There’s a major oil and natural gas boom happening in one of themost 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,TN-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 and have[potential] reserves are anywhere from 1 Bcf per well to 9 Bcf perwell.” Engineering studies reveal the wells have a capacity toproduce for 20 years, he said.

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 barrelsof oil, 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 [innortheast Tennessee] that we’ve got seismic on.” When all arecombined, “we’re looking at [a prime production] area that is 60miles wide and 90 miles long,” McCown said.

Tengasco, which has been active in Swan Creek since 1995-96, hascompleted 21 successful wells in the field and currently isdrilling three additional wells, according to the company. It hasmore than 50,000 acres leased in and around Swan Creek, which itacquired following a lawsuit with Amoco. Other producers are cominginto the area. Miller Petroleum is drilling in the region, and amajor energy company is “talking about” doing a joint venture withTengasco, McCown noted.

For now, much of the production is shut in until Tengasco buildsanother 28-30 miles of intrastate pipeline to Kingsport, TN, whereit will serve a major manufacturing complex of Eastman Chemical Co.and “some of your bigger facilities long the way,” and also havethe ability to tie in with East Tennessee Natural Gas — which isthe only interstate serving the eastern Tennessee market. Tengasco,the sole intrastate in the state, hopes to have its line expansioncompleted and in service by either July 1 of this year, weatherpermitting, or in the “worst-case scenario” by Oct. 1, saidTengasco CEO Michael E. Ratliff. The company also may add another30 miles by 2001, he noted.

The pipeline extension would enables 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 nearly half a century, hasn’t done avery good job of serving the region’s gas customers, he contends.

“The growth of all East Tennessee has been stymied by that oneline because it’s the only pipeline in [that region]. If that linewere to shut down, it’d shut down all of eastern Tennessee. Itwould be a catastrophic disaster,” Ratliff told NGI. He thinks DukeEnergy’s purchase of East Tennessee Natural Gas from El PasoEnergy, as part of El Paso’s acquisition of Sonat Inc., willportend better days.

“I think it’s a great thing that Duke Energy bought it. They arevery pro-business. El Paso and East Tennessee for years haveoperated [the pipeline] under a monopolistic situation…..Theywould not create more capacity on that line, and what it’s done iscurtail business throughout all of eastern Tennessee,” he said.

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