Expert: Energy boom may skip W. Slope, for now
The last boom in the western Colorado economy came as oil prices approached and then cleared $100 a barrel.
Oil prices again are forecast to hit the same milestone, but energy companies, rather than rushing back into the Piceance Basin, are looking elsewhere.
That’s not a situation that will last forever, though, industry observers said, forecasting a bright future for natural gas drilling in northwest Colorado.
Still, BJ Services said this month it is moving two hydraulic-fracturing crews to other fields, and a major Piceance Basin player, Exxon Mobil, said the company has “reduced our drilling tempo at Piceance, due to the business environment.”
Part of that business environment is the newfound interest in the Niobrara Foundation in eastern Colorado, where energy companies are moving to drill for oil, the stuff that’s now fetching $90 a barrel, with some experts calling for the price to hit $100 a barrel by summer.
“My members that are focused on the West Slope are pretty inactive now,” Colorado Petroleum Association President Stan Dempsey said.
The Niobrara, “that’s where a lot of the activity is happening,” Dempsey said.
What’s driving the move is the price of oil, which has risen and is forecast to rise more, versus the price of natural gas, which is running well below the 2006–08 prices that fueled a boom in western Colorado.
The Piceance Basin has another competitive disadvantage because it produces what is termed a “dry gas,” meaning it is accompanied out of the wellhead by relatively small amounts of liquids that can be used in the gasoline or diesel supplies or by chemical plants, Dempsey said.
The infatuation with oil won’t last, said Marc Smith, president of the Western Energy Alliance, which previously was known as the Independent Petroleum Association of Mountain States.
Eventually, the Piceance and other gas producers in the Rocky Mountain states will have a competitive advantage as other regions of the country use the natural gas they produce and need more, Smith said.
The Rockies fields are the only fields that export, and with the completion of pipelines to the east and west, they will be positioned well to meet new demands when they arise, Smith said.
“I know five or six different service companies that are bringing rigs back into the Rockies,” Smith said.
Exxon Mobil remains optimistic about its holdings in the Piceance, spokesman David Eglinton said in a statement.
Exxon Mobil’s “plan for the long-term development of our acreage remains unchanged. We are still at the early stages of development, with some 300 wells drilled to date,” Eglinton said. “We estimate that several thousand wells will be needed to fully develop our Piceance project.”
Now that drilling companies have had a chance to deal with lower prices and digest drilling rules in Colorado, “there is a real, continued, long-term growth opportunity” for Piceance Basin natural gas, Smith said.
The Piceance “may be at a temporary plateau, which some will mistake as a false summit, but there is nothing but blue skies ahead,” Smith said.
In the meantime, effort to increase demand for natural gas, such as fleet conversions by the city of Grand Junction and Garfield County, will pay off in the future, said David Ludlam, executive director of the West Slope Colorado Oil and Gas Association.
“So, despite higher short-term investment returns in other parts of the state, western Colorado remains one of the nation’s critical clean-energy reserves and a great opportunity for long-term capital investment as demand for natural gas grows stronger,” Ludlam said.