Texaco Inc. announced yesterday that it had struck natural gas in an offshore test well 100 miles east of Atlantic City, marking the first discovery of hydrocarbons since commercial drilling began in the Baltimore Canyon area last April.
Texaco termed the find "very encouraging" but said it will require the drilling of at least two more wells over the next eight to 12 months to determine whether the strike represents a commercially exploitable discovery.
"I consider it significant because it is the first indication of any sort that natural gas can flow from a reservoir in the Eastern Seaboard of the U.S." said Richard B. Palmer, Texaco senior vice president for worldwide exploration. "Up to this moment of time there was no indication this province could do this."
So far 39 oil companies have spent over $1.1 billion for lease rights in the region just east of the New Jersey shore.Geologists have identified that area as a prime prospect for oil and gas deposits, noting that it lies close to the refineries, factories and population centers of the heavily industrialized Northeast.
In June, Continental Oil Co. capped a test well and wrote off a $4 million investment after a 12,000-foot well turned out to be a dry hole. Shell Oil along with eight other partners spent $6 million and drilled to 14,000 feet but also came up dry.
The unsuccessful Conoco and Shell wells were drilled in what was considered the geological formation most likely to contain either oil or gas - the so-called Baltimore Dome.
The Texaco well, however, was about 30 miles east of the dry holes in rock strata not part of this domelike formation.
Palmer said the gas discovery does not necessarily mean that there is petroleum also but that is possible.
John Lichtblau, an official of the Petroleum Industry Research Foundation, an independent research group, said the Texaco announcement is "quite significant and opens up a new frontier" for the petroleum industry. Lichtblau said the announcement confirms the opinion long expressed by most geologists that gas was more likely than petroleum to be discovered off the North Atlantic shore.
Texaco said that natural gas was flowing from the well at a rate of 7.5 million cubic feet a day. It said the gas was coming from a 38-foot stretch of the well below 14,000 feet. The well is in 432 feet of water.
At an afternoon press conference atop the Chrysler Building; Texaco officials were pleased but cautious about the discovery. They said that in order for it to be commercially viable, it would have to contain reserves of at least 1 trillion cubic feet of natural gas and flow at a rate of 200 million cubic feet a day.
Even if the discovery met this standard, it would not be large enough to meet the consumption needs of New England for even one year - currently 1.2 trillion cubic feet.
The gas from the well, however, has so far tested "sweet," meaning there are no traces of hydrogen sulfide, an undesirable impurity.
Rumors have circulated for more than a month that Texaco might be close to a discovery. Until yesterday's announcement, however, the company had said only that it had discovered "hydrocarbon indications."