Jul 13, 2008

Europe’s greatest energy-secret hidden beneath the onions and garlic!

By Andrej Nosko

The natural gas field near the city of Makó, known for the garlic and onion farming, is considered to be one of the largest continental troughs in the world. If the initial estimates prove to be accurate, amount of the non-conventional gas found under the garlic and onion fields of Makó would mean it is the biggest onshore gas field since 1959 discovery of Groningen field in Netherlands. This would position Hungary as an important gas producer, potential exporter and would free Hungary altogether from its gas import dependence.

Makó in the recent news
Although the presence of the non-conventional gas in Hungary strictly speaking, is not such a novelty. The news reemerged when on March 31, 2008 USA, Texas based consultant RPS Scotia Group, published the Resource Estimates of the Makó trough, and in the begining of April MOL Nyrt, the largest acreage holder for unconventional plays in Hungary and the owner of a well-developed energy infrastructure in Hungary, announced results of its joint study with Exxon, noting great potential in the Makó area.

The following map has been compiled and redrawn from various illustrative images, included in the Falcon Oil and Gas Ltd. FORM 51-102F1 (Management Discussion and Analysis for the year ended December 31, 2007) and MOL April 14, Press release, to illustrate the contractual relationships in the Makó trough. The map is interactive, and annotated, feel free to click on the colored polygons, or open the larger map before reading further.


View Larger Map
Open Map in Google Earth Progam (You must have Google Earth software installed)

Contractual relations in Makó trough
Although the largest acreage owner of the unconventional gas resources in Hungary is MOL, the news of Makó deposits was publicized mainly in connection with a series of announcement of joint deals between Canadian Falcon Oil and Gas Ltd., Hungarian MOL, and USA based ExxonMobil.

On April 10, 2008 the TXM Exploration and Production LLC, wholly owned subsidiary of Canadian British-Columbia based Falcon Oil and Gas Ltd. entered into a Production and Development Agreement with ExxonMobil Corporation affiliate Esso Exploration International Limited (acting in Hungary through its subsidiary ExxonMobil Kutatas es Termeles Magyarorszag Kft). On April 11, 2008, was this agreement followed by MOL and Exxon which signed an agreement to start a joint exploration work program in blocks 106 and 107 (see the map) in Makó Trough, as well as MOL's taking part on the Exxon's stake of the previous deal with Falcon. On May 16, MOL and ExxonMobil signed a Heads of Agreement to undertake a joint technical study of basins in Hungary with unconventional hydrocarbon potential.

Makó deposits in historical perspective
The predecessor of MOL, Hungarian state-owned oil company was exploring nonconventional gas deposits in Hungary (click for map overlay) already in 1960's and 1970's, and as WSJ quotes, geologist Dr. Gyorgy Szabó, currently a director at Falcon, who took part in the geological survey of the region in 1970s, Hungarian geologists "knew there were hydrocarbons there, but we also knew the rock was low-permeability and low-porosity." According to WSJ, in the late 1980s, the World Bank financed a deep-drilling program in Hungary, supervised by experts from the U.S. Geological Survey. The results of that review ended up in the hands of John Gustavson, founder of USA Boulder-Colorado based Gustavson Associates, who was touring former Warsaw Pact nations in 1991 on the lookout for oil and gas. In 1998 he acquired the license for a big chunk of Makó. Gustavon unsuccessfully tried to entice major oil companies into the project. Acording to WSJ he won interest of Marc Brunner, now CEO of Falcon Oil and Gas and, back than founding chairman of Ultra Petroleum, Pannonian Energy (which was in 2001 acquired by Gasco Energy of which Mr Brunner is currently a Chairman) and Pennaco Energy (Acquired by Marathon Oil), all companies with significant exprience in nonconventional gas exploration, notably in Wyoming.

Estimations of recoverable sources
Besides the news converage which is rather unreliable, since it does not provide citations, one can use two available reports for the 'preise' estimations. It is the September 2006 Independent Resource Assessment from The Scotia Group and March 2008 update to this report. The reports can be obtained throught search in the SEDAR database. The selected data from the reports is included in the following table (The comparison data is used from the BP Statistical Review of World Energy 2008):


Show the table in full screen.

This table summarizes the probabilistic summation of the recoverable resource estimates, nonetheless, this is only the technical probability of the project, and the certainty of the exploration still varies significantly. According to various sources, time to go online for the Makó gas varies from late 2008 to 2012 or to even later dates. Nonetheless, the news of the Makó deposits is very interesting and important, and although the nonconventional resources are not the cheapests there are, with the prices of gas predicted to rise substantially for Europe, even the nonconventional gas resources will prove indispensable and affordable.

If the predictions of Alexei Miller, Gazprom CEO, of gas prices rising to $500 per 1,000 cubic metres from the current $400 by the end of 2008 - or even $1,000, should the oil prices hit $250 per barrel - prove accurate, Makó's Hungaricum will not be onions and garlic, but natural gas and, a new landscape populated by hundreds of gas drill rigs.

Link to photo gallery of drills (added on November 19, 2008)


6 comments:

makotrough said...

Hi there,

we have recently put up a blog covering the whole story of the Mako Trough and it's upcoming development. Lots of Maps, Links to Corporate Presentations, Analysts Research, geological Knowledge etc.

http://makotrough.blogspot.com/


We like to use your Google Maps as well, if possible, please drop us a line. Thanks

Joe Gus said...

I congratulate you to a quite accurate description of the Makó gas field and its history and status. I can only add that Makó is unique and that it required the systematic evaluation of 16 opportunities around the world before I found this winner. I looked for giant oil or gas opportunities in stable countries in areas where financial conditions were also favorable. Of the 16 I studied eight countries in much more detail. Finally, I acquired large licenses in 4 by convincing the governments that the chances were there, but that very expensive exploration was required.
One by one the others fell by the wayside for geological reasons, but Makó prevailed. Originally, I perceived of 4 major risks at Makó: I speculated that the gas could be there, but was it? Yes, that was proved by Falcon's drilling. I was concerned, if a sufficiently large production license could be obtained over a hitherto unknown concept of a basin centered gas accumulation? It was with the help of Gyorgy Szabo. Since 1998 I kept an eye on the market for gas in Europe. Would it hold up? Yes, it has and then some. Those are three risks out of four, which have been mitigated. Now, Exxon needs to show that Rocky Mountain technology can be imported into Makó. I trust Exxon can. In the meantime I am off on my very own and exploring systematically for a novel, giant uranium deposit. Maybe I will be lucky again. Visit me at www.gus235.com John Gustavson

XOMBOSS said...

Intersting reading. We will have to see what happens next year at a lower depth then F1

Joe Gus said...

"Patience" is the word that has pursued me since 1998, when I first obtained the Makó licenses. Now, in November 2009 I must use Patience again: Exxon, the present operator has several months under Falcon's farm-out agreement during which to analyze their results from the 3 frac attempts in the Foldeak-1 well. Exxon also has experience from their Mindszent and their Hod-1 wells, not all good from a mechanical standpoint.
Briefly, the Foldeak-1 frac's were not what you would expect from a world-scale operator. Also mechanical problems (erosion-failed valves without back-up, possible inadequate cementing of casing, and other problems). The Exxon operator's report to be released to MOL and Falcon in a couple of months will tell more. Exxon is currently rigging up to test more of the identical Szolnok BCGA in the nearby Bekes basin on a farm-out from another party controlled by Aspect Energy. That is good for everybody, because Exxon appears to have to learn from one well or frac to the next. Perhaps ANY operator would have to do that in this very hot, very high pressure formation. We had hoped that Rocky Mountain technology (some developed by Exxon) would export easily into Central Europe, but that is apparently not so.
Therefore, my word is still "Patience". Remember, when I started this in 1998, I saw 4 (four) BIG RISKS. Is the gas there? (Now proved). Will time be available for the licensees? (Now protected by the 35-year Exploitation License). Is there a market, which will pay for the gas? (You bet!). The fourth risk is still there, namely can modern technology get the gas to the surface? That is what now is being attempted, but with many mechanical problems. Some of these problems should NOT have occurred, but that is easy for me to say. In conclusion, the gas is there, the legal protection to allow time is there, the market is there, and surely the engineers will get the gas out..... with patience.

Joe Gus aka John Gustavson

PS You can contact me regarding Makó Trough on my web site www.gus235.com which shows how I am now exploring for uranium, right in the middle of the USA.

Joe Gus said...

"Patience" is the word that has pursued me since 1998, when I first obtained the Makó licenses. Now, in November 2009 I must use Patience again: Exxon, the present operator has several months under Falcon's farm-out agreement during which to analyze their results from the 3 frac attempts in the Foldeak-1 well. Exxon also has experience from their Mindszent and their Hod-1 wells, not all good from a mechanical standpoint.
Briefly, the Foldeak-1 frac's were not what you would expect from a world-scale operator. Also mechanical problems (erosion-failed valves without back-up, possible inadequate cementing of casing, and other problems). The Exxon operator's report to be released to MOL and Falcon in a couple of months will tell more. Exxon is currently rigging up to test more of the identical Szolnok BCGA in the nearby Bekes basin on a farm-out from another party controlled by Aspect Energy. That is good for everybody, because Exxon appears to have to learn from one well or frac to the next. Perhaps ANY operator would have to do that in this very hot, very high pressure formation. We had hoped that Rocky Mountain technology (some developed by Exxon) would export easily into Central Europe, but that is apparently not so.
Therefore, my word is still "Patience". Remember, when I started this in 1998, I saw 4 (four) BIG RISKS. Is the gas there? (Now proved). Will time be available for the licensees? (Now protected by the 35-year Exploitation License). Is there a market, which will pay for the gas? (You bet!). The fourth risk is still there, namely can modern technology get the gas to the surface? That is what now is being attempted, but with many mechanical problems. Some of these problems should NOT have occurred, but that is easy for me to say. In conclusion, the gas is there, the legal protection to allow time is there, the market is there, and surely the engineers will get the gas out..... with patience.

Joe Gus aka John Gustavson

PS You can contact me regarding Makó Trough on my web site www.gus235.com which shows how I am now exploring for uranium, right in the middle of the USA.

andray said...

Joe, thanks for reading and replying to the comments on my blog! Are you anytime soon in the region of Central Europe? Would be happy to meet!