Eldorado Exploration (Pink Sheets: EDEX) utilizes a proprietary detection process called Passive Induced Polarity (PIP) to capitalize on oil and gas reserves not previously detected.PIP, founded and owned by GeoSurveys, uses a sensor unit to identify the presence of hydrocarbons to indicate the volume of oil and gas. Eldorado President Tom Laurance began working with the inventor in 1992, and since then has been using the tool to determine which wells have sufficient reserves and which do not.
Eldorado is one of the first companies to utilize PIP, and it was that technology that assisted the company in its discovery of two shallow wells on its Mesa #1 well in New Mexico. Last week the company announced the identification of a structure 25 miles long, and about 4 miles wide across the center of the company’s 11,000 acres in New Mexico. Eldorado commenced drilling in the middle of the acreage and hit two shallow gas wells.
“It’s a significant new gas field discovery,” said Laurance.”We think we’ve opened the door a little bit and it’s going to be very big for the company.”
The next step is to figure out whether there’s enough gas in the ground to build a 25-mile pipeline and Lawrence said he hopes to have the project completed by next year.
“We do have to drill enough wells to justify reserves,” said Laurance. “We’re 25 miles from the nearest interstate pipeline that we can tie into. We probably will have to drill five or six wells to get enough supplies guaranteed to make sure if we put in a pipeline, the pipeline will pay for itself.”
Regarding the oil and gas industry as a whole, as the price of oil goes up, it should automatically inflate the price of natural gas as well – but right now, it’s not. Laurance attributes the drag to the increased consumption of petroleum products in China and India, and said the old mature fields all over the world are declining faster than we can replace new reserves, driving the price of oil up. If oil goes up, natural gas will eventually increase as well.
“I think there’s going to be a little bit of a rebound effect … natural gas will start seeking its own level in the next 12 to 18 months. We should see about 20 to 25 percent increase in price,” Laurance said.”It’s a domino effect and we’re taking advantage of it.”
Laurance said abnormally mild winters paired with the attention placed on oil as it climbs in price also affect the price and demand of natural gas – but that the lag is temporary.
“Just like anything else you stretch it and stretch it and pretty soon it snaps back,” he added.