CONSOL Energy Inc., primarily a coal mining company which has recently branched out into coalbed methane and conventional gas production, announced last week it also has begun producing commercial quantities of natural gas from properties it controls in northeastern Tennessee through a joint venture called Knox Energy.
Knox Energy is producing 1.2 MMcf/d of gas from six shallow formation wells located on approximately 270,000 contiguous acres in four counties. A total of 14 wells have been drilled to date; six are producing, seven are awaiting hook-up and one is still being evaluated, the announcement said.
“The Knox Energy joint venture furthers the development of our multi-energy strategy and our strategy to consolidate energy assets in the Northeast quadrant of the United States,” said J. Brett Harvey, CONSOL Energy president. Knox Energy is a joint venture of CNX Gas Co., LLC and New River Energy. CNX Gas is a wholly owned subsidiary of CONSOL Energy Inc. New River Energy is a privately held Tennessee company.
Knox Energy, which will be operated by CNX Gas, is producing gas from several formations down to the Knox Formation at depths, generally, of 2,500 to 6,500 feet. The wells also are producing about 20-25 barrels of oil per day. CNX Gas and New River Energy have created a second joint venture, Coalfield Pipeline, to operate the gathering system. Coalfield Pipeline currently has capacity to carry 5-7 MMcf/d to a connection with the East Tennessee pipeline of Duke Energy.
“The proximity of these reserves to the large energy consumption centers in the East, the available access to transmission, and the favorable extraction costs will make this an excellent expansion of our gas business,” Harvey said. “The extraction depths and the production techniques employed are similar to the depths and techniques we use for coalbed methane extraction.”
Harvey said no reserve or annual production estimates are available yet for Knox Energy. “However, based on what we have seen from the first wells, we have high expectations for the reserve base and production potential,” he said.
Knox Energy also will evaluate coalbed methane reserves on its Tennessee properties. The company is taking electric logs of all shallow gas wells drilled to determine the extent of coal reserves in the area.
CONSOL Energy Inc. is one of the largest U.S. producers of coalbed methane, with reserves of 1.2 Tcf and daily gas production of approximately 130 MMcf/d, primarily from wells in Virginia. The company recently began coalbed methane production in Pennsylvania and West Virginia. CONSOL Energy produced 38 Bcf in 2001, and expects to produce 50 Bcf this year.
Last August CONSOL acquired 366 MMcf of proved developed and undeveloped coalbed methane reserves, existing production wells and pipeline gathering assets in Virginia from Conoco Inc. in a transaction valued at $160 million. Prior to that the company acquired the Appalachian natural gas exploration and production (E&P) and related pipeline properties of MCN Energy Group Inc. for a total of about $180 million. The MCN purchase included coalbed methane properties representing 276 Bcf of proved, long-lived reserves and opportunities for lower-risk development drilling.
CONSOL Energy is the largest producer of high-Btu bituminous coal in the United States, and the largest exporter of U.S. coal, with 25 bituminous coal mining complexes in seven states, two Canadian provinces and Australia.
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