Jade Gas Holdings Limited has signed a non-binding Letter of Intent (LOI) with Zhengzhou Langrun Intelligent Equipment Co., Ltd. for non-dilutive project financing of up to USD 46 million (AUD 70 million) for the initial phase of its Phase 1 LNG Project development at the Red Lake gas field in Mongolia. The partnership with Langrun, a leading Chinese gas equipment manufacturer and operator primarily focused on Coal Bed Methane (CBM), aims to utilize the company's midstream gas processing expertise to enhance gas production, allowing quicker access to customer markets and ultimately earlier revenue.

Financing Structure and Development Plans

The financing deal contemplates several key aspects, including drilling and production operations for the next 18 wells at the Red Lake gasfield, surface facilities to gather, process, and liquify the gas into a saleable LNG product, and a low upfront capital outlay option to be funded by future Jade revenue. The arrangement also includes potential to expand the terms to accommodate all 175 Phase 1 gas production wells.

The LOI is designed to enable Jade to monetize gas produced from initial production wells and development at the Red Lake gasfield on non-dilutive terms. The Phase 1 Plan for Development Operations envisages a 15-well program across multiple well pad locations and will focus on gas production from three primary gas resource-bearing seams: seam IIIb, seam IIIa, and seam Ic.

Subject to agreement of definitive documentation, government, and regulator cooperation and other approvals, the Red Lake gasfield could potentially be developed to cover purification pipeline and other transport, compression for potential production of CNG, liquefaction for production of LNG, refueling stations and storage facilities, suitable land for construction of facilities, and operational rights.

Partnership Scope and Langrun's Capabilities

Langrun will provide financing for drilling and associated production services, supply and install gas processing equipment, and manage production operations. The initial phase will focus on wells, with the first two production wells coming online in June and gas breakthrough in August 2025. Langrun's core businesses span multiple areas of gas infrastructure. Their Upstream Wellhead Development and Utilization covers wellhead construction, gas collection, and equipment production.

Transportation Gas Equipment focuses on research and development and manufacturing of gas equipment, including providing a full set of core equipment for gas stations, with core products including L-CNG/LNG pump skids, CNG hydraulic piston compressors, and CNG/LNG dispensers. Industrial Gas Infrastructure Construction focuses on key industrial gas infrastructure, including the construction and operation of pipeline gas projects, gas pressure-regulating devices, and pressure-regulating metering skids.

Terms and Future Expansion

The LOI sets out confidentiality obligations and preconditions for cooperation and is non-exclusive, creating no immediate financial obligations on Jade or project Joint Venture partners. All future project-specific arrangements will require separate, formal agreements. A binding agreement is subject to commercial flow rates being achieved at the first two production wells, regulator, and Mongolian government approval, with a revenue-sharing arrangement to be negotiated based on each party's contributions.

In subsequent phases of project development, the partnership may expand to cover additional wells and broader Phase 1 development. Jade notes that CBM project financing of this nature accelerated Qinshui Basin development in China, with the widespread and prolific development of the basin initially undertaken under similar project financing partnership structures.

Management Commentary and Company Background

Jade Executive Director Joe Burke commented that Langrun is well known to the company, having also worked with their drilling contractor DWK for many years. Burke stated that collaborating with a company with such vast experience in gasfield developments would be a huge advantage, as they focus on the most appropriate pathway to develop the Red Lake gasfield, emphasizing quick transition to gas production and customer markets for early revenue.

Langrun CEO Wang Yongtao expressed the company's forward outlook on working with Jade Gas to help monetize its gas assets, sharing Jade's view of significant opportunity for gas in the southern Mongolian region. Wang noted that Langrun has experience and understanding to execute on the vision to take advantage of gas demand in the region, particularly for LNG and CNG, where they have rich experience, viewing Jade as having potential for a large-scale, long-term energy project that can significantly impact the energy dynamic of the southern Mongolia and northern China region.

Zhengzhou Langrun Intelligent Equipment Co., Ltd. is a listed company in the gas sector, registered in Zhengzhou High-tech Industrial Development Zone of Henan Province. As a long-term strategic partner of PetroChina, the company has jointly established 4 joint ventures in Henan Province, operating 7 mother station/gate stations and undertaking social responsibility of city gas distribution, transportation, and sales.

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