Chat Sparks Texas Coal Gas Play

Maverick Has Potential

Out on the dusty southwest Texas plains where cattle outnumber people and the Rio Grande meanders through on its way to the Gulf of Mexico, scientists are working feverishly to determine if that desolate land might develop into the next hot coalbed methane play.

That's right. Coalbed methane.

Coalbed methane is the fastest growing segment of the overall natural gas resource base in the United States. But until recently conventional wisdom held that the lignite coals of the Gulf Coast were not prospective due to low rank and insufficient gas content.

A pilot project in the Olmos coals in the Maverick Basin, however, hopes to prove that conventional wisdom false, and for the first time produce commercial quantities of coalbed methane on the Gulf Coast.

And the project was virtually an accident.

The Exploration Co. (TXCO), based in San Antonio, had been following the progress of coalbed methane production in the United States, trying to determine if some of its properties in North Dakota might be prospective for coalbed methane. It never occurred to the firm that its rapidly expanding acreage position in the Maverick Basin could hold coalbed methane.

TXCO's chief financial officer has contacts in Mexico, however, and a couple of years ago a retired exploration manager for PEMEX, the Mexican national oil company, was in the company's San Antonio office discussing operations on both sides of the border. During those talks the official mentioned that the PEMEX oil and gas division was required to drill wells to vent natural gas prior to northern Mexico coal mining operations by the firm's mine division.

"That triggered our interest," said James E. Sigmon, president of TXCO. "We began thinking about what might be on this side of the river."

Tentative First Steps

TXCO began investigating the area and found that there was a coal mine near Eagle Pass, Texas, active up until World War I.

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Out on the dusty southwest Texas plains where cattle outnumber people and the Rio Grande meanders through on its way to the Gulf of Mexico, scientists are working feverishly to determine if that desolate land might develop into the next hot coalbed methane play.

That's right. Coalbed methane.

Coalbed methane is the fastest growing segment of the overall natural gas resource base in the United States. But until recently conventional wisdom held that the lignite coals of the Gulf Coast were not prospective due to low rank and insufficient gas content.

A pilot project in the Olmos coals in the Maverick Basin, however, hopes to prove that conventional wisdom false, and for the first time produce commercial quantities of coalbed methane on the Gulf Coast.

And the project was virtually an accident.

The Exploration Co. (TXCO), based in San Antonio, had been following the progress of coalbed methane production in the United States, trying to determine if some of its properties in North Dakota might be prospective for coalbed methane. It never occurred to the firm that its rapidly expanding acreage position in the Maverick Basin could hold coalbed methane.

TXCO's chief financial officer has contacts in Mexico, however, and a couple of years ago a retired exploration manager for PEMEX, the Mexican national oil company, was in the company's San Antonio office discussing operations on both sides of the border. During those talks the official mentioned that the PEMEX oil and gas division was required to drill wells to vent natural gas prior to northern Mexico coal mining operations by the firm's mine division.

"That triggered our interest," said James E. Sigmon, president of TXCO. "We began thinking about what might be on this side of the river."

Tentative First Steps

TXCO began investigating the area and found that there was a coal mine near Eagle Pass, Texas, active up until World War I.

"The literature of that time described the coals as bituminous, which was unusual since most of the coals in Texas that we were aware of were Wilcox lignite coals," Sigmon said.

Further investigation uncovered that a second mine had operated north of Laredo, containing a different kind of coal that was much harder and closer to anthracite -- but this historical information seemed to indicate that high-grade coals did exist in Texas.

"However, all this literature dated from the early 1900s, and we weren't comfortable with the validity of that information," Sigmon said, "so we decided to take sample cuttings of the Olmos coal zone in a well we were drilling to test deeper oil and gas targets.

"Ordinarily the coal zone would be behind surface pipe and we wouldn't even log it," he added, "but we got a significant amount of cuttings from the coals."

TXCO had those cuttings typed, which proved the coals were indeed bituminous B coals.

"The next step was to run adsorption tests on the cuttings to determine just how much gas the coals could hold and if they were saturated with gas," Sigmon said. "We got positive results from those tests as well."

TXCO next drilled three shallow core tests that ranged from 200 to 600 feet deep, and ran desorption tests on the cores to get some idea of the gas quantities contained in the coals. The results were encouraging.

"That was two years ago," Sigmon said, "and since that time we have been quietly amassing more acreage in the Maverick Basin specifically to target potential coalbed methane targets. Today we have about 250,000 acres in the basin that are prospective for coalbed methane, and we have drilled 10 additional wells to run more desorption analyses."

TXCO also set pipe on some of those wells to run permeability tests on the coals, which were encouraging.

"You can have coal and gas in the coal, but if you don't have fractures and permeability in the coals it's difficult to get the gas out," Sigmon said.

The firm has established four pilot programs totaling about 30 wells to assess the dewatering phase of the Olmos coals and the ultimate economics of a coalbed methane play. TXCO bought over 100 old wells and re-entered some of those to establish the pilot projects. The company also drilled five new wells as part of the pilots.

"Having run adsorption tests, we knew the coal was undersaturated, which means it doesn't hold as much gas as it could," Sigmon said. "We have to reduce the pressure down to the saturation point before the gas will come out of solution.

"We've installed a monitor well at one of the pilots to monitor the bottom hole pressure so we can continually assess our progress."

Other Sites of Potential

The Olmos in the Maverick Basin isn't the only coal zone in Texas garnering some attention -- Ravenridge Resources and Union Pacific Resources studied the Wilcox north of Houston and had some encouraging results. Anadarko Petroleum subsequently acquired UPRC.

Bob Downey, owner of the Energy Ingenuity Corp. in Colorado who has assisted the USGS and the Texas operators, said the Wilcox coals have as much if not more potential than the Olmos, but virtually no wells have been drilled to test the coals, so there is just not enough data available to make a determination.

"The status of that Wilcox play is akin to the first couple of wells in the San Juan Basin," he said. "Every time you think you have a handle on the mechanisms that control coalbed methane and where the most prospective areas are, something will pop up and prove you wrong."

The Powder River Basin provides a classic example.

"Companies walked away from the coals there in the 1970s and '80s because they were too thick, the permeability was too high and gas content was too low," Downey said. "They were sure only an ocean's worth of water would be produced out of the coals. Today we know just how wrong they were."

Downey believes that if companies can prove up coalbed methane potential on the Gulf Coast, it would be a "real boon for the country and those firms." Unlike the Rockies, there is a massive infrastructure in place, gas prices are better, the weather is more temperate and it's not on federal lands.

"Those are a lot of operational and economic positives," he said.

Sigmon realizes the daunting task still facing his company.

"We've heard all the stories about other coalbed methane plays," he said. "All the experts tell us that every play is different, and what works for one is not the optimum approach for another -- (so) we are experimenting at our pilots to see what will work.

"We know that in other coalbed methane plays the original operators were not the ones who made it economic -- they walked away too soon," he said. "We don't intend to repeat that mistake, so we view this as a long-term project and plan to find the right solutions for this particular play."

Sigmon fits the situation into a neat package:

"Do we have coal? Yes. Is it the right kind of coal? Yes. Does the coal contain significant quantities of gas? Yes. Do we have permeability? Yes. Can we commercially produce the coalbed methane? We still don't know.

"Obviously we are encouraged since we have acquired an additional 250,000 acres to chase this play."

Barker is excited by the potential, too:

"If this works here in the Maverick Basin, the bituminous coals found at depth throughout the Gulf could hold huge potential," he said. "We're talking about large quantities of gas in an existing infrastructure."

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