Mongolia has moved closer to exploring its shale potential as Genie Oil Shale Mongolia, a subsidiary of Genie Energy, has signed a prospecting agreement with the Petroleum Authority of Mongolia (PAM).
The new agreement gives Genie access to twenty-five thousand square kilometers in Central Mongolia southeast of the Mongolian capital, Ulaanbaatar. It is the first agreement of this type signed after the recent legislative change that opened up more land for exploration.
In May, Vice-minister for mining Erdenebulgan Oyun has announced that Mongolia is to double the amount of land open for exploration in the hope of attracting $1bn of investment and end its reliance on foreign energy imports. Until then only eight per cent of Mongolia was open to exploration. The new law overturned the ban on new mining licenses imposed in 2010 and effectively increased mineable territory to 20 per cent. The law also allowed companies to explore for 12 years, as opposed to the previously existing nine-year time limit.
The new deal between Genie and PAM follows an exclusive, 5-year oil shale development agreement signed in 2013 which enabled Genie to explore and evaluate the commercial potential of oil shale resources on a separate 34,470 square kilometres area in Central Mongolia. The two agreements combined give the company access to approximately 60,000 square kilometers of shale-rich deposits.
It is not entirely clear how much oil and gas-rich shale Mongolia has. Mongolian experts, in a study carried out in 1994, estimated that the country has approximately 23 billion tons of oil shale pitch, a raw material with properties similar to those of oil. The high content of pitch in the samples would indicate that the shale was of good quality.
However, the oil shale deposits – not to be confused with shale oil – may be quite tricky to explore. Mongolia lacks any oil and gas industry, with virtually no technology, no tech-savvy oil workers, no infrastructure, no pipelines. Secondly, drilling at the depths required for fracking (between 1800 and 2400 metres) will be difficult in Mongolia. Add to this the scarcity of water and many believe that fracking technology has a small chance of success in Mongolia.
It is still early days, though. And while pessimists list the potential problems, the optimists point out that foreign companies such as Genie Energy have enough experience and expertise to unlock Mongolia’s shale potential. That is if the resources turn out to be worthwhile and the Mongolian experts seem to think so.
Yuval Bartov, Chief Geologist of Genie Oil and Gas, said, “Our analysis of the available geological evidence suggests that this license area may contain world class deposits of thick and rich oil shale well-suited for our in-situ extraction technology.”
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