Powder River Basin Drilling Gathers Strength
The Powder River Basin, which is known widely for its coal-bed
methane (CBM) gas production, is without a doubt the "most active"
onshore basin in the Lower 48, and will likely hold this
distinction for a long time to come, according to a major
gatherer-processor in the basin.
There's "nothing to suggest there's not going to be
12,000-15,000 wells drilled over the next five to seven years" in
Powder River, said Robert J. Clark, CEO of Bear Paw Energy, at the
Rocky Mountain Energy Investment Forum in Denver last week.
Official figures estimate production in Powder River, which
includes North Central Wyoming and Montana, at more than 324 MMcf/d
from 2,100 wells. But Clark thinks current activity is greater. "We
believe, based on our estimates, there's about 395 MMcf/d being
produced from 2,500 wells in 'The Powder,'" as the basin is called
by those active there. Bear Paw handles gathering and processing
for about 530 wells in the basin, with throughput of about 89
"The Powder has been an opportunity for us to grow into a new
area and ... at a significant pace with the help initially of
[Pennaco Energy], who was very active." Clark said the company has
entered into a deal to interconnect with another 160 wells,
enabling Bear Paw to expand into the western part of the Powder
River Basin. And it's in the process of negotiating final
agreements on a project that will kick off by the end of the year,
But Bear Paw isn't the only Powder River player in an expansion
mood. Wyoming Interstate Co. Ltd. (WIC) "just announced it plans to
loop its Medicine Bow Lateral, which I believe will give them
upwards of 1 Bcf/d [of] takeaway capacity...Williams earlier [last]
week announced an open season for new capacity from its Cheyenne
Compressor Station," Clark said at the investment forum, which was
held in conjunction with the 12th annual Colorado Oil and Gas
Association conference in Denver. Also, Big Horn Gas Gathering has
plans to build a $19 million extension into the western section of
Powder River, he noted.
Powder River producers are eager to transport their gas to
markets in the West as well as those in the East, but capacity
constraints on pipelines running to California are preventing them
from supplying gas for power generation demand there, he noted.
"Pipelines are looking at ways they can alleviate that by
looping lines or adding compression. Unfortunately... because
[pipes] have to file at FERC, and that's typically a 12-month
process from the day you file until you get approval," Clark said
he wasn't expecting an easing of the constraints anytime soon.
With respect to serving Powder River producers, "I think [WIC]
was probably ahead of the game compared to any other pipeline in
the Rockies in building the Medicine Bow Lateral. It was ready for
the gas when it started to come down both Fort Union and Thunder
Creek [systems in Wyoming]. Now they've added some horsepower [that
became] operational" last week, bringing the WIC lateral's current
capacity up to 389 MMcf/d. The planned looping will more than
double the capacity of the lateral, Clark noted, adding that WIC's
construction "is falling right in line with the volumes as they
come out ofÿthe Powder."
Others are eyeing system expansions as well. Williston Basin
Interstate Pipeline, which just completed an open season for new
capacity, is considering building an extension of its existing
system serving the basin, Clark said.
Also, Richard H. Lewis, CEO of Denver-based Prima Energy Corp.,
said it expects to complete by the end of the quarter Phase One of
a new gathering system that initially will hook up the company's 20
producing wells in the Stones Throw area of the Powder River Basin.
"That will be our first coal-bed methane wells actually on
production." Ultimately, the project, which will have five phases,
will provide gathering to the 115 CBM wells that Prima plans to
have drilled by the end of the year, as well as service the
gathering needs of competitors.
Lewis said Prima recently formed Arete Gathering Co., a wholly
owned subsidiary, to "pursue gathering opportunities where we think
it's warranted, where our lease position is not [strong] enough, in
an effort to capture additional value from wellhead to the
burnertip." Initially, the new company will focus on gathering
prospects in the Powder River, where Prima has a substantial lease
position, he said.
Bear Paw's Clark believes gas prices will remain strong in the
future, and will "promote continued drilling not only in the Powder
but elsewhere in the Rockies." However, if prices were to trend
downwards, he doesn't think that that would affect Rockies'
production as much as gas-on-gas competition would. "I think over
the next 12 months while [WIC] is getting approval on its Medicine
Bow loop, there's the potential because of the volume of gas being
drilled and produced in the Powder you're going to see a widening
[of] the differential in the Rockies compared to the Henry Hub. I
think that will alleviate itself as CIG has that capacity added
later next year," Clark said.
Susan Parker, Denver