Lots of natural gas, few pipelines
November 12, 2005
There is a paradox at work in the Piceance Basin. Arguably, it’s one of the richest natural gas fields in the United States, yet there are not enough pipelines in place to get it to the most lucrative markets.The 6,000-square-mile Piceance Basin straddles Interstate 70 and the Colorado River in Garfield and Mesa counties and extends north into Rio Blanco County and south into Delta and Gunnison counties. The Piceance Basin is sure to become even more of a focal point for natural gas production in the future.”The only areas where gas production is growing are Wyoming and Colorado,” said Bryan Hassler, vice president of gas marketing and transportation for Antero Resources. “All other [areas] are pretty much in decline and have been for number of years.”Currently, the Piceance Basin has insufficient pipeline capacity to carry natural gas to the most lucrative markets. The lack of pipeline capacity in the Piceance has kept the market price for natural gas in this region lower than that in other parts of the country.”It’s the law of economics. If you’ve got plentiful supply and little pipeline capacity the price is going to go down,” Hassler said. “There is plenty of supply and no way to get it out.”In the last four years gas prices have increased dramatically in the Rocky Mountain region, creating a climate ripe for investment by pipeline companies. Natural gas prices hovered around $2.50 per thousand cubic feet three years ago and have topped $6.65 this year.”Four years ago the price [was such that] operators couldn’t drill and make money on their investment,” Hassler said. Nor were pipeline companies willing to make a big investment. Until this year.Two new and capacious pipelines are about to come on line that will carry far larger quantities of gas out of the Piceance.Wyoming Interstate Co. is constructing a 124-mile, 24-inch pipeline from the Greasewood Hub near Meeker to Wamsutter, Wyo. The pipeline is expected to begin operating in January.Entrega Gas Pipeline, an affiliate of EnCana Oil & Gas (USA), plans a 36-inch pipeline, which will also originate at the Greasewood Hub and travel north to Wamsutter.There, Hassler said, “It gets really exciting.”Entrega also plans a 42-inch line from Wamsutter to Cheyenne, Wyo., where it will connect with a 1,000-mile pipeline that will “move 2 billion cubic feet per day out of the Rockies to the upper Midwest,” he said.That line is also expected to be completed by year’s end. With those lines in place, producers will be able to move their product to the lucrative markets of the Midwest and Northeast.”Prices in the Northeast are higher than Rockies, much higher,” Hassler said. Natural gas commands $14.06 per thousand cubic feet in New York City, while in Wyoming it trades for $10.53.”Despite the burgeoning market for natural gas, an increased supply from the Piceance Basin has not yet begun to flow. Households in western Garfield County, smack in the middle of the basin, will face rising fuel bills this winter.