By KATHY SHIRLEY
EXPLORER Correspondent

Maverick Has Potential

Chat Sparks Texas Coal Gas Play

Gulf Coast Coals Being Studied by USGS

In summer 2000, TXCO and two other Maverick Basin operators enlisted the help of the U.S. Geological Survey to determine the economic viability of the Olmos coals. The USGS has established either data shares or cooperative research and development agreements with the companies.

"There is virtually no data on the gas contents of Gulf Coast coals, so this cooperative drilling program gives us the opportunity to collect vital information on the potential for coalbed methane along the coast," said Charles Barker, senior research geologist with the USGS and co-primary investigator on a project to assess coals in the Gulf Coast basins with Peter Warwich, USGS, Reston, Va.

"We are charged with doing resource assessment of coals in Texas as a power generation source," he said. "It is the federal government's role to determine where our energy is going to come from, and Congress has mandated that the USGS evaluate the potential energy sources in the country.

"We started this project looking at coal for mining and realized that with just a few additional measurements we could tell how much gas was in the coals."

Typically the lignite coals on the Gulf Coast don't contain high gas contents, due to their low rank and shallow depth.

"That's why we started looking for these deeper coal targets like the Maverick Basin," Barker said. "Coal rank increases with depth, and we have found there may be some hot spots along the coast. One of those spots is the Maverick Basin and another is north of Houston. Quantifying gas content is our goal."

The Cretaceous-age Olmos coal can be as much as 20 feet thick in the Maverick Basin and is found at 2,500 feet or less in prospective areas. The coalbed methane wells cost about $100,000 to drill and complete, and production of about 150,000 cubic feet of gas a day will be necessary to make the play commercial, Barker said.

To date the USGS and the operators have drilled eight wells together, and three more are planned before the end of the year.

The Olmos coals were deposited in a marginal marine environment where coal slumps formed on top of built-out deltas, Barker said. The coals are relatively pervasive in the region, underlying almost all of Maverick County.

"I think these coals look like Raton Basin coals with a lot of partings in the coal and pinchouts of the coals that laterally pick up again," Barker said. "There are other producing coalbed methane basins that appear to be good analogs to the Maverick Basin, so the indications are good."

Just across the border in Mexico operators are de-gassing ahead of mining and getting millions of cubic feet of gas.

"Of course, opening the mines is like a massive frac, so it's not quite the same situation," he said, "but it does indicate that there is substantial gas in the coals."

Don't Damage the Coals!

Uncovering the most effective completion practices will be the biggest challenge to making the Olmos coal economic, and it will be some time before scientists can assess the optimum techniques for producing the coalbed methane.

As operators drilled through the coals to deeper oil and gas targets, they used classic oilfield drilling and completion techniques, which are typically damaging to the coals. Coals have low permeability and it's easy to do enough reservoir damage to ruin the reservoir around the borehole.

"The challenge is find the right technique to minimize damage to the coals," Barker said. "We are currently organizing a program with industry cooperation to drill new wells versus re-entering old wells to test state-of-the-art coalbed completion techniques to get a better idea of how the Olmos coal can produce."

Rob Downey, owner of Energy Ingenuity Corp. in Colorado who has assisted the USGS and the Texas operators, agreed that the key to the play is minimizing formation damage.

"Coals are naturally fractured reservoirs, but unlike other naturally fractured reservoirs coal has some unique properties," Downey said. "Being a carbon-based material it has a natural affinity to pick up anything with an ionic charge."

So, for example, if a well is drilled with polymers, those polymers will bind clays and can cause blockage on the face of the coals, which prevents gas from flowing across the coals.

"Polymers are the latest oil and gas drilling technology," Downey added. "The best drilling approach for coals is good old air or clean water."

There is approximately one trillion cubic feet of coalbed methane in the Maverick Basin, and Barker's question remains: Can we produce it?

"Certainly the infrastructure is there, the operators are interested in tapping the potential of the coals and the coal's thickness and gas content seems to be adequate," he said. "All the elements are in place except whether we can introduce enough permeability to generate commercial rates of gas.

"The next year should tell us if we can indeed pinpoint the proper completion techniques and production schemes to commercially produce that trillion cubic feet of gas."

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."