BUDAPEST, Hungary — Beneath the onion and garlic fields of southeastern Hungary lies one of Europe’s best-kept energy secrets — a huge reservoir of natural gas long thought to be out of reach.
For decades, the Mako Trough was known only to a small group of petroleum engineers. But that changed in April, when U.S. energy giant Exxon Mobil Corp. bought into a venture run by Denver-based Falcon Oil & Gas Ltd., which is working to tap the formation’s riches.
Exxon is drilling in Colorado’s Piceance Basin, and Britain’s BP PLC is developing the Jonah Field in Wyoming, as is Canada’s EnCana Corp.
Part of the success of those ventures is due to “fracing,” a method of fracturing rock to get the gas inside moving. Now that technology is being applied outside North America, in places such as Hungary.
Mako is widely thought to be the biggest onshore gas find in Western Europe since the massive Groningen field was discovered in the Netherlands in 1959.
Falcon Oil & Gas estimates its license area alone contains a resource of about 44 trillion cubic feet of gas. That is three times as large as Britain’s proven gas reserves.
But if Mako’s potential is huge, so are its challenges. Much of its gas is buried at depths of more than 20,000 feet, and the farther down, the hotter it is. The temperature can reach 400 degrees Fahrenheit.
That is because Mako is located at an unusually thin spot in the Earth’s crust, with molten rock relatively close to the surface.
“It’s still cooking,” says John Gustavson, a Danish-born American geologist familiar with the trough.
The heat and pressure boost drilling costs: One of Falcon’s wells cost $50 million to drill, a hefty sum for a small company.
Falcon and its Hungarian unit employ a total of about 42 people, including full-time consultants.
In the late 1980s, the World Bank financed a deep-drilling program in Hungary, supervised by experts from the U.S. Geological Survey.
The results of that review ended up in the hands of Gustavson, who was touring former Warsaw Pact nations in 1991 on the lookout for oil and gas. In 1998, he acquired the license for a big chunk of Mako.
Gustavson tried to entice major oil companies into the project. None took the bait. One of the few oilmen who were interested was Marc Bruner.
Bruner formed Falcon to explore Mako and later bought Gustavson’s license.
By May 2007, Falcon had won a production license from the Hungarian government for more than 245,000 acres.
In April, Falcon entered into a $300 million production and development deal with Exxon. A few days later, Exxon announced another deal, with MOL Nyrt, the Hungarian national oil company, to start a joint exploration program in MOL’s contract area in Mako.
