The US Rocky Mountain region has great potential for natural gas reserves, but Houston-based Dominion Exploration & Production Inc. is growing frustrated with permitting delays and escalating costs of doing business.
Timothy S. Parker, senior vice-president and general manager of Dominion's offshore region, said rig and lease permit costs are rising in the Rockies. In addition, it is taking 150 days or longer to receive a permit for drilling from the US Bureau of Land Management office in Utah, he said.
"What we are looking at is a failure of the agencies to provide enough staff to deal with increasingly technically challenging permits and vastly increasing numbers of permits. They don't have a chance of getting their jobs done...and we don't think it is going to change substantially in the future," Parker said.
His comments came during a Sept. 23 industry briefing sponsored by consultant Lukens Energy Group, Houston. Lukens Pres. Jay Lukens agreed that Rocky Mountain gas producers face access challenges and permitting delays.
"There is a lot of frustration out there about environmentalists and permitting. You see many of the major players in the region selling their acreage position and their production to move elsewhere," Lukens said.
Thomas L. Price, vice-president of marketing for Colorado Interstate Gas Co., Colorado Springs, Colo., said that there is an obvious need for pipeline infrastructure development to transport gas both east and west out of the Rockies. CIG is a subsidiary of El Paso Corp., Houston.
"Environmentalists have come in and targeted the Rockies as the area that they really want to focus on. They are trying to stop development on every front," Price said.
Operating delays
Equipment and personnel shortages are apparent in the Uinta basin, Parker said, adding that Dominion has experienced fracturing delays as long as 10 days. Pipeline hookup services also are taking longer than normal.
"If you don't think that we are in a boom, go to the Rocky Mountains right now, and you will find that we are indeed in a boom. We are seeing all kinds of delays," Parker said. "Lease costs are up dramatically, when you can get a lease."
Consequently, Dominion is focused on developing its assets that are within reach of existing infrastructure, he said.
"That means that we are giving up on some of the exploratory acreage that we have. We are doing things like letting other people explore there because it may be worth more to them than it is to us.
"We are making a deliberate set of choices. We are walking away from some areas because of the access issues," Parker said.
Dominion remains interested in growing Uinta basin assets because those properties provide long-life reserves with improving production results, he said (OGJ Online, July 25, 2001).
"But outside of the Uinta basin, and especially outside of the areas where we already are active, we are making the decision that we are only going to get in if we can get to a value-critical stage," he said. "The only way we are going in is with significant size acquisitions. That means that [acquisition] prices have got to make sense, and we are having a very hard time with that as well."
Parker said the Rocky Mountain region is growing increasingly important to the US natural gas supply, but he expects that production increases will be "a lot slower than people think" because of escalating frustrations for producers doing business there.
He doubts that some of the more robust production forecasts for the region are attainable. Price agreed with Parker, saying that CIG's internal forecasts for anticipated overall gas production from the Rocky Mountains are more conservative than many other forecasts.
Pipelines
"The Rockies are really fairly remote from the consuming markets in the nation," Price said.
Pipeline take-away capacity from the Rockies has been expanded periodically throughout the years, and CIG expects more export capacity will be needed. CIG's model for 2003-15 shows about an even split of gas flowing east and west of the Rockies, Price said.
He noted that pipelines were not able to keep pace with growing gas production during 1999-2000. Pipeline expansions have since eased that crunch, and increased pipeline capacity is planned again, Price said.
"The question is whether it is going to be enough.
"Most parties would say no, it's clearly not enough take-away capacity," he said.
—Timothy S. Parker, senior vice-president and general manager, offshore region, Dominion Exploration & Production Inc.
—Thomas L. Price, vice-president, marketing, Colorado Interstate Gas Co.
