Chinese gas equipment manufacturer Langrun signed a non-binding letter of intent to provide up to $46 million in financing for a CBM-to-LNG project by Australia's Jade.
Jade stated that the Chinese gas equipment manufacturer would fund drilling and production activities for the next 18 wells in the field. The company has already completed seven wells at Red Lake. The planned support includes what Jade described as “non-dilutive financing” for surface facilities required to gather, process and liquefy gas into LNG. Jade also noted that the agreement contains “a low upfront capital outlay option, to be funded by future Jade revenue”.
Both companies agreed to consider expanding the cooperation to cover all 175 planned gas production wells in the first phase of Red Lake’s development. Jade said that Phase 1 consists of 20 production wells, including two that commenced production in June.
In its statement, Jade said: “Langrun’s expertise in the gas industry in China and in particular in CBM offers a great fit for Jade as the company seeks options to fast-track development of the Red Lake gas field and to optimize gas production for faster access to customer markets and ultimately early revenue.” The company added that, subject to regulatory and government approval and the signing of definitive documentation, the Red Lake project could be developed to include purification, pipeline and other transport systems, compression for potential compressed natural gas (CNG) production, liquefaction for LNG production, and refueling station construction to support gas sales for vehicle, industrial and other markets.
Jade also stated: “Jade could provide the gas source, suitable land for construction of facilities, and operational rights, while Langrun will arrange the financing for drilling and associated production services, supply and install gas processing equipment and manage production operations.” The company emphasized that the binding agreement depends on commercial flow rates being achieved at the first two production wells, as well as required regulatory and governmental approvals.
Langrun chief executive Wang Yongtao said: “We share in Jade’s view that there is a significant opportunity for gas in the southern Mongolian region, and Langrun has the experience and understanding to execute on this vision to take advantage of the gas demand in the region, particularly for LNG and CNG where we have a rich experience.” He added: “Jade has the potential for a large-scale, long-term energy project that can have a significant impact on the energy dynamic of the southern Mongolia and northern China region, and we want to be a part of that.”
Jade also reported on Friday that it had issued two million shares without disclosure to investors.
