Member Info for GKahn

You shouldn't trust anyone that is paid to post

Hazbeen
Your BYE BYE didn't last long.

In that case, hopefully Afzal has sold out

Who is Afzal?

I will come back once we have more news

He must be rremunerated for his negative posting. The interesting question is - by whom?

A number of stale bulls selling and not placees flipping IMHO

Mr P
And don't forget the Raptors

Sageman
The government take could be as high as 55 % depending on production levels under the PSC. Based on 5,000 b/d, the annual cash from Heron after cost sand government take should be more than PM’s market cap.

If Heron produces 5,000 b/d per day then we will be in very good shape to unlock the potential of not only block XX but also possibly and hopefully the Raptors prospects.
A few months ago, I posted about the potential cost recovery. Has anyone given any further thought on how this might be worth to PM?

Where does the figure of 5-10,000 b/d come from?

Nor was there a mention of the land use issue further to the RNS of 17 August

PM has sufficient funds to meet expenses through Q1 next year. The earliest the Company could theoretically go bust is therefore sometime towards the end of the first half next year. If you accept that it is inconceivable that PM would go bust once it has been granted the Heron EL in the first half 2021, CS’s prognosis is surely based on the EL application being turned down.

The Mongolian government is no longer under timing pressure to issue the EL any time soon. Operationally, this year has gone, thanks to the Mongolian elections and its consequences, Bureaucracy and Covid 19. Accordingly, provided the EL is issued well before the end of Q1 next year, there should be plenty of time to implement next year’s exploration and development plan and, most importantly, finally resolve the land issue permit problem. We may anticipate that the 2021 programme will be little different from the 2020 programme which was finalised by the end of Q1 of this year. The only difference is that PM will have less cash on hand, but nevertheless we understand that there is sufficient adequacy through Q1 next year and possibly a few months more, particularly as there will be some admin expense savings following the CFO’s year end retirement. Once the EL has been granted, PM can finalise the Heron offtake arrangements and raise equity.
GKahn

I am still inclined to believe that the Heron land use issue has not been finally resolved and I doubt the Exploitation Licence will be granted until it is.

While it is and continues to be very frustrating, the fact is that a whole year of exploration and development has been lost. Accordingly, provided the exploitation licence is issued before the end of Q1 next year, operations can proceed according to the plan that Mike Buck and his team had finalised six months ago. However, it seems most unlikely that the exploitation licence will be issued before the land use permit is approved. Hopefully, this can be finally resolved so as not to adversely impact plans for 2021.

There has been some discussion on this board about the adequacy of feedstock for the refinery following its planned start-up in a little more than two years. However, a shortfall in refined product output versus domestic crude oil production might not be such an issue as at first theorised.

The refinery capacity is about 30,000 b/d and domestic crude production is currently about 20,000 b/d, i.e. a theoretical shortfall of about 10,000 b/d. This assumes that all production from PetroChina’s blocks are redirected to the new refinery and not exported.

Operating refineries at a thruput well below their capacity is not ideal and can be problematic particularly in the winter months. This raises an interesting question: will it make sense to shut the refinery operations in the winter months and operate at high thruputs during the benign weather months.

This scenario has storage implications for both crude oil and refined products. In all likelihood the current modus operandi for supply of refined products given the climate conditions in Mongolia is to fill storage tanks in urban areas in the autumn and draw-down during the winter, which implies that there is adequate refined product storage capacity already in place.

Continuing the illustrative scenario, the refinery could operate at 30,000 b/d for eight months, starting say in April and shut down for four months from end November through March. This would require adequate crude oil storage at the refinery to handle crude oil deliveries during the winter months when the refinery is shutdown, and about 3 million barrels of crude oil storage capacity should be more than sufficient.

If this a realistic scenario, the availability of feedstock for the refinery may not be a critical issue, so that the Mongolian Government may not be under timing pressure to grant the Heron exploitation licence.

Oilfarmer
many thanks for your post. Pressure building on the Government, excellent
GKahn

Dozzawba
Your arguments are well-reasoned with which I agree. I would point out though that the Government faces a considerable challenge in securing sufficient feedstock for its refinery when it comes on stream by year-end 2022. Essentially all Mongolia’s crude production is attributable to PetroChina and its fields are in slow decline. Without any new discoveries the refinery throughput will be limited to about 50% of its design capacity. This assumes that the Government requires that all PetroChina crude oil production ceases to be exported to China; and clearly this raises political issues and questions PetroChina’s intentions for further investment and exploration in Mongolia. As to additional sources of feedstock, there is of course Heron but additional supplies must be found and development in just two seasons of operations as 2020 will have been an entirely non-productive year. Both the country and PM can ill-afford to lose a whole year.
GKahn

Thank you Dozzawba, much appreciated.
Goodness knows where the crude feedstock will come from and be available when the refinery comes on stream in a little more than two years from now. Are they building an Indian White Elephant!