Petro Matad Limited (“Petro Matad” or “the Company”), the AIM-quoted Mongolian oil explorer, announces that the Red Deer-1 exploration well in the Asgat Sag Basin of Block XX in eastern Mongolia spudded on 4 August.
The well is being drilled with the Daton Petroleum Engineering and Oilfield Service LLC rig, DXZ1.
The Red Deer-1 well is targeting a prospect with 48MMbo of Mean Prospective Recoverable Resource and is planned to be drilled to a total depth (TD) of 2,100 metres.
The well is expected to take up to 35 days to complete. In the event of a discovery, the Company will bring in a separate rig for testing. A call-off testing contract has been signed which ensures testing operations, if warranted, can commence soon after discovery.
Meanwhile, at Heron-1, the first casing point at 551 metres was reached on schedule and casing has been run and cemented. The DQE rig 40105 is now ready to drill out cement and then drill 8 ½ inch hole to the prognosed TD of 3,050 metres.
However, the provincial government has challenged Petro Matad’s legal right to use the land at Heron-1 on the basis that a tripartite agreement between two central government agencies and the province has not been executed.
In all of Petro Matad’s operations, the Company has followed the land permitting regulations as required under the PSC and in accordance with instructions from the Ministry of Mining and the industry regulator MRPAM. The absence of a tripartite land-use agreement between government agencies has never previously been an issue. We are working with the Ministry, MRPAM and the provincial government to remedy this situation as soon as possible.
The rig at Heron-1 has been put on standby whilst the situation is resolved.
All efforts are currently directed at fixing this interruption as quickly as possible in order to minimise rig standby costs. Daily standby costs are low by industry standards and are of the order of $12,000.
The Red Deer-1 well is located in a different province to that in which Heron-1 is located and has not been affected.
Further updates will be provided in due course.
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