I think this is a longer version of the same story:

Well, the longer the story is, the better explained :)

Enough for 100 years? – Secrecy is abundant around the Mako gas field.

http://www.hetivalasz.hu/cikk/0901/m...

There is gas under Mako; still we do not know whether it is economical. Right now, everyone is silent about the resource that made such sensational news two years ago. Chances are that it will not solve Hungary’s energy problems, and if this program succeeds, the earliest production will start in 2012. The Heti Válasz has been at the site, they have found only a locked up gas well, and when they approached the new drilling site, they were barred by a barricade.

“As per contract agreement we have signed with Mol, we are not able to make any comment about the work being done in the Mako area” – no matter how cleverly we tried to question –we were turned away with this answer by an employee of TXM Olaj és Gázkutató Kft the first company to explore the Mako resource. The secrecy is understandable, since the company and its parent company the Canadian Falcon Oil & Gas Ltd. has spent more than 39 billion Forint so far to map the gas resource under the Mako trough, and even now it is still unknown whether it will be economical.

We thought, why not get a look how the experts are doing their work to free the gas from the ground. Simultaneously two wells being drilled between Mako and Hódmezővásárhely, near Óföldeák. Trying to avoid the huge potholes that pepper the road to this tiny village with population less than 500. The village cannot support their livelihood, most of the folks here travel to Hódmezővásárhely or to Mako’s industrial park to make a living. At lunchtime we stopped by Zöld Fa the local pub, we found six of the town folks around the tables. There is a hand written note on the wall, advertising cheap firewood.

Lost in the fog

The gas is not the foremost subject around town, rather some of the inconvenience caused by the activities. “They have erected the drilling tower in December and it is lighted up like Christmas three”- said the pub owner. “It is blinding when you are driving home at night”

The men - with the pessimism that is typical of the people that live on the Great Hungarian Plain – are saying that they will not benefit from the gas under their feet. The only folks will benefit from these activities are the ones own the land where the wells are drilled. They are not yet preoccupied with the tax income possibilities for the town, and the job opportunities did not materialized either, there was only one position filled from the town by János bácsi as a security guard. “But he is not working there anymore” finishing their talk by turning back to the TV to watch the C category film.

Leaving town, we can see the work area from a good distance away, but before we can get there, we have come across a TXM well from earlier times on a leveled land, only a gas pipe with valves atop on it, and next to the valves thick pipes disappearing into the ground. The valves are locked with a shining chain, the gauge showing zero pressure. In the distance one kilometer away, just barely, we can see the drilling tower in the fog.

On the drilling site, workers are working feverishly, monotone noise coming from the rig. Warning signs at the entrance warns about dangers on the site, possible gas leakage and deadly H2S. Smoking and use of mobile phone is prohibited.

The well site supervisor looks friendly enough as he approaches the barricade, and as he steppes outside the barricade, he gets into a very serious conversation with someone on the phone. A few moments later, we are talking to the same TXM personnel with whom we talked earlier and politely refused any information about the operation. He nervously inquires about which side of the barricade we are, because we are not allowed to venture beyond the barricade.

He wants to know whom we are talking to and about what, because no one there can give us any qualified information. Allegedly, here at this new site they are drilling for a production well, and this location economically more promising than the previous one. Here, the gas is approximately 4700 meters deep; the earlier well reached more than 6000 meters.

Could break the drill

The oil and gas industry experts knew the existence of Mako resource since the early 1970’s. Soon after the discovery, all hopes for exploitation were given up due to technical difficulties and lack of founding.

“The structure of the conventional gas fields can be imagined as a giant Swiss cheese, and the gas is accumulating in the large holes.” – explains Tihanyi László director of the oil and gas faculty at the University of Miskolc. “In comparison the Mako structure is tight, therefore an unconventional gas field. The gas-bearing rocks in these depths were not allowed to form gas-bubbles in the structure, therefore the gas were trapped in the tiny capillaries. Imagine the structure of these rocks as being like the structure of the Trappista cheese; the tiny holes in the cheese are invisible to the naked eye.”

This is one of the difficulties need to be solved for the successful exploitation. First we have to use the right technology to connect these tiny gas-chambers that allows the gas accumulate in one place. This can be achieved by fracturing technology, and this type of technology has been successfully employed elsewhere.

Exxon Mobil is the world’s leading company in this type of exploitation. Last year Exxon acquired a substantial interest in the Mako gas-field. Exxon’s foray into the Mako gas-field emphasizes its importance. Although Exxon’s success story with tight gas plays in the Rocky Mountains makes them look like a sure bet, but there is a possibility that the Mako trough could break the bit off their drill. “There are no two resource sites that are alike, and the Mako site is the hardest nut yet to date.” – said professor Tihanyi. If it wasn’t enough that the sedimentary rock is hard, and in many places 6000 meters deep, in addition to this the temperature in the Carpathian-basin is much higher than other places in the world. While in most places in the world, the geothermal gradient is 3 Celsius per 100 meter, here in Hungary on the average 5-7 Celsius. According to the scientist, the earth’s crust is much thinner here than elsewhere. If you were to drill somewhat deeper, the magma would flow to the surface. Therefore, it is no wonder that the temperatures of the gas flowing from those depths are approaching 200 Celsius.

These technical and technological difficulties are compounding the cost to drill these wells. The consensus of the experts in the field is that the economical exploitation of the Mako type of gas-field requires oil prices above the $100 level. For example the deployment of one of Falcon’s well cost was close to $50 million , for that reason Falcon had no choice but to bring in a capital rich partner in Exxon Mobile the company that brought world fame to the Mako trough, then at a later point Mol also joined in the partnership.

How much is there?

There are many opinions on just how much gas is buried in the Mako trough. The first estimates of 1500 billion cubic meters would provide Hungary with gas for 100 years. The country’s present consumption is 14-15 billion cubic meters per year. Last Spring the TXM in a revised estimate with a 50% recovery rate expected to produce 1240 billion Cubic meters of gas, expected production timeline was 2012-14.

The Jamestown Foundation also pitched in: According to them, the commercial exploitation could start early as 2011, and in 2012 producing 10 billion cubic meters. The Exxon Mobil and Mol estimates 340 billion cubic meters of recoverable gas. According to Mol, this will requires 2000 wells, and Mol could deploy 50 wells per year. According to these calculations - the 50 wells per year with the currently known technology – in the next thirty years, they will extract 30% of the estimated 340 billion cubic meters of gas. Right now, still not clear whether worth it.

The estimated gas reserve is imposing enough to continue the exploration. On thing is certain according to Mol, even with the Mako gas reserves Hungary still will require to import gas in the future. In case of success, 40-40% of the gas goes to Mol and Exxon and 20% to Falcon.

Similar to Wyoming

At the end of the 80’s the Worldbank financed the deep drilling program in Hungary, this awoke an interest in the Mako gas-field in the West. In 1998, John Gustavson an American geologist acquired an exploration license in some part of the Mako trough. He liked the similarities in the Mako trough with plains in Wyoming. Gustavson researched and compared the earlier Hungarian and the later international exploration results, and then in 2002 he started to show his findings to major oil companies. In the end, he attracted the interest of Marc A. Bruner the former CEO of Ultra Petroleum. After that, Bruner founded Falcon Oil and Gas, and purchased the Mako concession from Gustavson. Starting in December 2005 Falcon with 6 exploration wells explored and delineated the gas resource in the Mako trough.

In May of 2007, Falcon acquired a production license on 100 thousand hectares of land from the Hungarian government. This is the largest concession that was ever given in Europe. The Hungarian government will receive 12% mining royalties. Falcon signed a $300 million exploration and exploitation deal with Exxon Mobil’s Esso International Ltd. The agreement covers 75% of Falcons production license. Falcon retains 33% undivided interest in the contract area and Exxon getting the other 67%, then Exxon agreed with Mol to work together in the contract area.