Powder River Potential Draws New Gathering Consortium
The tremendous supply potential of the Powder River Basin in
Montana and Wyoming has attracted a new consortium of energy
companies with plans to build a large gas gathering system. CMS
Energy, Enron Capital & Trade Resources, Western Gas Resources
and CIG Resources announced they have formed Fort Union Gas
Gathering, L.L.C. to build a $43 million, 106-mile, 24-inch
gathering header from Glenrock, WY, north to a point near Gillette,
WY. A gas treating facility also will be installed at Glenrock.
The pipeline would have an initial capacity of 450 MMcf/d with
the capability to be expanded to 700 MMcf/d. It would be connected
near Glenrock to Wyoming Interstate Co.'s proposed Medicine Bow
Lateral, which is expected to be in service Jan. 1, 2000. WIC told
FERC in its recent application for the lateral that it has
long-term transportation commitments totaling 178 MDth/d and that
commitments are expected to increase to 440 MDth/d over a four-year
Over the next decade, the Powder River Basin is expected to be
one of the Rocky Mountain region's fastest growing producing areas.
Current estimates show the basin could hold more than 30 Tcf of gas
reserves. Coal-bed gas production is expected to reach about 1
Bcf/d in the next decade from about 100 MMcf/d in 1998.
What makes the basin such an attractive resource is the
relatively low drilling costs, no water disposal problems and the
forecast for favorable gas prices. The basin's coal deposits are at
a shallow 300 to 400 feet as compared with depths measuring
thousands of feet in the San Juan Basin of Colorado and Nevada.
Wells can be drilled for about $60,000, according to producers
operating in the Powder River.
"I think it's going to ramp up to 300 to 400 MMcf/d pretty
quick," said CMS' Tim Young, executive director of business
development. "We have the acreage. Western and Barrett, and [CMS]
and Pennaco are Nos. 1 and 2 in combined acreage in the basin. We
have 600,000 acres with Pennaco, and Barrett and Western have
700,000. That's a pretty strong position to support our system." In
October, CMS paid $28 million to enter into a joint development
project with Denver-based Pennaco to develop Powder River coal-bed
methane gas reserves. The two companies are planning to begin a $30
million drilling program next year that will include about 600
wells. Meanwhile Western and Barrett are planning to drill at least
400 wells next year in the basin. Other producers also have
significant drilling plans.
CMS Energy's international gas pipeline unit, CMS Gas
Transmission and Storage, and Enron Capital & Trade will each
hold a 33-1/3% interest in the Fort Union partnership, with CMS
serving as managing member. Western Gas Resources will operate the
field facilities and hold a 23.3% interest, while CIG Resources
Co., a Colorado Interstate Gas affiliate, will hold a 10% stake and
CIG will provide administrative and gas control services.
"Through our participation in this pipeline, ECT will be able to
provide producers with an economical means to deliver gas to the
market as well as offer more comprehensive gathering, compression
and marketing services to our customers," said Kevin Hannon,
president and COO of Enron Capital & Trade.
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