolic cones radiating out from each well,with pressure gradients depending on the permeability of the coal, pumping rateEtc.
· Starting with the net RISC risked 2U resource,the properties of the coal and the net desorption potential from the Langmuircurve in CM/Tonne as well as a preliminary estimated in situ recovery factorare applied to the risked resource estimate to arrive at the initial PJ/Sq KM recoverynumber which is used in the field development planning (FDP) exercise.
As you cansee there are a lot of factors that need estimating or calculating here whichis why the initial output from the modelling exercise needs to be treated withcaution.
· Using the FDP dashboard, a number of othervariables are the fine-tuned adjusted using their respective slide bars.
· The field development planning output is thencompared with the nominated (TJ/Day x 30 year) production target and the riskedresource.
· The Well Selection and Configuration Dashboardson page 7 of the model are used to nominate the type of wells and number ofwell pads Etc. that are needed in order to do the CAPEX & OPEX estimates.
The whole process is iterative, and somethingusually changes each time I work on the model.
Relevant printouts from the Model appear belowtogether with notes.
Printouts From the Model
1.00 Risk Register
JGH_Model_Page_1_Risk_Register.pdf
· Put simply, the reserves are well and truly downthe de-risking path.
· The Geopolitical Risk will probably fly belowthe radar.
· Drilling operations will need to be upgraded tothe necessary standard particularly if directional wells are needed to harvestcoals near or under the adjacent mining lease/s.
I see a major de-risking of the TTCBM projectas production testing proceeds. This isflagged in the recent ASX 10/10/2022 announcement.
https://hotcopper.com.au/documentembed?id=uOMxKKzFkiWRTLKhOROKAxjvTDYL4g%2B4zBTzv%2F1%2B97FiGug%3D
“Extended Production Testing The extendedproduction test will include the Red Lake-5 and Red Lake-7 wells. This testingwill provide critical information on well performance and deliverability thatwill ultimately support Jade’s assessment of commercial development options. Aspart of this, two production skids are in the final stages of construction inBrisbane. These skids will be integral to the production of water andseparation of gas once it starts desorbing off the coals during the variousupcoming tests. It is anticipated that these skids will be onsite in December2022. In parallel, the Company is currently working on the planning and designof the Pilot Program with its well engineering and project managementconsultants, In-Gauge Energy.”
2.00 GSA Pricing Summary
JGH_Model_Page_2_Pricing_Summary.pdf
This section summarizes everything to a price/GJ operatingat the nominated TJ/Day output.
It contains calculations on the potential contribution sharevalues operating as a going concern and in the event of a transactional sale.
These values should not be treated as investment advice orany sort of a formal valuation as they are based on the many inputs andassumptions used in the modelling process.
3.00 Pipeline to Market
JGH_Model_Page_3_Pipeline_to_Market.pdf
The printout contains noteswhich sum up my impression of the present situation.
4.00 Drilling Schedule
JGH_Model_Page_4_Drilling_Schedule.pdf
5.00 The Langmuir Curve
JGH_Langmiur_Desorption_Curve.pdf
This desorption curve is a valuable tool in assessing the (Recoverable)gas in place and determining the well completion & pump design necessary toachieve subsurface drainage down to the best estimate of abandonmentpressure.
6.00 Reserves Analysis
Won't fit please see next post
The primary reference document is the analysis done by RISC,entitled Independent Technical Specialist’s Report on the coal seam gasexploration projects of Jade Gas Pty Ltd dated 24/06/2021.
https://riscadvisory.com/wp-content/uploads/2021/09/ITSR-on-Jade-Gas-Mongolian-Assets-v1.pdf
Some notes from the above reporton the Tavan Tolgoi area.
Page 8, “The presence ofthick known coal deposits in the Tavan Tolgoi area make the Tavan Tolgoi coalseam gas exploration asset one of the lowest risk coal seam gas explorationtarget areas in the South Gobi Basin.”
The settings used in theModel attempt to reconcile the approach RISC and Jade used in coming up withthe risked 2U reserves and Prospective Areas.
On Page 17 RISC uses an areaof 125 Sq.KM for the Area with Potential Coal but mentions that “Jadehave used a best estimate area of 222 Sq.KM in their estimate of GIIP(Gas Initially in Place).”
After plotting the relativeareas on Google Earth, using it as a planimeter, and being mindful that the extractionarea footprint is open to being increased by directional drilling under themining lease, I have ended up modelling on the 222 Sq.M prospective areaused by Jade.
An (Estimated) 20%recovery of gas in place was used because of the chance of lowered permeabilityat the depth of the coals and some degree of undersaturation due to geologicaluplifting.
Page 8 “Significanteast-west trending thrust faults form the coalfield boundaries throughout muchof Tavan Tolgoi area, bringing underlying, older volcanics and noncoal-bearingformations to the surface and truncating the coal resource areas.”
7.00 Field Development Planning
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After a number ofiterations, a target if 150 TJ/day was used.
Early days though and thismay change once production pilot data is available.
The Key Inputs to the Field DevelopmentPlanning Dashboard are the Nominated Recoverable PJ/SQ.KM (Set at 8.11PJ/Sq.KM)and the associated Prospective area (Set at 222 Sq.KM).
Production cost /GJ wise, (Amongsta whole lot of other parameters), the model is sensitive to the RecoverablePJ/SQ.KM setting and the Well Spacing setting.
On Page 19 “RISC considersthe calculated well spacing for the recovery estimate of between 224 m and251 m is very tight” and I would hope that the 600M spacing used byRISC on Page 21 of the same report using “An alternative approach tocalculating resource potential of an area is working up from well ultimaterecovery expectations and well density”, would result in a 20% gas inplace recovery factor.
The model is presently seton the 234 M spacing to provide a more conservative analysis.
Again, pilot results shouldgive a much better understanding of this.
8.00 Preliminary Budgets
Won't fit please see next post
These are best guesses atthis stage and can be overridden by the slide-bars on the GSA Pricing summarypage.
9.00 Strategic Planning
Won't fit please see next post
This automated output fromthe model is intended as a storyboard to facilitate strategic planning.
I am acutely aware of my ownlimitations as I undertake the modelling process and there is no way it doesn’tcontain errors but I hope that it gives readers a useful perspective of thisexciting project.
All the best and GLTA
Regards
OGP
