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Petro Matad in Mongolia oil strike

London-listed explorer hoping for commercial flows from discovery amid talks with PetroChina for possible early development

Petro Matad has hit oil pay with the Heron-1 exploration well sunk on its Block XX in eastern Mongolia.

The probe, which was earlier stalled by land use issues after being spudded in July this year, encountered a 77-metre gross interval of potential oil reservoir after being drilled to a total depth of 2960 metres into the primary target in the Lower Tsagaantsav reservoir, the London-listed company said in a statement.

It stated the reservoir interval, which included both oil and gas shows, was “very similar” to productive reservoirs found in wells at the T19-46 oilfield immediately to the north in PetroChina-operated Block XIX in the landlocked East Asian country.

The well, which was drilled as an appraisal to the latter oilfield, had a pre-drill resource estimate of 25 million barrels of mean prospective recoverable resources.

Casing of the well is now being carried out ahead of a testing effort that is likely to require a further rig to be brought in.

Petro Matad chief executive Mike Buck said the test is aimed at delivering commercial oil flow rates so the company can move into the exploitation phase at the discovery once its exploration licence on the tract expires in July 2020.

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“We have already been in dialogue with PetroChina with a view to using its existing field infrastructure to develop the find so that we can move into early production, contingent on commercial flows,” Buck told Upstream.

He added that commercialising the discovery would enable it to retain the block so that it could continue to appraise further possible finds on the acreage.

The well was drilled by DQE International’s rig 40105 that will now suspend it and then be mobilised to drill the Gazelle-1 hole in the same block, one of three Mongolia tracts wholly owned and operated by Petro Matad.

The Gazelle prospect lies roughly five kilometres west of Heron-1 and has been estimated to hold mean recoverable prospective resource potential of 13 million barrels.

Petro Matad aims to spud the Gazelle-1 well by the end of September targeting a structure that is on trend with a pair of oilfields operated by PetroChina to the north, with a 50% to 65% chance of success for the probe, according to Buck.

The company is meantime also drilling the Red Deer-1 well in the southern part of the block that was spudded last month and has mean recoverable prospective resource potential of 48 million barrels of oil.

The well is being drilled using rig DXZ1 supplied by Daton Petroleum Engineering and Oilfield Service but has been delayed due to equipment-related issues, with drilling results due in mid-September.

Buck said progress with the well has been in line with expectations and “there have been no surprises” in terms of the stratigraphy of the targeted structure, adding that this was “positive”.

“We thought we understood the geology here and that has been borne out,” he said.

He revealed the fourth and final well of the campaign will target a prospect dubbed Velociraptor - named after a dinosaur in the Jurassic Park movies - in its Block V in the west of the country that has prospective resource potential of as much as 200 million barrels.

The company will thus be returning to the block where it came up dry with the Snow Leopard-1 well drilled last year, although Buck said this probe also demonstrated there was a working petroleum system in the tract.

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He said there was additional prospectivity of around 200 million barrels on either side of the prospect that could potentially double resources in the event of a discovery.

“The block has larger high-impact prospects that we hope can build on what we have going on in the east where we hope to generate early production revenue from possible discoveries,” he said.

However, the drilling campaign could be extended with further wells as Petro Matad would be keen to use the rig to drill more than one prospect in the east, he added.

He admitted though “we are still scratching our heads” over prospectivity in the company’s Block IV in the west where the Wild Horse-1 well drilled last year came up dry but showed source rocks exist.

Petro Matad has recently gained a two-year extension of the exploration period for blocks IV and V to July 2021.

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