Producers face a mountain of challenges in the Rockies as the area grapples with changing dynamics, the impact of shale, and ethane rejection. Such issues were addressed during a recent roundtable discussion on natural gas in the region.
“I see two things going on,” Stuart Nance, Bill Barrett Corp’s vice president of marketing, said of the Rockies. “I see the industry repositioning itself. We’re repositioning people; we’re repositioning plays and other resources.”
The changes are happening, said Nance, as the region grows and dynamics shift. Back in 2005, the Rockies were producing more than 5.5 billion cubic feet (Bcf) per day. The top performing basins were, and continue to be, in Colorado, Wyoming, and Utah. At the time, Wyoming accounted for nearly 70% of the production, while Colorado contributed nearly 17% and Utah produced between 12% and 15%.
“Today, we’ve hit the peak and we’re now down to around 8.5 Bcf per day and declining,” Nance said during Hart Energy’s Rockies Midstream conference in Denver. “Today, the Colorado market share is almost a third.”
Colorado has been gobbling up a larger portion of the margin largely thanks to the DJ Basin. Wyoming production, meanwhile, has been declining due to sluggish activity in the Green River and Powder River basins.
Some Rockies pipelines are also undergoing repurposing. Nance pointed to the Pony Express Pipeline, which was initially an oil pipeline before being converted to service gas. It’s now being converted back to oil. The pipeline travels from Wyoming to Kansas.
Meanwhile, shale gas production in the east is shifting the market for Rockies gas west. Shale plays are beginning to expand into the Utica, for instance.
“You certainly have to anticipate there’s going to be continued pushback as gas in the marketplace takes the place of what Rockies producers have done over the past five years to push to value-added markets,” Bryan Hassler, manager director of Freepoint Commodities, said during the panel. “You have to be creative.”
To exacerbate the problem further, regional bottlenecks are also pushing Rockies gas back. Hassler said producers need to anticipate and prepare themselves for such challenges to ensure their commodities are protected.
Jesse Wood, vice president and Rockies regional manager for Summit Midstream, said many regional basins will also start segregation. As plant capacity fills, he said, producers will separate lean gas from rich gas to prevent lean gas from filling up processing plants as gas heads to market.
It’s among the many changes Wood has seen over the course of his 30-year midstream career. A relatively new challenge being faced by midstream players throughout the country involves ethane and how to dispose of the virtually worthless natural gas liquid. This is particularly troublesome in places such as the Marcellus and Utica, but is affecting the Rockies as well.
“It’s certainly a big issue,” said Wood. “We’ve already seen a lot of (facilities) going into ethane rejection, and we’re quite (far) from the market center for ethane. With all the ethane coming out of the eastern U.S., it’s definitely going to impact the markets.”