Phil Castle, The Business Times
Natural gas production in Western Colorado fuels domestic manufacturing and also could play an important role in exporting, according to representatives from three companies who joined in a panel discussion in Grand Junction.
G2X Energy and Nucor Corp. rely on natural gas reserves in the Piceance Basin to provide a long-term supply for their manufacturing processes as well as serve as a hedge against potential price increases.
Those same attributes could make Piceance Basin gas attractive for exports if the proposed Jordan Cove liquefied natural gas terminal is constructed in Oregon.
“We’re excited to be in the Piceance. We’re excited to be part of this area,” said Danny Wilson, executive vice president of upstream at G2X Energy.
The panel also featured Joe Stratman, executive vice president of Nucor, and Bob Braddock, senior project advisor for Jordan Cove LNG. John Harpole, founder and president of Mercator Energy, moderated the discussion.
The Unconventional Energy Center at CMU joined with the Consumer Energy Alliance in presenting the discussion. The West Slope Colorado Oil and Gas Association and Chevron also sponsored the energy management forum.
G2X Energy converts natural gas to methanol, which in turn is used in adhesives, automotive products, paints and plastics as well as blended with other fuels.
G2X Energy works with Terra Energy in developing natural gas reserves in the Piceance Basin, Wilson said.
Nucor manufactures steel out of recycled scrap metal as well as through what’s called a direct reduced iron (DRI) process. Nucor works with Encana to develop Piceance Basin reserves.
Wilson and Stratman both said their companies depend on the increased natural gas supplies and lower prices that have resulted from such techniques as hydraulic fracturing and horizontal drilling.
“This is one of the great outcomes of the natural gas revolution,” Wilson said.
Stratman said long-term supplies at affordable prices make it possible to operate a DRI plant in the United States. “Having economical natural gas is one of the requirements of making DRI successful.”
There could be additional demand for Western Colorado natural gas if construction proceeds on the Jordan Cove terminal and a pipeline to supply it, Braddock said.
“It opens up the Piceance Basin gas to a whole new market.”
The Jordan Cove terminal has been in the works for about 10 years as a project of Veresen, a Canadian energy infrastructure company, Braddock said. Veresen also owns a half interest in the 680-mile Ruby Pipeline system that extends from Wyoming to Oregon.
Jordan Cove initially was proposed as an import terminal at a time when it was believed natural gas supplies would dwindle in the United States. But the project was changed to an export terminal in the aftermath of booming production that’s made the U.S. one of the leading natural gas and oil producers in the world, Braddock 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, Braddock 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 proposed Jordan Cove facility near Coos Bay. The 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 near Coos Bay constitutes a good place from which to ship natural gas to overseas markets — in particular Japan and utilities there that use natural gas to generate electricity.
Ships can transport LNG from the West Coast of the United State to Japan in nine days, half the time it takes to ship LNG from the Gulf Coast of the U.S., Braddock said.
Eventually, LNG exports also could go to China as that country uses more natural gas to generated electricity, he added.
Wilson, Stratman and Braddock all said the security of a long-term supply of natural gas combined with the ability to establish a ceiling on how much that gas costs makes Piceance Basin resources attractive.
Braddock said Japanese utilities want natural gas from North America to add to the stability of supplies from Australia, Indonesia, the Middle East and Russia. Jordan Cove with process natural gas from the Piceance Basin as well as Western Canada, he said.
While there’s a fear LNG exports could push natural gas prices higher, Stratman said there’s a bigger picture at which to look. LNG exports could help to reduce the trade deficit, he said. “That’s an economic win for the United States.”
Wilson said he’s not concerned about higher prices related to LNG exports, either. “We’re not challenged by that. That’s really good for the U.S.”
Braddock said natural gas extraction becomes more efficient with repetition, so increased development would help. “The more we can produce as a country, the better our domestic industry will be.”