NGI The Weekly Gas Market Report
Except for the deep-water Gulf of Mexico, major producers haveessentially “thrown in the towel” in the U.S. oil and gas marketand are traipsing overseas to find their fortunes, a top executivewith The Coastal Corp. said last week. As a result, he believesmost of the burden to supply a 30 Tcf natural gas market in theUnited States will fall to independent producers.
“The inescapable truth is that despite increased imports fromCanada, despite talk of a natural gas pipeline all the way down[from] Prudhoe Bay and despite talk of more LNG imports, most ofthe supply will have to be produced right here in the Lower 48.That implies that the burden of delivering a 30-40% increase in gassupply over let’s just say 15 years will fall primarily on theshoulders of U.S. independents,” said Keith O. Rattie, Coastal’ssenior vice president of natural gas.
Speaking at the 12th annual Rocky Mountain Natural Gas StrategyConference in Denver, Rattie noted that 30% of the Lower 48resource potential is buried in the Rocky Mountain region. As aresult, a large part of the responsibility will fall to independentproducers in Colorado, Wyoming, Montana, North Dakota and otherareas in the region. The Rocky Mountain area is “rising tostrategic prominence at a time [when] other basins are lookingtired,” Rattie noted. The majors “packed up and left Dodge” a longtime ago, he said. But the independent producers “have hung on andstayed here [and] are up to the job. We at Coastal take our hatsoff to those in this region who hung in there through the downturn,stayed focused, kept the faith in both the future of natural gasand this region’s future natural gas potential,” he said.
“The Rockies, which some believe has a resource base equal tothat of the U.S. Gulf of Mexico, …..used to be described as the’Rodney Dangerfield’ region. That was because of its reputation ofan area of tight gas and small prospects. But not anymore,” hesaid.
Fred C. Julander, president and CEO of Julander Energy Co.,agreed, saying that Rocky Mountain producers will be counted on tohelp supply a 30 Tcf market as much as the Gulf producers. “As longas we have a reasonable political climate, the Rockies are going toprovide a bountiful harvest for major natural gas discoveries forthe next 20 years.”
Coastal’s Rattie reminded producers that “this ain’t yourgrandfather’s gas market” anymore. The e-commerce revolution is”sucking up a lot of electricity,” and the market now has two peakseasons owing to the high summer gas demand of power generators. Hesaid 98% of the 250 power generation facilities currently underconstruction in the nation are gas fired. “The full impact of theshift to natural gas has yet to be felt,” he warned the 900independent producers, gatherers and processors at the conferencesponsored by the Colorado Oil and Gas Association (COGA).
Some major producers, whose focus is primarily in the Gulf, alsoattended the conference to check out potential investmentopportunities in the Rocky Mountain region. Canadian producers cameas well, but mostly to size up the basin-to-basin competition.
Jim W. Mogg, CEO of Duke Energy Field Services, believes gasproducers “will rise to the occasion and develop the supply” tomeet a 30 Tcf Market. “Producers have a history of stepping up tomeet that increased demand,” he noted. “When you look at the energyindustry in the U.S. [today] what you see is…primarily a naturalgas industry,” Mogg said, pointing out that 80% of the drillingrigs running nationwide are targeted for natural gas plays. That’slargely because demand and gas prices have been at near-recordlevels, which Mogg says will be “very sustainable for the future.”
Specifically, he believes the Rocky Mountain region, being “oneof the nation’s high-growth, high-potential areas,” will play acritical role. “Production in Colorado, Utah, Wyoming and Montanahas doubled in the last 15 years. And we now buzz about the JonahField [in Southwest Wyoming], one of the largest recent natural gasfield discoveries in the U.S.,” he noted. Estimated production inthe field at 300 MMcf/d.
Other very active basins and fields include the Powder RiverBasin, the Denver-Julesburg Basin, the Raton Basin, the PiceanceBasin and the Wamsutter, Mogg noted. The active rig count in theRocky Mountain region during the second quarter was 153 compared tojust 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 muchneeded, and the pipeline companies and gathering companies areresponding 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 thetable. All this activity makes it clear that the Rockies arecertainly one of the great places to be” in the energy industrynow, he said.
Susan Parker, Denver
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