NGI The Weekly Gas Market Report
The tremendous supply potential of the Powder River Basin inMontana and Wyoming has attracted a new consortium of energycompanies with plans to build a large gas gathering system. CMSEnergy, Enron Capital & Trade Resources, Western Gas Resourcesand CIG Resources announced they have formed Fort Union GasGathering, L.L.C. to build a $43 million, 106-mile, 24-inchgathering header from Glenrock, WY, north to a point near Gillette,WY. A gas treating facility also will be installed at Glenrock.
The pipeline would have an initial capacity of 450 MMcf/d withthe capability to be expanded to 700 MMcf/d. It would be connectednear Glenrock to Wyoming Interstate Co.’s proposed Medicine BowLateral, which is expected to be in service Jan. 1, 2000. WIC toldFERC in its recent application for the lateral that it haslong-term transportation commitments totaling 178 MDth/d and thatcommitments are expected to increase to 440 MDth/d over a four-yearperiod.
Over the next decade, the Powder River Basin is expected to beone of the Rocky Mountain region’s fastest growing producing areas.Current estimates show the basin could hold more than 30 Tcf of gasreserves. Coal-bed gas production is expected to reach about 1Bcf/d in the next decade from about 100 MMcf/d in 1998.
What makes the basin such an attractive resource is therelatively low drilling costs, no water disposal problems and theforecast for favorable gas prices. The basin’s coal deposits are ata shallow 300 to 400 feet as compared with depths measuringthousands of feet in the San Juan Basin of Colorado and Nevada.Wells can be drilled for about $60,000, according to producersoperating in the Powder River.
“I think it’s going to ramp up to 300 to 400 MMcf/d prettyquick,” said CMS’ Tim Young, executive director of businessdevelopment. “We have the acreage. Western and Barrett, and [CMS]and Pennaco are Nos. 1 and 2 in combined acreage in the basin. Wehave 600,000 acres with Pennaco, and Barrett and Western have700,000. That’s a pretty strong position to support our system.” InOctober, CMS paid $28 million to enter into a joint developmentproject with Denver-based Pennaco to develop Powder River coal-bedmethane gas reserves. The two companies are planning to begin a $30million drilling program next year that will include about 600wells. Meanwhile Western and Barrett are planning to drill at least400 wells next year in the basin. Other producers also havesignificant drilling plans.
CMS Energy’s international gas pipeline unit, CMS GasTransmission and Storage, and Enron Capital & Trade will eachhold a 33-1/3% interest in the Fort Union partnership, with CMSserving as managing member. Western Gas Resources will operate thefield facilities and hold a 23.3% interest, while CIG ResourcesCo., a Colorado Interstate Gas affiliate, will hold a 10% stake andCIG will provide administrative and gas control services.
“Through our participation in this pipeline, ECT will be able toprovide producers with an economical means to deliver gas to themarket as well as offer more comprehensive gathering, compressionand marketing services to our customers,” said Kevin Hannon,president and COO of Enron Capital & Trade.
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