Phil Castle, The Business Times
The prospects of rising natural gas prices, more exports and ample pipeline capacity bode well for increased energy development on the Western Slope, according to an industry executive.
While nothing’s certain, John Harpole said he’s confident nonetheless in his mostly upbeat outlook. “I hope I’m back here in a year telling you how right I am.”
Harpole, the founder and president of Mercator Energy, shared his views during a briefing organized by the Grand Junction Area Chamber of Commerce. The Littleton-based company serves as a natural gas broker. Harpole also analyzed the potential effects of liquified natural gas (LNG) exports to Asia on production in the Piceance Basin of Western Colorado.
Mixing movie titles with energy projections, Harpole said it’s not the 3:10 to Yuma that matters so much as the $3.50 to Meeker — that is, the price of natural gas per million British thermal units at the hub in Northwest Colorado. If the price were to jump to that level, exploration and production activity likely would pick up in the Piceance, he said.
On a national level, technological advances in energy extraction from shale formations has made the United States the top oil and natural gas producer in the world, Harpole said. “The U.S. is winning, winning in a big way.”
But the prospects for production vary by region because of a number of factors, he said, among them price, demand and the ability to transport natural gas by pipeline.
While there’s concern among some natural gas produced in the Northeast could find its way back to the Rockies, Harpole said he doesn’t expect that to occur because it’s too expensive to ship gas to the West.
Meanwhile, the Rockies are well positioned because of large reserves and the infrastructure and capacity to move gas.
Harpole said the region is not only well-connected to markets to the west, including prime markets in California, but there’s also ample capacity in pipelines to accommodate increased production. “It’s a huge blessing we have that pipeline in the ground.”
Increased exports of natural gas to Mexico could help boost prices and production in Western Colorado
There could be even more demand for Western Colorado natural gas if construction proceeds on the Jordan Cove LNG terminal in Oregon and a pipeline to supply it, Harpole said.
As proposed, the facility would include equipment to purify, cool and liquefy natural gas. Two tanks each measuring 300 feet in diameter and 200 feet tall would store a total of 11.3 million cubic feet of LNG. If the project clears the permitting process, the facility could be operational by 2024, Harpole said.
Meanwhile, work also continues on the proposed Pacific Connector Pipeline. The 232-mile, 36-inch pipeline would extend from a hub at Malin, Ore., to the Jordan Cove facility near Coos Bay.
The Pacific Connector Pipeline would basically start where the Ruby Pipeline ends, connecting natural gas supplies from the Western U.S. to the LNG terminal.
The location for Jordan Cove constitutes a good place from which to ship natural gas to Asian markets — in particular Japan and utilities there that use natural gas to generate electricity, Harpole said.
Those utilities are looking for diverse and stable sources for natural gas on a long-term basis, which in term makes Piceance Basin gas attractive, he said.
“This area, in my mind, is suited perfectly for the long-term buyer of natural gas,” he said.
While other LNG facilities have been proposed for the West Coast of Canada, Harpole said he believes it’s unlikely they’ll be constructed. Moreover, there’s no pipeline capacity to transport natural gas from Canada to the proposed Jordan Cove facility, he said.
Meanwhile, the energy industry in the Rockies isn’t just waiting for higher prices — but also actively seeking out customers, he said.
Harpole said circumstances lead him to believe natural gas prices — and in turn exploration and production — will increase in Western Colorado.
The $3.50 to Meeker soon could be a reality, he said. “I don’t think we’re that far from it.”