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TransColorado Tests Phase 2, Expects First Flows in Feb.

January 18, 1999
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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 design.

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 TransColorado.

"Another thing we are encouraged by is the stepped up demand in California. The economy is running very hot. PG&ampE'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 through TransColorado.

Rocco Canonica

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