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Independents in Rockies Will Shoulder Supply Burden

Independents in Rockies Will Shoulder Supply Burden

Except for the deep-water Gulf of Mexico, major producers have essentially "thrown in the towel" in the U.S. oil and gas market and are traipsing overseas to find their fortunes, a top executive with The Coastal Corp. said last week. As a result, he believes most of the burden to supply a 30 Tcf natural gas market in the United States will fall to independent producers.

"The inescapable truth is that despite increased imports from Canada, despite talk of a natural gas pipeline all the way down [from] Prudhoe Bay and despite talk of more LNG imports, most of the supply will have to be produced right here in the Lower 48. That implies that the burden of delivering a 30-40% increase in gas supply over let's just say 15 years will fall primarily on the shoulders of U.S. independents," said Keith O. Rattie, Coastal's senior vice president of natural gas.

Speaking at the 12th annual Rocky Mountain Natural Gas Strategy Conference in Denver, Rattie noted that 30% of the Lower 48 resource potential is buried in the Rocky Mountain region. As a result, a large part of the responsibility will fall to independent producers in Colorado, Wyoming, Montana, North Dakota and other areas in the region. The Rocky Mountain area is "rising to strategic prominence at a time [when] other basins are looking tired," Rattie noted. The majors "packed up and left Dodge" a long time ago, he said. But the independent producers "have hung on and stayed here [and] are up to the job. We at Coastal take our hats off to those in this region who hung in there through the downturn, stayed focused, kept the faith in both the future of natural gas and this region's future natural gas potential," he said.

"The Rockies, which some believe has a resource base equal to that of the U.S. Gulf of Mexico, .....used to be described as the 'Rodney Dangerfield' region. That was because of its reputation of an area of tight gas and small prospects. But not anymore," he said.

Fred C. Julander, president and CEO of Julander Energy Co., agreed, saying that Rocky Mountain producers will be counted on to help supply a 30 Tcf market as much as the Gulf producers. "As long as we have a reasonable political climate, the Rockies are going to provide a bountiful harvest for major natural gas discoveries for the next 20 years."

Coastal's Rattie reminded producers that "this ain't your grandfather's gas market" anymore. The e-commerce revolution is "sucking up a lot of electricity," and the market now has two peak seasons owing to the high summer gas demand of power generators. He said 98% of the 250 power generation facilities currently under construction in the nation are gas fired. "The full impact of the shift to natural gas has yet to be felt," he warned the 900 independent producers, gatherers and processors at the conference sponsored by the Colorado Oil and Gas Association (COGA).

Some major producers, whose focus is primarily in the Gulf, also attended the conference to check out potential investment opportunities in the Rocky Mountain region. Canadian producers came as well, but mostly to size up the basin-to-basin competition.

Jim W. Mogg, CEO of Duke Energy Field Services, believes gas producers "will rise to the occasion and develop the supply" to meet a 30 Tcf Market. "Producers have a history of stepping up to meet that increased demand," he noted. "When you look at the energy industry in the U.S. [today] what you see is...primarily a natural gas industry," Mogg said, pointing out that 80% of the drilling rigs running nationwide are targeted for natural gas plays. That's largely because demand and gas prices have been at near-record levels, which Mogg says will be "very sustainable for the future."

Specifically, he believes the Rocky Mountain region, being "one of the nation's high-growth, high-potential areas," will play a critical role. "Production in Colorado, Utah, Wyoming and Montana has doubled in the last 15 years. And we now buzz about the Jonah Field [in Southwest Wyoming], one of the largest recent natural gas field discoveries in the U.S.," he noted. Estimated production in the field at 300 MMcf/d.

Other very active basins and fields include the Powder River Basin, the Denver-Julesburg Basin, the Raton Basin, the Piceance Basin and the Wamsutter, Mogg noted. The active rig count in the Rocky Mountain region during the second quarter was 153 compared to just 80 rigs in the second quarter of 1999.

This "growth is straining the infrastructure across the region. New projects and expansions to existing assets are very much needed, and the pipeline companies and gathering companies are responding to that need. There are numerous projects in the areas," including ones sponsored by Williams, Coastal, Kinder Morgan, Questar and Duke Energy Field Services. "All are stepping up to the table. All this activity makes it clear that the Rockies are certainly one of the great places to be" in the energy industry now, he said.

Susan Parker, Denver

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