Jade Gas (ASX: JGH) remains on target to fast-track development of its Red Lake gas field in the South Gobi region of Mongolia after further drilling success.

Jade has identified a high-value gas opportunity in Mongolia and is on track to quickly supply local buyers from what it considers a world-class asset.

The Red Lake field sits in the Tavan Tolgoi Basin, a region with high demand for electricity, fuel and the base load energy supply necessary to underpin the region’s intermittent renewables.

Future gas producer

Announcing the successful drilling of a second production well at Red Lake, executive chair Dennis Morton said the results confirmed Jade’s confidence in the field being a future world-class gas producer.

“This is a wonderful situation for the company as all gas sales options target high energy replacement costs,” Mr Morton said.

“This second well outshines the first well with higher gas readings supporting the company’s desire to quickly commercialise the gas [and] we will now look to put the two into production within the next few weeks and move on to drilling the next wells.”

Commercial pathway

Jade now expects to complete an agreement with a midstream manufacturer of specialist compressed natural gas (CNG) equipment, which will enable the company to commercialise the gas from these initial wells.

“The CNG facilities are easily transportable and are able to take lightly processed gas and convert it into a saleable and marketable form, enabling the company to potentially deliver to various markets in the immediate vicinity,” Mr Morton said.

“Our gas commercialisation plan is built around a modular and scalable LNG project but we are also canvassing other nearer-term and lower-capex opportunities in the form of CNG, a product that is also utilised in displacing diesel in coal haulage trucks and which we expect will be in great demand,” Mr Morton said.

“These markets are in need of a cleaner and more secure fuel source, including the displacement of diesel which currently powers the large coal haulage truck fleet in the South Gobi.”