EEA: Powder River Basin to Reach 1.2 Bcf/d in 2002

As exploration and production companies scurry to extract higher volumes of natural gas from the ground to meet the nation's voracious demand, coalbed methane production in the Powder River Basin of Wyoming and southern Montana continues to increase as conservative estimates of the basin's reserves from the late 1980s through the mid-1990s continue to fall by the wayside, according to Energy and Environmental Analysis (EEA).

In EEA's Monthly Gas Update, the company said the Powder River Basin has "excellent potential" in both the near and long term because of the area's size. In the near term, the analyst group pointed out that there are currently several thousand wells that have been drilled, but are not yet in production. EEA predicts that there are approximately 8,000 wells, with 5,000-to-5,500 producing and 2,500-to-3,000 awaiting hook-up.

Beyond the current development, the EEA pointed out that well spacing of 80 acres (8 per square mile) allows for the potential for thousands of additional wells.

As early as 1995, an assessment of the basin conducted in a Wyoming state geological survey said there was only a few Tcf to be had, while the Potential Gas Committee estimated the potential at only 6 Tcf.

"These estimates are now known to be far too conservative, and, based upon a Wyoming Geological Survey assessment, EEA estimates basinwide recovery of 15-to-20 Tcf," the EEA report said. "At a well recovery of 500 MMcf, this equates to the potential for 30,000 to 40,000 producing wells."

For the Powder River Basin, EEA estimated the 2000 production rate grew by 25 MMcf/d per month from 260 MMcf/d in January to 560 MMcf/d during December. April 2001 is estimated to be 600 MMcf/d.

During the remainder of this year, the group expects production from the basin to remain at a plateau of around 600 MMcf/d, or approximately the April level. In the fourth quarter of 2001, EEA predicts production will ramp up sharply, due to the addition of new pipeline capacity from the basin, and in 2002, gas production from the basin will climb to more than 1.2 Bcf/d.

For 1999 and most of 2000, EEA highlighted the most active operators in the basin by the number of new producing wells the company had. The study found the most active operators are Barrett Resources Corp.(1,284 wells), USX/Marathon Group (664), Devon Energy Corp. (304), Redstone Resources Corp. (293), CMS Oil and Gas Co.(162), and Yates Petroleum Corp.(140).

However, the amount of production in the basin is expected to increase greatly by next year and there are major transmission capacity constraints that need to be dealt with, EEA reported.

To the south of the Powder River Basin, the Cheyenne hub area is bottlenecked due to capacity constraints on the Trailblazer system (see NGI, June 19, 2000). Kinder Morgan plans to expand Trailblazer, but it is believed that this expansion still will be inadequate, EEA said. Colorado Interstate Gas also has plans to further expand its Medicine Bow Lateral pipeline by a reported 675 MMcf/d, with the expansion scheduled for completion this December (see NGI, Oct. 2, 2000). To alleviate the outlet bottleneck, the Northern Border Group has proposed a new Bison pipeline, extending 325 miles to the north from Gillette to connect with Northern Border in Montana (see NGI, Nov. 6, 2000).

EEA said it believes that the pipeline bottleneck will continue for the remainder of this year, but will improve in the early months of 2002.

"Production growth will slow or flatten until additional transportation capacity is available late in the year," the company said in its report. "At that time, production growth will continue and basin production is expected to reach 1.2 Bcf/d by the end of next year. Longer term, the play has the potential to achieve the 2.5+ Bcf/d level, assuming no major setbacks such as unanticipated levels of water-related development restrictions."

For more information on EEA's Monthly Gas Update, contact Kevin Petak at (703) 528-1900, or via e-mail at kpetak@eea-inc.com.

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