Sydney-listed Talon Petroleum has executed a binding offer letter with Telmen Resource to farm in for a 33% interest in the proposed Gurvantes XXXV coalbed methane (CBM) project in Mongolia, it said on February 3. 

Telmen has undertaken an initial work programme to better understand the area's prospectivity, Talon said. With that initial work now complete, Telmen has concluded negotiations with the mineral resources and petroleum authority of Mongolia on the commercial terms of a production sharing agreement (PSA).  

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The PSA requires approval from the ministry of mining and heavy industry and from the cabinet of Mongolia before it can be formally awarded, Talon said.

The PSA covers an area of 8,400 km² and is situated around 20 km from the Chinese-Mongolian border and close to the northern China gas transmission and distribution network. Talon believes that Gurvantes XXXV is “ideally placed for future gas sales to satisfy both local Mongolian, as well as Chinese, energy requirements”. 

In conjunction with the transaction with Telmen, the company has undertaken a placement to fund the priority work programmes on the Gurvantes XXXV field. The placement will be done in two tranches and Talon expects to raise A$5mn (US$3.8mn).