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Powder River Basin Drilling Gathers Strength

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 MMcf/d.

"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, he noted.

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

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