Petro Matad to use temporary facilities at Heron-1

Mongolian oil explorer and developer Petro Matad updated the market on operations at its Heron-1 oil discovery well on Thursday.

The AIM-traded company said it had received approval from the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) to start production at Heron-1 using temporary facilities, with operations expected to begin in October.

In an effort to avoid further delays caused by prolonged bureaucratic processes, Petro Matad proposed the use of temporary production facilities at the Heron-1 well site.

The board said such a solution would allow the company to begin oil production while awaiting the final construction permit for long-term production infrastructure.

It said the application for the permit was currently pending review by the newly-appointed provincial governor, who assumed office in early September.

There was no clear timeline for the permit approval, prompting Petro Matad to seek interim measures to expedite production.

The temporary facilities would be installed directly on the Heron-1 well pad, enabling Petro Matad to initiate oil extraction and sales while the long-term facilities were constructed in parallel.

Petro Matad said it had instructed its contractor to begin installation, which is expected to be completed within the next two to three weeks.

In addition to the operational developments, Petro Matad said it had made progress in securing the necessary arrangements for oil sales.

Following a high-level meeting at the Block XIX facilities, located about 20 kilometres north of Heron-1, the company reached an agreement in principle with the Block XIX operator.

The agreement would cover the collection, metering, processing, storage, export, and sale of oil produced from Block XX, where Heron-1 is located.

Petro Matad said the details of the cooperation agreement were currently being finalised, and would be submitted to MRPAM for approval.

“The further hold up of the construction permit at the final step of an unnecessarily complex process is unwelcome, but we are very pleased that we have the support of MRPAM to use temporary facilities to expedite production,” said chief executive officer Mike Buck.

“We do not anticipate any significant facility cost increase as a result of this solution and we will closely manage the construction activities when they start, to allow construction and production operations to continue simultaneously.

“The meeting in Block XIX was very productive and the operator's willingness to cooperate with the company is much appreciated.”

Buck said the company was “looking forward” to completing the drafting of the cooperation agreement, and to securing MRPAM's approval within the coming weeks.

“Meanwhile, Heron 2 drilling operations are proceeding smoothly.

“With Gobi Bear-1 soon to spud, these are busy and exciting times for the Petro Matad team.”

At 1100 BST, shares in Petro Matad were down 5.02% at 2.23p.

Reporting by Josh White for Sharecast.com.