Increasing activity in western Colorado’s Piceance Basin has moved DCP Midstream Partners LP to invest $150 million to expand gathering operations in the region.
DCP, operator and 70% owner of Collbran Valley Gas Gathering LLC (CVGG), said CVGG intends to construct 20 miles of 24-inch diameter gathering pipeline, compression and liquids handling facilities to support the increasing need for infrastructure in the Collbran Valley (also known as Plateau Valley) area of the Piceance.
The system will have throughput capacity of more than 600 MMcf/d and is supported by long-term acreage dedications from Plains Exploration & Production (PXP), Delta Petroleum and a subsidiary of Enterprise Products Partners LP. PXP CV Pipeline LLC (a 50% subsidiary of PXP) and Delta own 25% and 5% of CVGG, respectively.
Drilling in the Piceance is expected to increase through 2015, according to a recent report. The energy boom will more than double the population over the next 30 years in Garfield, Mesa, Moffat and Rio Blanco counties, said Rifle, CO-based Associated Governments of Northwest Colorado (AGNC), which commissioned Denver’s BBC Research & Consulting to conduct the study. Gas wells are expected to top 50,000 by 2035 (see Daily GPI, April 15). Among producer players in the basin are ExxonMobil (see Daily GPI, July 21) and Williams (see Daily GPI, May 9).
DCP Midstream LLC just announced an expansion of processing capacity in Weld County, CO (see Daily GPI, Aug 27).
“This expansion, which we first announced earlier this month, provides critical midstream infrastructure to serve the needs of Collbran Valley producers and a platform for our continued growth in the Piceance,” said DCP Midstream Partners CEO Mark Borer.
CVGG will invest approximately $100 million in 2008-2009 to achieve throughput capacity of approximately 300 MMcf/d by the second quarter of 2009. The remaining investment in primarily compression equipment of approximately $50 million will come in 2010-2013.
The new line will connect with a new gathering pipeline to be constructed by Enterprise. Gas on the CVGG gathering pipeline will be delivered to Enterprise at the interconnect, where it will be transported to Enterprise’s Meeker processing facility. CVGG will decommission processing services at its Anderson Gulch facility in 2009 but will continue to provide treating and compression services at the facility.
CVGG will receive gathering and compression fees as compensation for the system expansion under terms ranging from 20 years to life of lease. Through 2016 CVGG will continue to receive existing processing fees from its shippers on a maximum volume of 190 MMcf/d. Current processing capacity at Anderson Gulch is 120 MMcf/d. CVGG will also benefit from reduced operating expenses once the Anderson Gulch facility ceases processing.
The partnership plans to fund its portion of the expansion cost with debt under its bank credit facility. DCP gathers, processes, transports and markets gas, transports and markets gas liquids and is a wholesale distributor of propane. It is managed by its general partner, DCP Midstream GP LLC, which is wholly owned by DCP Midstream LLC, a joint venture of Spectra Energy and ConocoPhillips.
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