article about Saxonsxn.v/sxeyf.pk C$.295
Posted on Thu, Jul. 10, 2008L
Low-BTU gas has a new market
Saxon Oil and American Energies Pipeline are developing a joint venture to collect and clean the gas.
BY PHYLLIS JACOBS GRIEKSPOOR
The Wichita Eagle
Natural gas operators and royalty holders in central Kansas will soon have a new market for their low-BTU gas, which could bring wells that have been shut down since December 2006 back into production.
At that time, a refinery in Bushton that had been using low-BTU gas for fuel shut down for retrofitting and announced that it would no longer buy the low-BTU product.
"That put dozens of operators in central Kansas out of production," said Steve Moore of Saxon Oil, a Dallas-based company that is developing a joint venture with American Energies Pipeline in Wichita to collect and clean the gas.
"We hope to get those wells producing again by finding new markets and by employing technology to clean up the low-BTU gas," he said.
The joint venture, Mid Kansas Gas Gathering, will develop more than 400 miles of gathering lines to bring the gas to market.
"We know that there are billions of cubic feet of gas in central Kansas that currently is not being produced because there are no markets for it," Moore said. "Our goal is to aggregate the gathering systems and find new markets for the gas."
The gas is low in BTU because it is mixed with nitrogen and helium, both inert gases. Removing those gases will make the recovered methane of high enough quality for the transcontinental pipeline.
Capturing the helium will provide an added revenue stream.
"Helium is very scarce and very valuable, and most of the world's known supplies are in Kansas," Moore said. "The low-BTU gas is about 1 to 3 percent helium."
Helium, best known as the gas that makes balloons buoyant, is also used in medical devices and as an industrial coolant. Purified helium sells for somewhere between $125 and $150 per thousand cubic feet, compared to the current price of natural gas, which is considered high at $13 per thousand cubic feet.
Eventually, Saxon would like to develop a large gas processing plant in central Kansas, Moore said. Initially the goal will be to find buyers for low-BTU gas and get the technology to recover helium put in place.
Saxon Oil also plans to embark on exploration and production activities to drill and develop new wells in the central Kansas formation, Moore said.
"Essentially, central Kansas is part of the same rock formations that are found in the Hugoton," he said. "There is a lot of potential here. And the wells are typically shallow, which means they aren't terribly expensive to drill."
He said the development of new wells will give Mid Kansas Gas Gathering a steady supply of gas while producers who have been out of the business get geared up to produce again.
Reach P.J. Griekspoor at 316-268-6660 or pgriekspoor@wichitaeagle.com.