Rockies Midstream Infrastructure

The U.S. Rockies oil and gas producing region stretches over five Western states: Colorado, Wyoming, Utah, Arizona and New Mexico. In 2008, the estimated ultimate recovery of total gas reserves in the Rockies was 374 trillion cubic feet, excluding coalbed methane, according to Colorado School of Mines’ Potential Gas Committee (PGC). The greatest potential for non-associated natural gas in the Rocky Mountain region is concentrated in southwest and south-central Wyoming, northwest Colorado and northeast Utah, and includes the Uinta, Piceance and Greater Green River basins.

Beginnings

Moving Rockies gas to market began in 1928, when Colorado Interstate Gas Co. began gas pipeline service to the Denver/Front Range markets. The 300-mile pipeline provided service from the Texas Panhandle to industrial markets. A residential gas market soon followed. Within five years, gas use in the Denver area more than tripled, as gas was increasingly used in homes for cooking and, later, for heating.

In the 1930s, El Paso Natural Gas pipeline was built to route gas volumes from the Texas and Oklahoma panhandles and the Permian Basin of Texas and New Mexico to markets in Arizona. About 10 years later, more infrastructure was built to reach California markets. Mountain Fuel Supply Co., a Questar Corp. predecessor, also began aggregating and routing this gas, to markets near Salt Lake City.

For many years, U.S. gas pipeline companies operated as regulated aggregators and merchants of the gas commodity. They built gathering and pipeline infrastructure from the wellhead out. All gas supply was treated as pipeline-system supply, and dedications of gas supplies and long-term contracts were the norm. All gas supply and sale prices were regulated.

Early regional pipelines developed in this era were, by their current names, Questar Pipeline, Kinder Morgan Interstate Pipeline, Northwest Pipeline, Williston Basin Interstate Pipeline, Southern Star Central Pipeline, and an expanded Colorado Interstate Gas Pipeline. Some were connected to and sourcing local markets only, while others were anchoring parties for what would later become the nucleus of a significant supply-region export capability. Due to the seasonal character of regional markets, and a lack of abundant gas-storage resource in the West, this regional export capability was a prerequisite for long-term supply development.

In the 1980s, gas-supply development in the Rockies continued to exceed local demand. With a growing national demand for gas and a shortage of developable gas supplies elsewhere, six pipeline companies created what would later be referred to as the Trailblazer Pipeline System, an integrated network of jointly owned feeder pipelines that provided access to developing supplies based upon each owner’s percent of ownership, pipeline capacity, shared costs and long-term reserves. Thus, Overthrust Pipeline, Wyoming Interstate Pipeline Co. (WIC) and the Trailblazer Pipeline were added to supply-aggregation and regional-export capability. The group provided additional west-to-east transportation capability, but the primary focus was adding half a billion cubic feet per day (Bcf/d) of export capability to the region.

In 1986, the Federal Energy Regulatory Commission issued Order 436 and a series of subsequent orders, which led to the eventual unbundling of the historical interstate gas-pipeline merchant functions, so Trailblazer was one of the last merchant systems built in the Rockies region.

In the 1990s, the Rockies’ take-away capacity reached 2 Bcf/d. The midstream industry continued to evolve as various companies took on roles in the unbundled world. In 1992, the Kern River Pipeline system was built from Opal, Wyoming, to Kern County, California. Several of the system’s anchor shippers were producers who chose to transport Rockies gas to support their enhanced-oil-recovery (EOR) efforts in the Kern County oilfields. The original Kern River system had 0.7 Bcf/d of capacity. However, not all of the gas went to EOR recovery efforts. Some shippers sent the gas to residential and industrial customers in Nevada and California.

As demand for Rockies gas continued to grow, additional take-away capacity was needed. New and expanded pipeline systems included the Pony Express oil pipeline conversion (1997, 0.24 Bcf/d), TransColorado Pipeline (1999, ultimately expanded to 0.6 Bcf/d), Trailblazer Pipeline expansion (2002, 0.33 Bcf/d), Kern River mainline expansion (2003, expanded by 0.9 Bcf/d), Cheyenne Plains Pipeline (2006, added 0.74 Bcf/d ), Grasslands Pipeline (0.23 Bcf/d) and the Rockies Express Pipeline (2009, 1.8 Bcf/d).

Over the years, Kern River has expanded several times, adding some 0.5 Bcf/d of capacity. Bison Pipeline is currently under construction and will add 0.5 Bcf/d of takeaway. When completed, the Ruby Pipeline will provide an additional 1.25 Bcf/d of capacity when it enters service in early 2011. These projects and others, as well as numerous internal expansions of existing systems, have or will provide more than 8 Bcf/d of additional regional export capability.

Mountain of Change

Today, as one looks at the Rockies region, there are marked differences from those early days. First, regional markets are generally consuming gas produced locally. Major market centers are Colorado’s Front Range and the Salt Lake City area.

Also, an integrated network of pipeline infrastructure now exists to collect and aggregate significant regional gas volumes and to export up to 10.5 Bcf/d of excess supply to markets in the Pacific Northwest, West, Southwest, Midcontinent and, more recently, the eastern U.S.

Facilities built within the region are significantly more integrated than in the past, and volumes flow northwest, west-to-east, east-to-west, and south. Many regional capacity constraints have been reduced or eliminated. With an expected leveling of recent production growth, this historically capacity-short region can meet anticipated need.

In fact, interruptible gas flows will finally begin to enter the regional gas transportation mix and regional trading hubs and related activities are expected to be greatly enhanced as flexibility finally starts to replace decades of constraint. With fewer internal-capacity constraints, and sufficient regional-export capacity, gas prices in the region should become more stable and more predictable. This stability will provide more certainty in ongoing and future supply-development planning and investment decisions.

The bottom line: One of the nation’s largest gas-supply regions has developed in the Rockies, and major pipeline infrastructure has followed suit. An analysis of each of the producing areas and details of related midstream infrastructure, including west-to-east, beginning in western Wyoming; southward into Colorado and New Mexico; and east-to-west, ending in Utah, illustrates the importance of the region’s energy-supply capability.

Overthrust Area/WY Thrust Belt

The site of one of the older supply developments in the Rockies, the Overthrust area consists of supply infrastructure in southwestern Wyoming and northeastern Utah. Conventional resource development in the area continues, and there is some limited coalbed-methane development activity. Gas in this area is generally routed to the Questar Pipeline, into the Overthrust Pipeline, or to Kern River Pipeline. The U.S. Geological Survey estimates that resources able to be developed in this area are about 1 trillion cubic feet.

Greater Green River/Jonah-Pinedale/Vicinity of Opal, Wyoming (West)

The western portion of the Greater Green River area provides significant resource potential, estimated at 53- to 82 trillion cubic feet of resource potential. The Opal Hub in Wyoming has become a regional market-trading hub, with numerous pipelines interconnecting there and large gas-processing plants in the Opal area.

Several major gas-gathering systems terminate into these processing plants. These include the Jonah gas-gathering system (capacity about 2 Bcf/d), gathering systems upstream of Williams’ Opal plant, and the Rendezvous Pipeline and gathering system.

Also, Williams’ Northwest Pipeline provides a limited wet-gas gathering capability into the Opal plant. Williams’ Opal plant has a processing capacity of 1.45 Bcf/d, and Enterprise Products’ Pioneer plant can process up to 0.75 Bcf/d.

Western Gas Resources’ Granger complex in the area can handle 0.35 Bcf/d. Recent Rockies pipeline expansions, altered connectivity and reconfigurations of Overthrust, Wyoming Interstate and Colorado Interstate, Questar, and other pipelines provide an additional 1.5 Bcf/d of supplies coming into the greater Opal trading area to compete for market share and export capacity—both eastbound and westbound. They also provide ultimate sourcing capability to the Ruby Pipeline. Most of this pipeline-transported gas has been treated or processed and is ready to compete for capacity on take-away pipelines.

Greater Green River/Wamsutter, Wyoming (East)

The eastern portion of the Green River Basin has significant resource potential. Gas from this region generally flows east toward the Cheyenne Hub and traditional Rockies markets, and some is routed into the Rockies Express Pipeline toward eastern markets. Wamsutter, Wyoming, has become an interconnection point for several of the regional pipeline systems, where gas volumes are aggregated from the Greater Green River area, points west and the Piceance Basin. If transportation capacity eastward from the Wamsutter is limited, parties can transport volumes westward on other area pipelines and market their gas at Opal.

This flexibility and bi-directional flow capability is new to the Rockies region and is a welcome addition for upstream producers and other market participants. Flexibility will become increasingly important with the completion of the Ruby Pipeline and Kern River Apex expansions in 2011, which will add 1.5 Bcf/d of aggregated regional pipeline export capability. Gas from the Piceance Basin, gathered by the Rockies Express, flows to and through the Wamsutter area, where it is combined with receipts from the Green River area and other points west.

Wind River/Big Horn/Powder River

The Big Horn area (0.2- to 0.55 trillion cubic feet of resource potential) is sourced primarily from historical conventional resources, while the Wind River (0.9- to 1.94 trillion cubic feet) and Powder River Basins (8.8- to 15.5 trillion cubic feet) are also sourced from coalbed methane wells. The Powder River wells are very shallow and low pressure.

After an initial production surge, these wells produce for many years. The coalbed methane requires treating for CO₂ and may require management of significant amounts of water produced along with the gas stream.

Gas from these basins is generally sourced directly into Front Range markets, traded at the Cheyenne Hub, or requires other export markets. Recently, expansions on the Williston Basin Pipeline and new Bison Pipeline have targeted delivery into Northern Border Pipeline to reach Midwest markets and pricing.

Northeast Colorado/Denver-Julesburg Basin

Located more proximate to the Front Range and regional delivery markets, gas from northeast Colorado and the Denver-Julesburg Basin (1.3 to 2.4 trillion cubic feet of resource potential) can access local markets or choose to compete for export capacity. In general, these volumes access Front Range markets, trade at the Cheyenne Hub or seek export to other markets.

Raton Basin/Southeastern Colorado

Located in far southeastern Colorado and northern New Mexico, the Raton Basin (0.9 to 1.9 trillion cubic feet of resource potential) is connected only to the Colorado Interstate Gas pipeline system. As such, these volumes have avoided some of the export-capacity constraints and historical pricing issues of other Rockies regions, but they have encountered their own regional constraints on the CIG system.

Volumes produced in the region have generally flowed via CIG into markets in Kansas, Oklahoma, and Texas. However, CIG has recently provided a limited “backhaul” capability by implementing a 16-inch pipe northward from the Raton area to connect to its system that is more proximate to the Front Range and Cheyenne Hub; the capacity is 0.135 Bcf/d. There, Raton volumes can access a broader array of markets and compete for market share. Pioneer Resources, the largest developer/operator in the Raton Basin, has currently suspended future Raton development to focus on other areas. Overall lower gas prices expected in the U.S. over the next few years are likely to keep new development in this area idled. The current infrastructure is adequate to support current production levels.

Piceance Basin, Colorado

The Piceance Basin (12- to 21 trillion cubic feet of resource potential) in Colorado, often combined (geologically speaking) with the Uinta Basin, is one of the three-largest resource areas in the Rockies. The Uinta-Piceance Basin geology provides for development of coalbed methane as well as tight-sand resources.

To date, much of the development in the Piceance is focused on tight sands. The terrain is difficult, and the geology is quite complex. Producing operators in the region have been very successful, but area development has slowed due to current and expected low gas prices. Some of the gas in this area routes to the Meeker/Greasewood area, where it is processed or treated at Enterprise’s Meeker gas plant and can interconnect to the Rockies Express Pipeline to move to markets in the eastern U.S.

At Meeker, the White River trading hub has recently been implemented to provide for additional flexibility, as gas can also be routed toward Questar’s Clay Basin storage or into Kern River Pipeline to access western markets. Activity in this area has been bolstered by gas liquids.

Uinta Basin, Utah

Historically, volumes developed in this area have been severely impacted by local infrastructure and area pipeline-capacity constraints. However, recent projects and expansions now provide capability and flexibility to access multiple markets.

For example, producers can move gas north from the area and can access pipelines to route west to Opal or east to Cheyenne. Also, gas can flow westward on the Questar Pipeline system to access markets at Clay Basin storage or can be routed via Questar’s Southern System into Kern River Pipeline.

Finally, with access to the White River Hub at Greasewood, gas can seek markets there or access pipeline capacity to markets elsewhere. This flow flexibility may be enhanced further as Questar Pipeline considers additional expansion of its Southern System to provide additional capacity into Kern River or Opal.

San Juan Basin, New Mexico

The San Juan Basin in New Mexico (41- to 50.4 trillion cubic feet) has seen development of coalbed-methane gas resources spurred significantly by federal tax credits for many years. Yet, as those credits have expired, development has slowed. Since 1988, the development of the Fruitland coal seam has proved to be the major supply dynamic.

Paradox Basin, Utah

The Paradox Basin in Utah (0.93- to 2.02 trillion cubic feet) appears to have the smallest resource potential in the Rockies. Development here will depend on a higher-than-average gas price to support area development. Questar Pipeline provides the take-away capacity, but would have to be expanded if development exceeds forecast potential. (See Table 10.)

As evidenced by the overall Rockies gas-resource potential, its significant midstream assets and key market players, this region will continue to be a critical factor in the U.S. gas-supply base. Resources have developed over time to support individual needs while becoming more integrated, helping to lessen regional capacity constraints.

Gas trading and transportation capacity have been addressed and are supported. Though supply development in some areas may require additional midstream resources, macro infrastructure in the region should be sufficient to support development needs.

This article has been brought to you by Hart Energy's Midstream Business