After several years on hold because of poor Rocky Mountainregion market conditions, TransColorado Gas Transmission’s Phase IIexpansion project is proceeding and should be in service inDecember. FERC approved the 300 MMcf/d expansion last week as didthe Bureau of Land Management and the U.S. Forest Service.
The new line would link the existing TransColorado pipeline inthe northern San Juan Basin in northwestern New Mexico with themainline facilities of Questar in the Piceance Basin near the BigHole area of Rio Blanco County in northwestern Colorado. The linealso is expected to be connected to Northwest Pipeline and ColoradoInterstate Gas near Greasewood, CO. It is an important addition toregional pipeline infrastructure, providing access to growingreserves and production in the Piceance and Uinta basins.
When the Phase I project was approved by FERC in late 1994,TransColorado sponsors felt the market wouldn’t support thenorthward extension. But improved market conditions, includinghigher gas prices, an increase in drilling activity in the RockyMountain region and better access to Midwestern and MidContinentmarkets, have allowed the Phase II project to go forward.
“If you look just at the 30-day market, you’re unconvinced. Butif you look at the pattern that’s existed over the last coupleyears and what’s behind the pattern that has evolved,” you see asolid market need for new capacity in the region, said JulianHuzyk, marketing director for TransColorado. “In calendar year1996, you had an average differential between northern Rockies andSan Juan of 22 cents, and in 1997 you had an average of 33 cents.This year it looks as though it’s going to be closer to a 1996pattern, somewhere in the 20s. But San Juan Basin supplies arestill expected to – come 2000 – show a dramatic drop-off incoal-seam [gas] production. And couple that with projections of anumber of analysts that California demand is going to increase andCanadian pipeline projects will be taking supplies away fromCalifornia,” and you have a strong case for the TransColoradoexpansion, said Huzyk.
Huzyk also noted drilling and production in the region has grownsignificantly over the last few years in response to strongerprices, new pipelines (such as KN Energy’s Pony Express) and theexpansions of Wyoming Interstate and Trailblazer. Huzyk said recentoutlooks show regional production growing 500 MMcf/d this year.
TransColorado’s Phase II expansion is proposed to be about 280miles of 22- and 24-inch diameter pipe. Two mainline compressorstations will add about 10,000 hp to the system. TransColoradoselected winning bidders this week and plans to begin constructionof the Phase II project by July 27, with completion by December.
Shippers signed agreements several years ago for 210 MMcf/d ofthe 300 MMcf/d of expansion capacity. Most of those agreements willbe renegotiated, but Huzyk said he expects shippers to sign up forthe entire space in the pipe. TransColorado Gas Transmission isjointly owned by Questar Corp. and KN Energy.
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