Calgary firm to explore Mongolian block

Canoel International Energy Ltd., Calgary, plans to purchase an interest in Block XXIII in southeastern Mongolia from the undisclosed present holder, which will continue as a partner.

By OGJ editors
HOUSTON, May 28 -- Canoel International Energy Ltd., Calgary, plans to purchase an interest in Block XXIII in southeastern Mongolia from the undisclosed present holder, which will continue as a partner.

Canoel will buy shares of the entity, which will retain a 6% carried working interest through the first commercial discovery. Canoel, as operator, is required to pay as much as $46 million in the next 5 years, including a small amount in the first year.

Block XXIII covers 3.37 million acres in the East Gobi basin just north of the border with China. The Ulanbator-Beijing rail line crosses the eastern part of the block.

The block has a structural feature that separates the highly prospective Erlian basin in China from the East Gobi basin. Ershan, the Erlian basin's largest field, is said to contain 500 million bbl of oil in Lower Cretaceous sediments and produces 60,000 b/d that is shipped to a refinery at Dong Wu, China.

PetroChina's Zuunbayan and Tsagaan Els fields, in Mongolia a few kilometers north of Block XXIII, are producing 1,600 b/d from shallow Lower Cretaceous sediments.

Block XXIII is lightly explored. The Soviets conducted regional gravity and magnetic surveys and in 1970 shot limited seismic. Most of the results are published in Soviet academic journals. No wells have been drilled in the block since the Soviet exploration efforts.

Canoel said it has identified several large structures under major regional thrust faults that need to be verified by modern seismic data.

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