• Climate Change, Energy 09.06.2016

    Colorado is home to the second-biggest field of recoverable natural gas in the United States, according to a new assessment by the U.S. Geological Survey.

    Colorado’s Piceance has far more recoverable natural gas than previously thought – Denver Business Journal

    The assessment looks at the amount and scope of the gas locked in the Mancos Shale formation, part of the Piceance Basin on the Western Slope.
    Colorado drilling rig
    A WPX Energy Inc. drilling rig working in Colorado’s Piceance Basin on the Western Slope.

    Photo by Jim Blecha, courtesy of WPX Energy Inc.

    The USGS on Wednesday said the Mancos Shale, a rock formation that’s more than 4,000 feet thick in some areas, holds about 66 trillion cubic feet (Tcf) of natural gas that’s technically recoverable using current technologies, including horizontal drilling and hydraulic fracturing.

    That’s up from 1.6 Tcf that the USGS believed was locked in the Piceance Basin in 2003, the last time the agency took a close look at the natural gas resources locked in the rocks.

    The new assessment also pegged the basin’s oil resources at 74 million barrels of oil and 45 million barrels of natural gas liquids.

    USGS now says there’s enough natural gas in the Colorado natural gas field to meet the needs of the entire nation for more than two years. The U.S. in 2015 consumed about 27.5 trillion cubic feet of natural gas.

    “This is the second-largest assessment of continuous gas we’ve ever done,” Alex Demas, a spokesman for the USGS, told the Denver Business Journal.

    It’s enough gas to bolster arguments that the Federal Energy Regulatory Commission should approve the construction of the Jordan Cove liquefied natural gas (LNG) export terminal on Oregon’s coast, said David Ludlum, executive director of the Western Slope Colorado Oil & Gas Association.

    “We have a resource here in Colorado that the country has not even started to wrap its head around,” Ludlum said.

    “We can harness this resource to the benefit of our allies in the Pacific, for countries who are hungry for reliable energy that can be harnessed in a state that has the highest quality environmental regulations in the world and a track record of delivering,” Ludlum said.

    New technologies boost assessment
    Demas said the increase in the assessment of recoverable natural gas in western Colorado was due to the new technologies developed by the oil and gas sector in the last decade, including horizontal drilling and fracking that are able to access more oil and gas.
    “We reassessed the Mancos Shale in the Piceance Basin as part of a broader effort to reassess priority onshore U.S. continuous oil and gas accumulations,” said Sarah Hawkins, the USGS’s lead author on the new assessment.

    “In the last decade, new drilling in the Mancos Shale provided additional geologic data and required a revision of our previous assessment of technically recoverable, undiscovered oil and gas,” Hawkins said.

    The report noted that more than 2,000 new wells have been drilled and completed since the 2003 assessment. The USGS itself also drilled a well into the Mancos formation to get a core sample to test, Demas said.
    The nation’s biggest natural gas field is the Marcellus Shale in the eastern U.S., which has about 84 Tcf of natural gas.

    The Mancos in western Colorado is the nation’s second-biggest field with 66 Tcf of natural gas, according to the latest assessment released Wednesday.

    The third-biggest natural gas field is the Barnett, in Texas, with 53 Tcf, Demas said.

    Energy companies working in the area have grown aware that the amount of natural gas in the Mancos Shale formation is far larger than expected.

    In 2013, WPX Energy Inc., (NYSE: WPX) based in Tulsa, Oklahoma, drilled a horizontal well that produced about 1 billion cubic feet of natural gas in 100 days — earning it the nickname “The Beast.” That amount of production is equivalent to 40 years worth of natural gas production by a typical well in the Piceance Basin.

    But the downturn in the oil and gas sector also has hit hard on the Western Slope.

    The Piceance Basin, which produces natural gas, was once the center of the state’s oil and gas sector, with more than 100 drilling rigs operating.

    Now, it’s overshadowed by the Denver-Julesburg Basin in northeastern Colorado, where energy companies focus on producing oil and natural gas liquids, which are used to make plastics.

    Less drilling in slump
    Nationally, energy companies in general have focused lately on producing oil, which has a higher value in the market compared to natural gas.

    These days, there are three drilling rigs working in the Piceance Basin, according to Ludlum.

    Encana Corp. (NYSE: ECA) has more than 3,000 wells and 708,000 net acres of mineral rights in the basin. But that company drilled its last well in the area in late 2013, according to a company spokesman.

    And WPX, which drilled the “Beast” well, in April finalized the $910 million sale of its assets in the Piceance to Terra Energy Partners LLC, a privately held Houston-based company.

    But Ludlum said that the newly realized “size, scale and breadth” of the Mancos Shale and the larger Piceance Basin means that the area “can provide to the world.”

    All its producers need is for natural gas commodity prices to inch higher, he said.

    Natural gas prices are about $2.50 per million cubic feet, and haven’t been above $3 since early 2015.

    “The reality is that none of our producers can drill at $2 gas, but all of them can drill at $3 and we’re not that far from $3 gas,” Ludlum said.

    “Our producers are more efficient and cost conscience, and with the new companies, backed by private equity, it’s more conducive to long-term contracts for customers.”

    U.S. Rep. Scott Tipton, R-Cortez, who represents much of western Colorado, said the revised assessment offered “tremendous” potential for the local economy and the nation’s energy security — if the Jordan Cove terminal is built.

    “This is an incredible opportunity to create jobs and economic growth in one of the regions hit hardest by the economic downturn,” Tipton said.

    “In order to capitalize on it, it’s imperative that our nation’s elected representatives work to advance a responsible all-of-the-above energy policy that embraces both renewable energy technologies and traditional resources — including natural gas and coal,” he said.

    Robert Boswell, chairman and CEO of Denver’s Laramie Energy LLC, a private oil and gas firm with operations in the Piceance, said he thinks the USGS’s new assessment that there’s 66 Tcf of natural gas in the region — as dramatic as it is — is low.

    Boswell has worked in the Piceance since 2004 and built two companies there. The first one he sold in 2007 to Plains Exploration & Production Co. for nearly $1 billion. The second, current, iteration of Laramie is the third-largest energy company working the basin.

    “I think that’s still low,” Boswell said of the USGS’s 66 trillion Tcf estimate for recoverable reserves.

    “We knew that it [the Piceance] is one of the great basins in North America, and it’s closer to the west coast so we knew that it had potential ,” Boswell said of the company’s decision to focus on western Colorado.

    Cathy Proctor covers energy, the environment and transportation for the Denver Business Journal and edits the weekly “Energy Inc.” newsletter. Phone: 303-803-9233. Subscribe to the Energy Inc. newsletter


    Posted by Dana West @ 9:34 am for Climate Change, Energy |

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