Coalbed methane producer CONSOL Energy Inc. has entered into an agreement to allow Triana Energy Inc. to explore for and produce conventional natural gas that may be found beneath CONSOL Energy’s coalbed properties in southwestern Virginia.

The agreement calls for CONSOL Energy and Triana Energy to develop jointly natural gas on approximately 138,000 acres of CONSOL Energy’s controlled acreage. Currently, CONSOL Energy produces coalbed methane from the Pocahontas #3 and associated coal seams on these properties. None of these reserves are included in the agreement.

Based on preliminary analysis, conventional natural gas may reside in deeper formations. Triana Energy will be responsible for geological evaluation, drilling and completion of all wells. CONSOL Energy will be the operator of the wells, and will be responsible for construction and operation of all gathering systems.

“This agreement represents a unique opportunity to exploit synergies between our established coalbed methane operations in southwest Virginia and the conventional gas resource below it,” said J. Brett Harvey, president and CEO. “The large block of acreage we control and our existing operations infrastructure will create great value for our shareholders if conventional gas reserves can be developed.”

Triana Energy is an E&P affiliate of Morgan Stanley Capital Partners, which recently announced plans to purchase Columbia Natural Resources (CNR) and its 1.1 Tcf of mainly Appalachian natural gas reserves for $330 million from NiSource Inc. (see NGI, July 7). When final, the acquisition would make Triana one of the largest production companies in Appalachia.

“Triana brings a wealth of experience in locating and developing gas reserves in the Appalachian Basin,” Harvey said. “They have the expertise to explore and develop the reserve base we have in Virginia.” Triana is being run by former CNR executives. Columbia proved its expertise with deep development in Appalachia several years back when it brought in two top-producing discovery wells at about 10,000 feet in the Trenton and Black River formations in Roane County, WV, several years back. The Columbia wells recorded open flow tests at about 50 MMcf/d with 6,600 psi, considered extraodinary depth, pressure and production levels for the Appalachian Basin (see NGI, June 21, 1999).

The project with CONSOL is considered an exploration of an undeveloped area. No reserve estimates for conventional gas are available for this property. It is anticipated that drilling will start in the third quarter of this year.

CONSOL Energy is one of the largest U.S. producers of coalbed methane, producing about 135 MMcf/d, primarily from wells in Virginia. The company recently began coalbed methane production in Pennsylvania and West Virginia, and has a joint-venture company producing natural gas and oil in Tennessee.

CONSOL Energy also is the largest producer of high-Btu bituminous coal in the United States, with 20 bituminous coal mining complexes in seven states and in Australia, and it is the largest exporter of U.S. coal.

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