Pipeline Valves Article
Jeannie Stell - Editor, Pipeline and Gas Technology | March 18, 2011
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The Niobrara oil and gas play is an Upper Cretaceous formation in the Rocky Mountain region. The deep formation underlying northern Colorado, western Nebraska and eastern Wyoming is where the oil rush is taking hold.
Highly productive wells are being tapped in Colorado, just south of the Wyoming line. Horizontal drilling and other newer drilling technologies are being applied to the Niobrara formation, which is geologically similar to North Dakota’s Bakken play.
The self-sourced hydrocarbon system has organic carbon content in the 1% to7% range and is produced at depths of 6,000 to 9,000 feet in the Denver-Julesburg (D-J), North Park and Powder River basins.
Current focus areas are in and around Wattenberg Field in Weld County, Colorado, and in Laramie, Platte and Goshen counties, Wyoming, around Silo Field. Other areas include the southern portion of the Powder River Basin in Campbell, Converse and Natrona counties and North Park Basin in Jackson, Routt and Moffat counties, Colorado.
Today, the play is primarily exploited via horizontal drilling with lateral lengths of 3,500 to 5,000 feet and is fracture stimulated. Well costs run from $3- to $6 million.
Noble Energy (800,000 acres), EOG Resources (400,000 acres), Chesapeake Energy (400,000 acres), East Resources (100,000 acres), Fidelity Exploration and Production (80,000 acres), Petroleum Development (72,000 acres), Voyager Oil & Gas (48,000 acres) and SM Energy (24,000 acres) are some of the major players. Also, Anadarko Petroleum has a large position by way of the Union Pacific Resources Land Grant.
Operators in the area have long produced wet gas and light sweet crude from the D-J Basin. Recent reports suggest the Niobrara could have recoverable resources between 4 billion and 6 billion barrels of oil equivalent.
Several pipelines traverse the Niobrara play, but only one is a major oil system. In Colorado’s D-J Basin, SemGroup Inc.’s much anticipated 526-mile, 12-inch-diameter White Cliffs pipeline now provides about 30,000 barrels of oil take-away from the area into the oil hub at Cushing, Oklahoma.
A year ago, Noble Energy and Anadarko were enthusiastic about hooking up to the system. Both operators subscribed to 10,000 barrels daily.
“There have been times when we had to shut in wells up to a week at a time because the area lacked sufficient refining capacity,” says Anadarko’s facilities engineer Joe Aucoin, from his office at the White Cliffs’ connect near Plattesville. “It’s huge for us.”
At the time, price realizations in the field were expected to improve by as much as $6 per barrel, thanks to cost efficiencies from the new pipeline, according to Anadarko. Field-wide, savings are a potential $65 million per year at the pipeline’s capacity, according to Wood Mackenzie.
White Cliffs will not only provide producers such as Anadarko and Noble Energy with access to more markets and potentially higher prices for their crude, but also nearby oil-polishing facilities see reduced costs that were previously incurred in hot-oiling processes at the individual lease sites.
Other benefits of the pipeline include reduced air emissions from truck traffic, which used to be the transportation mode for take-away from the play, and an onsite centralized truck facility.
The common carrier originates in Platteville, Colorado, northeast of Denver, and terminates at SemCrude’s storage facility in Cushing. It has 100,000 barrels of crude oil storage in Platteville, adjacent to SemCrude’s 10-bay truck-unloading facility with 20,000 barrels of crude oil storage.
White Cliffs is the only line connecting the DJ Basin directly to Cushing. Despite its single-pump stations design, the pipeline is expandable to 50,000 barrels per day. White Cliffs is a major asset for SemGroup, the company that recently emerged from reorganization brought about by its 2009 Chapter 11 bankruptcy.
Operators were also anticipating significant increased take-away capacity for natural gas liquids (NGLs). The DJ Basin Lateral Pipeline, which began operations in March 2009, is a 125-mile NGL line connecting the DJ Basin with the Overland Pass Pipeline.
The 760-mile Overland line can transport 110,000 barrels of NGLs per day. It runs from Opal, Wyoming, to Conway, Kansas.
The pipeline’s capacity is 55,000 barrels per day from existing gas processing facilities in the DJ Basin. Such gas processing facilities include DCP Midstream’s Lucerne and Mewborne plants.
Additionally, DCP’s Platteville and Greeley facilities are connected to Mewborne. Increasing NGL production in the Rocky Mountain region correlates with increasing gas development.
“With the Overland and DJ Lateral in place, take-away constraints are lifting for producers,” says Roz Elliot, director of public affairs for DCP Midstream, Denver.
The new capacity provides a valuable additional outlet for NGLs from the field, agrees Ben MacFarlane, NGLs analyst with Bentek Energy.
Previously, the field’s NGLs had to travel on the Phillips Petroleum line down to Borger, Texas, or be trucked to alternative markets in Kansas.
Most of the other pipelines in the area transport natural gas.
Trailblazer Pipeline Co. LLC owns and operates a 436-mile gas take-away pipeline system that runs from Colorado through southeastern Wyoming to Beatrice, Nebraska. Kinder Morgan Energy Partners owns 100% of Trailblazer.
The pipeline is operated by Natural Gas Pipeline Co. of America, which is operated and partially owned by Kinder Morgan Inc. Trailblazer provides an outlet for Rocky Mountain gas seeking Midwest and East Coast markets. It receives gas from various interconnections and receipt points in Colorado, including Wyoming Inter-Dull Knife and Colorado Inter-Tomahawk.
Some of the largest delivery points for Trailblazer include NGPL-Gage Co and NNG-Beatrice in Nebraska. The top gas transportation customers for Trailblazer are Colorado Interstate Gas Co. and Marathon Oil.
Although the pipeline provides firm transportation and interruptible transportation services, it does not offer storage services.
Colorado Interstate Gas (CIG) pipeline is a 4,200-mile pipeline with a design capacity of about 3.7 billion cubic feet per day. El Paso Pipeline Partners owns the controlling interest (58%) in CIG.
The pipeline delivers gas from production areas in the Rocky Mountains and the Anadarko Basin directly to customers in Colorado and Wyoming and indirectly to the Midwest, Southwest, California and Pacific Northwest. CIG also owns interests in five storage facilities in Colorado and Kansas, which collectively have about 35 billion cubic feet of underground working natural gas storage capacity and one natural gas processing plant in Wyoming.
Also, CIG owns a 50% ownership interest in WYCO Development LLC, or WYCO, a joint venture with an affiliate of Public Service Company of Colorado, and operates WYCO’s High Plains pipeline and Totem Gas Storage facility.
El Paso also owns Wyoming Interstate Co. (WIC), an 800-mile pipeline with a design capacity of some 3.3 billion cubic feet per day. WIC is a mainline system that extends from western Wyoming to northeast Colorado (at the Cheyenne Hub) and several lateral pipeline systems that extend from various interconnections along the WIC mainline into western Colorado and northeast Wyoming and into eastern Utah.
WIC is one of the primary interstate natural gas transportation systems providing take-away capacity from the Overthrust, Piceance, Uinta, Powder River and Green River basins. CIG is the operator of the WIC system via a service agreement with WIC.
Also, El Paso owns 48% of Young Gas Storage Co., a facility with 6 billion cubic feet of capacity in Colorado.
Although the Niobrara play was a sleepy, slowly developed area about nine months ago, the play has drawn the interest of both oil and gas producers. Low gas prices make any U.S. oil play look attractive, and the Niobrara is no slouch.
In July, the Office of State Lands and Investments in Wyoming held a special oil and gas lease auction in response to demand from energy companies looking to acquire leasing rights in the booming eastern region of Wyoming’s share of the Niobrara.
A near-record $42 million of bids came in for the right to drill on state land. High bids reached $3,200 an acre, with the big spender title going to Big Bear Oil & Gas, which purchased 29 leases, including six for $1 million or more. The regularly scheduled state lease auction last May generated a record $45.6 million for Wyoming.
“Those who’ve wanted to be involved in this play have been out there. They’re grabbing up as much acreage as they can,” Harold Kemp, head of state minerals leasing, publicly stated.
The play is geologically similar to North Dakota’s Bakken play. After the rush to lease, ever more producers will begin to drill out their plays and more midstream infrastructure will be needed to move the produced hydrocarbons to market.