Energy future full of promise for Western Colorado

Energy consumption is sure to increase, especially with the emerging markets of China and India. And an infusion of natural gas discoveries portends well for that particular segment of the energy business. However, with prices for the gas at lower levels than during the boom days of 2005—2007, companies are in a bit of a conundrum—do they invest in new exploration and drilling, or wait until prices spike higher and produce stronger profits for the companies and their shareholders?

“What dictates this is how much we use,” said Chad Odegard, asset director for Williams Production in the Piceance Basin of western Colorado. Odegard addressed an energy forum sponsored by the Grand Junction Area Chamber of Commerce.

During the recent “shoulder months” of the fall season, natural gas companies typically store gas for use in the high-demand winter months. Demand from both homes and manufacturing facilities usually spikes in both winter and summer, when both types of users tend to use energy for heating or air conditioning. In addition, manufacturing demand depends largely on economic conditions—how much demand there is for new products.

There’s also a huge wildcard in the potential increased use of natural gas to power vehicles. As an example, Grand Valley Transit plans to add two natural gas-powered vehicles to its fleet, and the City of Grand Junction plans to feature trash pickup trucks powered by natural gas in the near future. The city is constructing a natural gas filing station near the city shops along the Riverside Parkway, scheduled for completion by the end of the year. It’s a station billed as the missing link that will enable natural gas vehicles to motor from Denver to Los Angeles.

Texas oilman T. Boone Pickens made a splash by promoting the use of natural gas in vehicles as a way to reduce dependence on oil while using an energy source abundant within the U.S. borders. Recent natural gas discoveries in the Marcellus Shale formation near the eastern seaboard, as well as in the Haynesville Shale formation in northwest Louisiana and east Texas, have raised expectations for how long the supply might last. Energy analysts say there’s now enough natural gas on hand to fuel the nation for another century.

“The supply of natural gas has changed dramatically,” said Doug Hock, director of public and community relations for Encana Oil and Gas. He added Encana is already using 40 trucks that use a combination of natural gas and gasoline to operate.

The discoveries to the south and east have led Williams and Encana to pour more resources into those regions, while holding steady in the Piceance Basin.

Encana is operating about 30 drill rigs in the Haynesville formation, said Hock.

In the Piceance, Williams plans to operate the current average of 11 rigs a month through next year, producing 850-880 million cubic feet of gas per day. Directional drilling techniques have been refined to the point that as many as 52 wells can be drilled from a single drill rig. Williams will spend about $620 million in capital investment for 2010, said Odegard, and produce about 860 million cubic feet of gas per day. About 350 wells will be drilled next year in the Piceance. Williams also plans more than $600 million in capital construction costs, including equipment for drilling and extracting. An uptick in production could happen in about 13 months.

“We’re looking to pick up additional rigs in 2012,” said Odegard.

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