From Platts Energy In Eastern Europe, Jan 2009

Mako Trough licenses brought under one work program

The Mako Trough is Hungary’s undeveloped gas jewel,
but only if it can be persuaded to give up its riches in an
economic manner. The gas is spread throughout a large,
deep basin-centered gas accumulation, which poses
major technical challenges to drilling, such as high
pressure and extremely high temperatures. Recoverable
gas resources at Mako have been estimated at over
21.8 Tcf, but US company Falcon has so far been unable
to convert these resources into economically recoverable
reserves, despite an active drilling program.
Should they do so, they would transform Hungary’s
energy security. The country uses 472 Bcf a year of
predominantly Russian gas, piped through Ukraine, and
has virtually no domestic production or proven reserves.
Hungary is also close to the major Austrian gas hub of
Baumgarten and receives some West European imports.
Now, however, Falcon has agreed to join forces with
ExxonMobil and Hungary’s MOL to combine all the
companies’ exploration licenses in the Mako Trough into
one unit. This means the amendment of a deal reached
in April, which saw ExxonMobil take over operatorship of
the licenses held by Falcon. The company says that
under the terms of the amended deal, ExxonMobil and
MOL will finance the expansion of the exploration area.

“We are pleased to enter into the amended terms
with ExxonMobil and MOL – the Mako Trough is
potentially an enormous resource, and Falcon regards
these modifications to the April agreement as a
significant step forward in optimizing the ultimate
development of Falcon’s assets,” Falcon chairman and
CEO Marc Bruner said. “All parties have a single
common goal, and will greatly benefit from a combined
work program,” he added.
Following the initial work program to evaluate
commercial production of unconventional gas and
liquids, ExxonMobil has the option to proceed to an
appraisal phase. “If ExxonMobil and MOL elect to
proceed to the appraisal work program, the parties agree
to expand the area where wells may be located and
apply a portion of the $100 million program
expenditures basin-wide in a combined work program,
based on the optimum locations from a technical basinwide
appraisal standpoint,” Falcon said. Quoting from
the new agreement, Falcon added, “if ExxonMobil and
MOL elect to proceed to the development work program,
the parties agree to apply 50% of the $75 million
payment due to Falcon to the same expanded basin-wide
area in a combined work program.”