THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY PETRO MATAD LIMITED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
1 March 2021
Petro Matad Limited
('Petro Matad' or the 'Company')
Block XX Operational Update
Petro Matad Limited, the AIM quoted Mongolian oil company, provides the following operational update.
Covid-19 situation in Mongolia
Mongolia had effectively contained the COVID-19 virus in country until November 2020. Since then the number of cases in the community led to the imposition of tight restrictions and to date there have been three lockdowns. The total number of cases in Mongolia is approaching 3,000 and since the start of the year Ulaanbaatar has been on a high alert level with business operations restricted and government agencies working on a rotational basis. A full lockdown was established for 12 days over the Lunar New Year holiday period ending on 23 February. During the lockdown the government carried out mass testing of the population with 500,000 people in the city of 1.5 million tested. A vaccination programme has now begun with the goal to complete vaccination of 60% of the country's population by the third quarter of 2021. The government has introduced a $3.5 billion comprehensive plan to protect the health of its people and to revive the economy. The official Covid-19 risk level in Ulaanbaatar was reduced on 23 February and 95% of businesses were permitted to re-open. As part of the plans for the economic revival, the government has said it does not intend to impose any more widespread lockdowns unless the spread of the virus spikes unexpectedly.
The restrictions and lockdowns since November 2020 have had an impact on Petro Matad's Block XX Exploitation Licence application process with government offices being shut. However, ministry and regulator employees have been working remotely and the Company has worked collaboratively with government to ensure that progress has been made during this period. With the lifting of restrictions on 23 February, Petro Matad is hoping to pick up the pace in the process to secure the Block XX Exploitation Licence.
Block XX Exploitation Licence
Reserves: Following the late December meeting of the Mineral Resource Professional Council (MRPC) its formal approval of the Heron Field reserves has been received.
Plan of Development: The expert auditor committee of the Ministry of Mining and Heavy Industry (MMHI) was constituted in January 2021 and has now completed its review of the Plan of Development. The recommendations made are being incorporated into the plan in advance of its submission to MRPC. In parallel, industry regulator the Mineral Resources and Petroleum Authority of Mongolia (MRPAM) agreed to do its own required and independent review of the Plan of Development simultaneous with the MMHI auditors' review. MRPAM has advised that its review is complete and we are waiting to be called to a meeting of the MRPAM Technical Committee to receive its recommendations. Petro Matad is ready for the meeting and has asked MRPAM to convene the Technical Committee as soon as possible. Once the discussions with MRPAM are complete the MRPC will be asked to convene to review and approve the Plan of Development.
Exploitation Area: The Company has submitted its formal application to MRPAM for the Exploitation Area and we are urging MRPAM to add discussion and agreement of the Exploitation Area to the agenda of the Technical Committee meeting that will review and conclude on the Plan of Development. Under the law, the Exploitation Area is to be determined by mutual agreement between MRPAM and the Company.
Formal application for Exploitation Licence: The MRPC approval and ministerial sign off on the Plan of Development and MRPAM's agreement to the Exploitation Area are the final two steps in the Mongolian government's Exploitation Licence application process. As soon as we have the outstanding documentation in hand it will be submitted to the Minister of Mining and Heavy Industry along with the approval of the reserves and the already approved Detailed Environmental Impact Assessment for the Heron Field development and we will formally request the Minister to grant the Block XX Exploitation Licence.
Timing: With the Lunar New Year lockdown now over, we are looking to complete all the necessary steps and to submit our application for the Exploitation Licence to the Minister by the end of Q1. The Company will endeavor for this to be submitted as soon as possible but given the slow progress we have seen in the process to date, this is an aggressive target and slippage into Q2 may occur, although it will not be for want of trying on the Company's part.
Memorandum of Understanding (MOU) with Petro China: As part of the Plan of Development preparations Petro Matad and Petro China discussed the technical and commercial aspects of unitisation of the Heron Field which straddles the boundary of Block XIX and Block XX. The companies agreed that unitisation and joint development are not merited due to the nature of the deposit and its relatively small extension into Block XIX. This conclusion has been incorporated into the Heron Plan of Development and will be discussed further with MRPAM at the appropriate time. The MOU also includes the agreement that Petro Matad and Petro China will discuss, agree and formalise how Petro Matad will access Petro China's Block XIX infrastructure to exploit economies of scale and operating efficiencies.
Online forum speculation
There has been speculation that the slow progress on the Exploitation Licence may be due to local antipathy towards Petro Matad or Petrovis LLC, the Company's largest and founding shareholder. We have seen no evidence of this and indeed, although the progress has been disappointingly slow, all of the approvals we have sought so far have been granted by the relevant government agencies. We have no reason to suspect that this will change as we seek the approvals that are still required.
The speculation specifically referenced a legal case in Mongolia against Mr. Ch. Davaanyam, a director of Petrovis and father of Petro Matad's Chairperson. Whilst Mr. Davaanyam has a small personal shareholding in Petro Matad, he has never had direct involvement in the Company and the Company has seen no impact on its activities resulting from the legal case involving Mr. Davaanyam.
The process by which an Exploitation Licence application must be made is not set out in detail in the Petroleum Law and Production Sharing Contract and so precedent is being followed where process is not legally specified. Petro Matad is following the process fully in line with legislation and in full cooperation at every step with the government agencies involved. We have provided recommendations to the government that would streamline the process in future. In the meantime, we will follow the process that the current legislation and regulations require and that the government dictates.
Progress has been much slower than we hoped to achieve, in part due to the recent impact of Covid-19 restrictions but also the result of the somewhat cumbersome Exploitation Licence application procedure which has not been used for many years as Heron is the first potentially commercial oil discovery in Mongolia for some considerable time. However, the Company is encouraged by the government's four-year plan 2020 - 2024 (https://cabinet.gov.mn/?lang=en) which seeks to increase investment in the upstream oil and gas sector in Mongolia. Consistent with this, we are receiving support from the relevant authorities which recognise the importance of demonstrating to potential investors that commercialization of discovered petroleum reserves is a priority for the country.
Further updates will be provided in due course.
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Further information please contact:
Petro Matad Limited
Mike Buck, CEO
+97 670 141 099 / +97 675 751 099
Shore Capital (Nominated Adviser and Broker)
+44 (0) 20 7408 4090
FTI Consulting (Communications Advisory Firm)
+44 (0) 20 3727 1000
About Petro Matad
Petro Matad is the parent company of a group focussed on oil exploration, as well as future development and production in Mongolia. At the current time, Petro Matad holds 100% working interest and the operatorship of three Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 10,367 square kilometres in the far eastern part of the country and Blocks IV and V have an area of 29,062 square kilometres and 21,143 square kilometres, respectively, in the central western part of the country.
Petro Matad Limited is incorporated in the Isle of Man under company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.