The Powder River Basin, which is known widely for its coal-bedmethane (CBM) gas production, is without a doubt the “most active”onshore basin in the Lower 48, and will likely hold thisdistinction for a long time to come, according to a majorgatherer-processor in the basin.

“The belief in the industry…is there’s nothing to suggestthere’s not going to be 12,000-15,000 wells drilled over the nextfive to seven years” in the Powder River Basin, said Robert J.Clark, president and CEO of Bear Paw Energy, at the Rocky MountainEnergy Investment Forum in Denver yesterday.

Official figures estimate production in Powder River, whichincludes North Central Wyoming and Montana, at more than 324MMcf/d, which is flowing from 2,100 wells. But Clark thinks currentactivity is greater. “We believe that based on our estimatesthere’s about 395 MMcf/d being produced from 2,500 wells in ‘ThePowder,’ as the basin is called by those active there.” The basin’srecoverable reserves range from 12 Bcf to 30 Bcf.

Bear Paw handles gathering and processing for about 530 wells inthe basin, with throughput of about 89 MMcf/d. “The Powder has beenan opportunity for us to grow into a new area and … at asignificant pace with the help initially of [Pennaco Energy], whowas very active.” Clark said the company has entered into a deal tointerconnect with another 160 wells, enabling Bear Paw to expandinto the western part of the Powder River Basin. And it’s in theprocess of negotiating final agreements on a project that will kickoff by the end of the year, he noted.

But Bear Paw isn’t the only Powder River player in an expansionmood. Colorado Interstate Gas (CIG) “just announced it plans toloop its Medicine Bow Lateral [raising capacity to more than 1Bcf/d]…Williams earlier this week announced an open season fornew capacity from [a horsepower expansion of] its CheyenneCompressor Station,” said Clark at the investment forum sponsoredby the Colorado Oil and Gas Association.

Power River producers are eager to transport their gas tomarkets in the West as well as those in the East, but capacityconstraints on pipelines running to California are preventing themfrom supplying gas for power generation demand there, he noted.

“Pipelines are looking at ways they can alleviate that bylooping lines or adding compression. Unfortunately… because[pipes] have to file at FERC, and that’s typically a 12-monthprocess from the day you file until you get approval,” Clark saidhe wasn’t expecting an easing of the constraints anytime soon.

With respect to serving Powder River producers, “I think CIG wasprobably ahead of the game compared to any other pipeline in theRockies in building the Medicine Bow Lateral. It was ready for thegas when it started to come down both Ft. Union and Thunder Creek[in Wyoming]. Now they’ve added some horsepower [that became]operational earlier this week,” Clark noted. CIG’s construction “isfalling right in line with the volumes as they come out of ‘ThePowder.'”

CIG announced yesterday it plans to loop the existing lateralwith 155 miles of 36-inch diameter pipe and plans to add 14,340 hpof compression at a cost of about $168 million. The additionalfacilities will boost capacity by 675 MMcf/d to 1.05 Bcf/d.

But CIG and Williams aren’t the only ones planning systemexpansions. There are reports that Williston Basin may build anextension of its existing system that serves the basin. Richard H.Lewis, chairman and CEO of Denver-based Prima Energy Corp., said itexpects to complete by the end of the quarter Phase One of itsgathering system that initially will hook-up the company’s 20producing wells in the Stones Throw area of the Powder River Basin.”That will be our first coal-bed methane wells actually onproduction.” Ultimately, the project, which will have five phases,will provide gathering to the 115 CBM wells that Prima plans tohave drilled by the end of the year, as well as service thegathering needs of competitors.

Additionally, Prima recently has formed Arete Gathering Co., awholly owned subsidiary, to “pursue gathering opportunities wherewe think it’s warranted, where our lease position is not [strong]enough, in an effort to capture additional value from wellhead tothe burnertip.” Initially, the new company will go after gatheringprospects in the Powder River, where Prima has a substantial leaseposition, Lewis said

Bear Paw’s Clark believes gas prices will remain strong in thefuture, and will “promote continued drilling not only in ‘ThePowder’ but elsewhere in the Rockies.” But if prices were to trenddownwards, he doesn’t think that would affect Rockies’ productionas much as gas-on-gas competition would.

“I think over the next 12 months while CIG is getting approvalon its Medicine Bow loop, there’s the potential because of thevolume of gas being drilled and produced in ‘The Powder’ you’regoing to see a widening [of] the differential in the Rockiescompared to the Henry Hub. I think that will alleviate itself asCIG has that capacity added later next year,” Clark said.

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