Energy firm readies to drill Piceance
GARFIELD COUNTY Marathon Oil is gearing up for a run on one of the country’s hottest natural gas plays, Colorado’s Piceance Basin.The energy giant – it’s the fourth largest U.S.-based oil company in the country behind Exxon Mobil, Chevron and ConocoPhillips – has also joined those companies in a sizable investment in gas-rich northwest Colorado, between $1.6 and $2.5 billion over seven to 10 years.”This is an opportunity for Marathon to do this development and do it right,” said Dennis Arnst asset team leader for the Piceance project.Marathon acquired mineral leases on 8,700 acres of primarily private land from Petroleum Development Corp. (PDC) for $354 million last year. The land is located on a high mesa just west of Parachute Creek and northwest of the town of Parachute in Garfield County.The company expects to have about 25 employees in its newly opened regional office in Grand Junction and about 200 contract workers for its drilling program.The time is also right financially for the company.”We’re in a period in the industry where there is quite a bit of capital to reinvest,” said Doug Thierwechter, manager for government affairs. “In the last few years income has been larger and there’s been a bit of refocus on (Marathon’s) U.S. business.”Marathon also has exploration and production operations in 10 countries including Angola, Canada, Equatorial Guinea, Indonesia, Libya and Norway.Arnst said the company plans to drill 700 wells by 2014. It has on order two Helmerich & Payne “Flex 4” drilling rigs, which are highly automated and can drill up to 22 wells from one pad. Drilling is set to begin in September. Marathon expected to produce about 180 million cubic feet of gas per day and estimates its leases contain a resources of 900 billion cubic feet of gas, Arnst said.Although the company has operated in Colorado in the past, and closed down a Denver office in 2003, this is its first foray into the gas-rich Piceance Basin.The relatively remote location and high altitude, about 8,000 feet, presents some challenges for the company. “We intend to operate around the calendar,” Arnst said, including during the winter months. Access to the mesa will be on a recently completed road built by PDC to enter its own development areas.Surface-land owners, from whom Marathon is leasing mineral rights, including Occidental Oil and Gas Corp. and Chevron, have required surface use agreements that stipulate how development will occur.”They have their arms around protecting the surface,” Arnst said. The agreements call for reclamation plans that extend over 40 years in some cases.The rising cost of doing business, driven in part by a workforce shortage and lack of pipeline capacity to get Piceance Basin gas to market, have driven costs up to $3 million per well for both drilling and completion, Arnst said.Marathon is also well aware of social challenges of doing business in the area.”We have to listen to and engage the community,” said Thierwechter. “We know there were some mistakes made by some companies when they first came in.”Among the issues they’re ready to tackle is the growing problem of methamphetamine use in the region. Meth use was also a central issue in the Wyoming communities where Marathon has operated.”Meth is becoming a bigger issue in the communities where we work. It’s a hiring issue,” said Scott Scheffler, public affairs specialist.Marathon says it has stringent hiring policies including drug screening.”We’re seeing high rejection rates” in other areas, Thierwechter said. The company also conducts random drug inspections using drug-sniffing dogs. “We haven’t seen issues (with meth) on our locations,” Arnst said.Searle said the company is also aware that citizens living in the gas patch in the region are vocal about what they see as environmental issues around oil and gas development. “We want them to know us and tell us what those issues are. We want to work with them,” he said.
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