There’s a major oil and natural gas boom going on now in one ofthe most unlikely places in the United States – northeasternTennessee.

“As far as our company [Tengasco Inc.] is concerned, yes it’s aboom,” said Michael McCown, chief geologist for the Knoxville,TX-based diversified energy concern. “We’re giving the industry awake-up call here. These are big wells…..they’re really big. Thegas wells are coming in anywhere from 1 MMcf/d to 9 MMcf/d, andreserves are anywhere from 1 Bcf to 9 Bcf per well.” The company isdrilling a well now with a production capability of 27 MMcf/d ofgas, he noted. Engineering studies reveal the wells have a capacityto produce for 20 years.

Tengasco is finding gas in its Swan Creek Gas Field at depthsthat are considered deep for the Appalachian Basin (5,000 feet) andat costs that are a fraction of those spent by producers in Texasand Oklahoma, McCown said. He estimated the company is drilling gaswells for about $200,000-$225,000, and oil wells for approximately$125,000.

At this point, Tengasco has only drilled 15% of the 25-milelong, one-mile wide Knox Group structure, which is part of the SwanCreek field. Based on the wells drilled so far, it has proved gasreserves of 104 Bcf and proven oil reserves of 1.6 million barrels,and potential reserves of about 1 Tcf, McCown estimated.

But the size of the Swan Creek structure may be much bigger thanTengasco initially anticipated, thus increasing its oil and gaspotential, he said. “We’ve recently seen some other seismic data,which indicates this huge [Swan Creek structure] could be as muchas 50 miles long,” rather than 25 miles. “It keeps getting bigger[with] the more seismic we do.” Tengasco believes Swan Creek willultimately develop into a giant field with as much as 2-3 Tcf ofrecoverable gas reserves from the Knox structure.

In addition to Swan Creek, “we’ve got five other structures[each 10-17 miles long in Northeast Tennessee] that we’ve gotseismic on.” When all are combined, “we’re looking at [a primeproduction] area that is 60 miles wide and 90 miles long,” McCownsaid.

There has been some speculation that the gas from the Swan Creekfield is of a poorer quality. In response to this, Tengascoreleased a study last week that concluded “the Swan Creek gasestested are interchangeable with the adjustment gases selected,” oneof which was the gas currently being delivered by East TennesseeNatural Gas. The study was conducted by an independent engineeringgroup using standards prescribed by the American Gas Association,the company said.

“The results of this study clearly and firmly put to permanentrest the issue of the quality of our gas at Swan Creek and the needfor a nitrogen rejection unit to service our markets,” said MichaelRatliff, Tengasco’s chairman and CEO.

Tengasco, which has been active in Swan Creek since 1995-96, hascompleted 21 successful wells in the field and currently isdrilling three additional wells. It has more than 50,000 acresleased in and around the Swan Creek field, which it acquiredfollowing a lawsuit with Amoco. Other producers are jumping on thebandwagon. Miller Petroleum is drilling in the region, and anundisclosed, major energy company is “talking about” doing a jointventure with Tengasco, McCown noted.

For now, much of the field’s production is shut in untilTengasco can build another 28-30 miles of intrastate pipeline toKingsport, TN, where it will serve a major manufacturing complex ofEastman Chemical Co. and “some of your bigger facilities long theway,” and also have the ability to tie in with East TennesseeNatural Gas – which is the only interstate serving the easternTennessee market. Tengasco, the sole intrastate in the state, hopesto have its line extension completed and in service by either July1 or in the “worst-case scenario” by Oct. 1., Ratliff said, withthe possibility of adding another 30 miles by 2001.

The pipeline extension would enable Tengasco to supply 40% andup to possibly 80% of the Eastman Chemical plant’s gasrequirements; the remainder would be filled by East TennesseeNatural Gas. Tengasco last fall signed a 20-year, $200 millionsupply contract with the Eastman facility, the largestmanufacturing facility in the state.

In addition to the Eastman plant, “we’re going to provide gas toend-users along the way [from the Swan Creek field to the easternTennessee market] to give them more capacity to expand theirbusinesses,” Ratliff said. East Tennessee Natural Gas, which hashad a lock on that market for almost half of a century, hasn’t donea very good job of serving the region’s gas customers, he contends.

“I think it’s a great thing that Duke Energy bought it [EastTennessee]. They are very pro-business. El Paso and East Tennesseefor years have operated [the pipeline] under a monopolisticsituation…..They would not create more capacity on that line, andwhat it’s done is curtail business throughout all of easternTennessee.”

Susan Parker

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