Piceance Basin might become very well recognized

Oct 02, 2001 02:00 AM

Few outside of Colorado have heard of it. Even fewer can pronounce its name. Workers toil on the Nabors 909 gas-drilling rig 1 mile north of Interstate 70 in the Piceance Basin. The basin contains buried gas in a quantity so vast that it defies imagination. Yet Colorado's Piceance Basin is one of the nation's biggest reservoirs of natural gas. One day, it may become the nation's largest gas supplier, if producers can find economical ways to unlock the basin's captive treasure.
It's pronounced PEE-awnce, and its public profile is low compared with that of other large gas discoveries. The media lavish attention on some of the Rockies' major coal-bed methane plays, making household names out of Wyoming's Powder River Basin and the San Juan Basin in southwest Colorado. But the Piceance in western Colorado is bigger -- much bigger -- than any other gas discovery in the Rocky Mountain region.

Southern Union Gas drilled the basin's first producing well in 1955. But development was slow as geologists struggled to draw gas from the low-porosity rock that characterizes the Piceance. Still, its buried gas is a quantity so vast that it defies imagination.
Give it a try, anyway. Imagine a space the size of the Pepsi Centre, filled with natural gas. Now multiply it 5 mm times. That's just a conservative estimate. Other credible professionals say the Piceance's total gas resource could be 10 times greater.
"It's very big," said Ken Wonstolen, senior vice president of the Colorado Oil and Gas Association. "And it will become a bigger and bigger player as time goes on."
The US Potential Gas Committee, a prestigious academic- and industry-led group based at the Colorado School of Mines, rates the Piceance Basin's potential resources at 31 tcf, including the Uinta branch of the basin that extends into eastern Utah. By comparison, the committee estimates that the Powder River Basin's coalfields have 24 tcf of methane gas trapped within their seams. San Juan Basin's coal-bed methane resources are rated at 10 tcf. US consumption is about 22 tcf each year.

The 6,000-square-mile Piceance Basin straddles the Colorado River and Interstate 70 in Garfield and Mesa counties, with portions extending northward into Rio Blanco County and south into Gunnison and Delta counties. Its name comes from an Indian dialect, translated as "tall grass." Consider the basin in consumption terms. Colorado residents and businesses consume about 350 bn cf of natural gas per year. The Piceance, using the conservative estimate from the Potential Gas Committee, could supply the state for almost a century.
"The Piceance could end up being the biggest natural gas field in North America," said Fred Julander, owner of Denver-based Julander Energy and a long-time observer of Colorado's natural-gas sector. Julander estimates the basin's total gas accumulation could be as much as 100 tcf -- enough to supply Colorado's needs for 280 years at current consumption rates.
"It's a world-class project, no doubt about it," said Ted Brown, director of Williams Energy's Piceance Basin Asset Team, the largest producer in the basin. The rub, however, is that not all of the supply can be recovered.

As with petroleum fields, some of the oil and gas can be produced easily, some with difficulty at higher costs, and some that probably never will be tapped because new energy resources will make fossil fuels obsolete. Natural gas costs will drive the Piceance Basin's ultimate stature in the gas industry.
So far, low gas prices have stunted development. Drilling increased in late 2000 and early this year when prices briefly spiked at $ 10 per thousand cf. Now, slack demand and prospects of a protracted economic recession have pushed gas prices back to about $ 2 -- a marginal level at which some producers can make money in the Piceance while others will be less aggressive in new drilling.
Experts see its potential developing more fully in coming years as Americans consume more natural gas, especially to fuel turbines for generation ofelectricity. Technological advances in exploration and production should make extraction easier.

The Piceance has had its brushes with fame, but energy production never took off. The US government exploded nuclear bombs 1 mile underground there in 1969 and 1973 in an attempt to shake loose locked-up natural gas. However, the ill-fated efforts at Rulison and Rio Blanco yielded nothing but a small quantity of radioactive gas.
The plan was part of the federal government's "Project Ploughshare," designed to use up much of its aging nuclear arsenal to demonstrate peaceful uses for atomic explosions. The first explosion at Rulison was three times more powerful than the atomic bomb that devastated Hiroshima. The second at Rio Blanco was seven times stronger.
Opponents were led by Dick Lamm, a young environmental attorney who later became Colorado's governor. They feared the explosions would crack the Earth's surface, lethally contaminate the nearby Colorado River and send deadly radioactive clouds over the Front Range.
Proponents imagined a powerful new technique for stimulating natural gas production. In the end, neither was right. The explosions occurred without the Earth cracking, but public opposition and poor results brought an end to the experiments.

Earlier efforts fell short In the early 1980s, the Piceance Basin was the site of a major effort to produce oil from enormous quantities of petroleum-rich shale that impregnates the Book Cliffs geologic formation. But just as the oil-shale plan started to develop, energy prices fell and the project collapsed, literally overnight.
On May 2, 1982, which came to be known in the Grand Valley as "Black Sunday," Exxon abruptly announced it was shutting down its $ 5 bn Colony Oil Shale Project, putting more than 2,000 oil-shale workers and support people out of their jobs, and depressing the western Colorado economy for years.
Exxon's departure became an entree for Denver-based Barrett Resources. Bill Barrett acquired most of the mineral leases from Exxon and other shale developers, then drilled his first gas well in 1984.
Barrett's geologists discovered that the gas was trapped in "tight sands," an industry term describing rock formations that are less porous than those in conventional gas fields. Producers often must fracture the tight rocks by pumping fluids and minerals underground at high pressure.
"The public hears a lot about the Powder River Basin because it's gas from coal and it's fairly easy to get out of the ground," said John Curtis, a School of Mines professor and executive director of the Potential Gas Committee. "But with tight sands in the Piceance, producing gas is tougher."

Completing a well in the Piceance Basin can cost up to $ 1.2 mm, compared with coal-bed methane wells that are easy to drill and can cost as little as $ 80,000. Despite the high costs, Barrett Resources, now known as Williams Energy Services after a merger two months ago, has drilled 500 wells, producing and selling 160 mm cfpd of gas.
Williams is the most active producer in the Piceance. A handful of others, including Tom Brown, Alberta Energy, Mesa Hydrocarbons, ExxonMobil and El Paso/Coastal, have a smaller presence. Williams is well suited to working the Piceance because the company has pipelines and gas-processing plants that serve the area. That keeps its costs down and allows it to explore and produce even when gas prices fall to levels that are uneconomical for other firms.
Half of Williams' gas is shipped outside of Colorado; much of the remainder is purchased by Xcel Energy for Colorado customers. Barrett's efforts have produced controversy as well as natural gas.

Residential and environmental groups objected last year when Barrett sought state permission to place wells on every 20 acres instead of its previously approved 40-acre spacing. The Colorado Oil and Gas Conservation Commission granted Barrett 20-acre spacing on some parcels but ordered that on other holdings, the firm use directional drilling from existing well pads to minimize surface land disturbance.
Williams plans to expand its Piceance Basin operations as long as natural gas prices remain at profitable levels. "The Piceance is going to become very well recognized," said Brown of Williams. "As long as prices hold, you have the potential for drilling to go on for many, many years."

Source: The Denver Post - Knight Ridder/Tribune Business News
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