A Kinder Morgan gas pipeline official last week indicated that the Rocky Mountain region could be close to having yet another major export pipeline in place in the next few years. Kinder Morgan’s Advantage project has only 40,000 Dth/d of capacity remaining unsubscribe along with some winter-only capacity, out of a total of 554,000 Dth/d. The company also has launched plans for a new gas storage field in southern Wyoming.

The proposed Advantage Pipeline would parallel El Paso’s Cheyenne Plains pipeline project, extending about 400 miles from the Cheyenne Hub in northern Colorado to multiple interstate pipelines near Greensburg, KS. The 560 MMcf/d Cheyenne Plains project is on schedule for development starting June 1 and will quickly added another 170 MMcf/d by January 2006.

But the prospect of EnCana bringing 1.3 Bcf/d of incremental production from the Piceance Basin to the Cheyenne Hub “changes the equation, and ultimately we think will allow us to up-size [the Advantage] project to a 36-inch or even larger pipeline if we get an increase in commitments from shippers,” Dave Scharf, director of business development at Kinder Morgan Interstate Gas Transmission, said at the annual GasMart conference in Denver last week (see Daily GPI, May 24).

“We believe there’s a very natural fit between the Rockies and the Midcontinent,” said Scharf. He noted that the Midcontinent has large, well established markets, but has declining supply. In Kansas, gas production from the Hugoton Basin is down 880 MMcf/d since 1996. While in Wyoming, gas production from the Power River Basin has increase to 980 MMcf/d since 1996, Scharf said.

“These are very complimentary developments which would tend to push Rockies gas east. Furthermore, the Rockies are capable of a lot more supply growth,” said Scharf.

Meanwhile, there is significant pipeline infrastructure remaining in the Midcontinent, including Kinder Morgan’s own Natural Gas Pipeline Company of America system to Chicago.

“What we think we need are more transition assets from the Rockies to the Midcontinent to utilize the Midcontinent infrastructure and the gas storage, which would limit the price volatility that we see in the Rockies,” he said.

Using information from the Potential Gas Committee, Scharf said that gas production from the Rockies is projected to grow by 7.40 Bcf/d from 2002 to 2020 to meet projected demand. “We think this is achievable but of course it will require lots more infrastructure to move this gas to market.”

He said that the local infrastructure in the Wyoming basins is in “pretty good shape. The transmission side on the other hand has some really obvious gaps. Compared to the Gulf Coast or the Permian Basin or the Midcontinent supply areas, the Rockies is pretty deficient.”

Kinder Morgan also knows first hand that there’s a significant demand for gas storage capacity in the Rockies. During a recent open season for its Cheyenne Market Center storage project, it offered 6 Bcf of working gas capacity but received bids for more than 26 Bcf.

“There’s a real need for gas storage,” Scharf said. “It provides liquidity; it helps dampens volatility that we have seen and will no doubt continue to see in this area as supplies come on and as pipelines are built.

“The problem with these storage projects is the cost of the cushion gas these days,” he said. “You really can’t afford to buy the gas and put it in the ground for cushion and leave it there for the life of the project with the kinds of prices.”

However, he said Kinder Morgan has found a solution to that problem with a proposed expansion at its Oil Springs Storage field in the Hanna Basin in southern Wyoming. Oil Spring already has cushion gas in place and Kinder Morgan plans to add about 10 Bcf of additional working gas capacity. The field currently is performing a retail utility function. Scharf said the company expects the expanded field to have about 133,000 Dth/d of withdrawal capability and 67,000 Dth/d of injection capacity.

“It’s about 27 miles from the interstate corridor so we need a pipeline to interconnect with Wyoming Interstate Co.” He said it would have about 1.4 storage cycles per year.

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