TransColorado Tests Phase 2, Expects First Flows in Feb.
TransColorado Gas Transmission started pressuring up it Phase 2
extension into western Colorado last week and expects to begin
transportation services from the northern Rockies to the San Juan
Basin some time next month, pending FERC approval of its rate
The Phase 2 pipeline consists of 275 miles of 22-inch and
24-inch diameter pipe that extends from San Juan County, NM, up to
a point 25 miles east of Rangely in Rio Blanco County, CO. With the
start-up of Phase 2, TransColorado will offer open access
transportation for an incremental 300 MMcf/d. Phase 1, which was
completed in December 1996, included 22.5 miles of 24-inch diameter
pipe, and 2.5 miles of 16-inch diameter pipe, extending from the
Coyote Gulch plant in La Plata County, CO, to the Blanco Hub near
Aztec, NM. The entire project cost $284.4 million.
Phase 2 is designed to create new access to San Juan basin
interconnections with primarily westbound pipes for Rocky Mountain
natural gas supplies. However, the pipeline faces an uphill battle
because market conditions over the last year have reduced basis
between northern Rockies points and the San Juan Basin to less than
10 cents on average from more than 30 cents in 1997. TransColorado
will have a difficult time charging its filed for maximum rate of
about 39 cents/Dth.
"As we bring on the pipe in order to encourage throughput, we're
certainly going to have to consider discounts," TransColorado's
Julian Huzyk admitted. "But we've seen basis blow out in the summer
in the past such that we think we're going to be able to charge the
max rate during the summer months, and on average we hope we'll be
able to capture a large portion of that rate."
Huzyk said 1999 will be a turning point for San Juan Basin
coal-seam gas production, which means increased flows on
TransColorado. "Probably this spring will be the most difficult
period for TransColorado with Phase II coming on line," said Huzyk.
"But we see some evidence that coal-seam declines are kicking in,
and your are going to see supply start to decline significantly,
much more so than the amount of gas we're bringing in on
"Another thing we are encouraged by is the stepped up demand in
California. The economy is running very hot. PG&E's system was
running at the ragged edge in November and December. SoCal has been
running within 200 MMcf/d of their capacity."
In addition, cut-backs in drilling budgets will limit increases
in conventional resources in the basin, he said. "Despite El Paso
Field Services global compression project they had only a slight
uptick of conventional gas production September through October,
and since then they haven't seen any significant improvement.
Really what they are counting on is producers getting out there and
accelerating conventional development to offset coal-seam declines.
The problem is [low crude oil prices]. They're holding back
drilling programs." The bottom line is it's finally time to open
the valves and give the northern Rockies greater market access
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