Member Info for GKahn

There appear to be three tank trucks (tankers) in the picture, and they look large. In the US the larger tankers have a capacity of 11,600 US gallons i.e. about 275 barrels (1 barrel=42usg)

If Heron starts to produce at 300 barrels/ day and allowing two days for the round trip to a refinery in NW China, the three tankers are probably sufficient initially for a continuous operation.

What happened to the Gazelle prospect?

Now we know for sure that Mike Buck and the Board cannot be trusted

At start-up of the Mongolia refinery, scheduled for some time in 2026, there should be adequate crude oil already in storage. Depending on the time of year for the start-up of operations, this could be as much as 90 days’ supply. As an example, at 20,000 b/d of refinery thruput, this could amount to 1.8 million barrels – a substantial amount of crude oil to be sourced pre start-up from block xx together with crude from Petro China’s blocks. Moreover, the refinery will have to be operationally viable based on a minimum of crude oil availability on an ongoing basis. Whether there will be sufficient crude oil production is very questionable. However, if the prognosis is favourable, the Mongolia government should ensure that the pipeline from the blocks to the refinery and adequate tankage is operational as soon as practicable so that the pre-fil can commence. With proper planning these facilities should have been ready to receive the oil TODAY.

It looks likely that the delay in getting the land use permit has comprised the timing for DQE’s drilling of many wells. Such further consequential delay in getting significant crude oil on production will be damaging for Petro Matad and for refinery viability.

Extract from RNS ‘…..we are aware that DQE expects to be busy with PetroChina and other operators from early Q3 2024.’

that suggests that there will be no drilling this year.

I agree Master 82, the Mongolian Government should never have issued an exploitation licence that was conditional on the land use permit over which the government had no control. Hence the licence was and continues to be undeliverable. As the land use permit continues to be held up, possibly indefinitely, the PM board now needs to slim down the organisation and lay off staff to conserve funds. The fact that there has been no explanatory RNS implies that local interests are determined to thwart any further exploration and development.

Government's production share of 40% and 5% royalty to be factored into the economics

Jimi: Extract from your post “not that it's of any importance to PMs operations” There is a possible issue to be addressed or finessed regarding the Government’s production share (40%) and royalty 5%. Assuming Heron is producing MG’s entitlement either would have to be exported or stored.

No trades showing since 2.30?

It is becoming evident that the local authorities are resolved not to cooperate for the registration of the area required by the regulations on the management of special purpose land.

BP

Indeed, there are several issues to be negotiated. However, I believe that these can be agreed relatively quickly once the land problem is finally resolved. Hopefully the Chinese will be pragmatic and MRPAM will be supportive and co-operative.

I am confident the export economics should be attractive whether or not the trucking costs and PC’s fees can be treated as recoverable under the PSC.

Ojay

Thank you for your kind words, much appreciated.

In terms of analysing the export economics for Heron crude, there are a few points on which we need clarification.

Firstly, the trucking costs for the 400km to NE China and empty return, I saw a recent post which mentioned a cost of US$8.00 /bbl. I am not sure of the provenance for this figure, maybe PetroChina, but the estimate looks reasonable. In addition, PC will want a marketing/facilitation fee.

Secondly, we need clarification on whether the trucking costs and PC’s expenses can be treated as recoverable Petroleum Costs within “Petroleum Operations”. I have looked for a definition of Petroleum Operations, but unfortunately the summary of the PSC in the AIM Admission document does not include a definition.

Generally, there has been a close historic correlation between Brent and the Daqing crude price, in which case whichever is adopted as the basis for pricing Herod crude may not be material. However, we need to understand whether discounted Russian crude entering the China market could be a factor in the export negotiations with PetroChina.

Under the Block XX PSC, the Mongolian government has a production share of 40%, managed by MRPAM, plus a 5% royalty which they will likely take as royalty oil. The question arises whether the Mongolian Government will participate in exporting their 45% share given the political sensitivities. If they decline what are the potential implications?

GKahn

OWL: RNS 7 December 2021:

“The Mineral Resources and Petroleum Authority of Mongolia (MRPAM) and Petro Matad held the first Exploitation Meeting at which it was agreed that the technical details of the benchmarking and pricing of Heron crude should be finalised between the Company and MRPAM by year-end. This will then allow for contract negotiations with potential buyers to begin. Mongolian crudes have been priced benchmarked to both Brent and Daqing crudes over the years. The Heron 1 assay is Brent-like in its chemistry and so Petro Matad is pushing for benchmarking to Brent in discussions with MRPAM and once agreed, plans to do so in the follow up negotiations with potential crude oil buyers early in the New Year.”

As far as I am aware there has been no further update on crude pricing.

You may find the following extract from the CPR in the AIM admission document of relevance despite being historic.

“Petro Matad has advised that any Block XX crude oil production would be sold at the Aershan Oil Gathering Station located in the Aershan Oil Field in Inner Mongolia, approximately 400 kilometres from the block. We are advised by Petro Matad that the crude price obtained at this point for any Block XX crude would be equal to the FOB price of Daqing crude oil less a differential of US$1 / bbl.”

Owl: the pricing basis for crude has not been resolved with the Mongolian Government. I recall an RNS of more than a year ago which stated that this was to be discussed, specifically whether the pricing should be linked to Brent or a Chinese marker Crude. There has been no further update on this issue since as far as I am aware. Logically these discussions with MRPAM would relate to the price for crude consumed by the Mongolian refinery when it is on-stream. In the meantime, while crude is exported to China, Heron crude would surely have to be competitively priced against the alternative.

Owl, I think you may be confusing the allowable costs recoverable under the terms of the PSC with what the refinery in NE China pays for the crude on a delivered basis. Petro Matad will not be reimbursed by the refinery in China

“Transportation costs reimbursed by Chinese refinery.”

Owl, what is the source for this statement?

Horsers and Landicamans: Clearly,Owl had another pseudonym in the past, and it may have been Fair Analyst. Owl also participates on the Synairgen, Beacon Energy and Touchst BBs. Do we know when Fair Analyst departed from this board and what other BB’s he posted on?

Oyu Tolgoi will surely feature, but will we see Mike Buck or Richard Bowley interviews?

CNN’s “Quest Means Business” on Mongolia tomorrow

It is time for the board to recognise the realities, most notably: the political situation and continued bureaucratic delays; and the weak financial position of PM, requiring repeated fund raisings at extraordinary discounts in order to further the dream and pay for overheads.