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Petro Matad Updates Oil Shale Operations South of Block IV

Source: 5/25/2012, Location: Asia

In addition to the operational update made by Petro Matad on its conventional oil exploration projects the Company is pleased to provide an operational update on its oil shale operations in the south of Block IV. The operational update on the Company’s conventional assets has been made in a separate contemporaneous release. Since Petro Matad’s discovery of the occurrence of oil shale on Blocks IV and V was reported, work has proceeded with the evaluation of what the Company considers to be one of its most promising occurrences of oil shale, Khoid Ulaan Bulag (KUB), in the south of Block IV. A summary of this work is outlined below:

- Two shallow core holes were drilled on the KUB oil shale occurrence in the south of Block IV, which confirmed that thick sections of oil shale occur over a large aerial extent.
- Assay results from those core holes complemented the previous surface samples over the outcrop area, indicating the high and potentially commercial values of organic content and yieldable hydrocarbons.
- Volumetric estimates from relatively limited data indicate a large tonnage of oil shale at what, in other parts of the world are considered economic grades.
- Preliminary studies carried out suggest the oil shale could be suitable for both in-situ and ex-situ processing.
- A bulk sample has been despatched to a test facility in the US for batch retort testing in order to determine the quantity and character of hydrocarbons which the rock could yield.
- The Company has contracted consultant Dr Jeremy Boak, a leading authority on oil shale, as prime consultant to assist in the examination of its oil shale prospects.
- Additional drilling will be undertaken to further refine the extent and quality of the oil shale occurrence.

The KUB oil shale occurrence occurs near the southern boundary of Block IV, 660km south west of Ulaanbaatar and 280km north of the border with China. It is one of 14 oil shale occurrences currently identified on Petro Matad’s Blocks IV and V. KUB consists of a well exposed area of oil shale with a minimum thickness of 265m, with an apparently more extensive continuation of the oil shale sequence beneath alluvial cover. The exposed area of the occurrence is about one square kilometre in extent, and has been geologically and topographically mapped, sampled with 70 surface samples and tested with one drill hole (KUB-1). That drill hole encountered oil shale with minor thin sandstone and conglomerate horizons over its entire 250m depth.

The exposure dips gently to the south and is bounded to the south by a recent fault. South of the fault, the sequence dips gently to the north beneath a variable thickness of alluvial cover. Oil shale is exposed south of the fault 2-3km east of the main exposure. A single 4km high resolution seismic line was shot by the Company in 2011 and indicates approximately the same thickness of oil shale as that in the exposed area (approximately 250m). A second core hole (KUB-2) drilled through about 200m of alluvial cover, encountering the oil shale sequence at 250m depth, as expected. The hole was terminated in oil shale at a depth of 307m. The seismic profile indicates the oil shale may continue for more than 200m. As in KUB-1, the oil shale sequence was logged and sampled on 1m intervals, with 5m composite samples being submitted for analysis.

The surface samples from the exposed occurrence averaged approximately 15.0% Total Organic Content (TOC) with an average yield of 106.1 litres/tonne (l/t) of oil. Drill core samples from both core holes returned somewhat lower values of both TOC and hydrocarbon yield than surface samples, possibly because they were 5m composites. However, even on average the TOC and hydrocarbon yield from those composites were notable by world standards. A bulk sample comprising 50kg of oil shale material from the exposed section has been collected and despatched to a test retort facility in Colorado, US. This batch retort test will provide baseline data on the hydrocarbons and volatiles generated during retorting, and on the characteristics of the spent shale and char. The oil produced in the test will be submitted for further testing to determine physical and chemical characteristics. The Company has allocated a small proportion of its overall budget to the ongoing evaluation of this oil shale prospect. The work programme includes additional drilling to further refine the extent and quality of the occurrence, further testing of samples on shorter intervals than carried out to date and other studies associated with processing techniques.

CEO Douglas McGay said “We recognise the early stages of our exploration on the KUB oil shale occurrence as well as the yet-unanswered questions of extraction, treatment and infrastructure. However, the potential of the resource and the energy needs of the region compel us to continue evaluating it. The Company has taken care not to detract from its conventional oil exploration efforts in this and other Blocks.”

Technical information in this news release has been reviewed by Consulting Geologist, Mr Rodney Graham. Mr Graham is a Licensed Professional Geologist with 30 years of experience in international minerals exploration and development. He is a member of the American Association of Petroleum Geologists and the Society of Economic Geologists.

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