Crude oil production in the Denver-Julesburg (D-J) Basin has nearly doubled since January 2016 — only the Permian has outpaced the D-J’s growth rate over the same period — and production there now averages about 640 Mb/d. The D-J has just about everything producers want, including an unusually intense concentration of hydrocarbons within four geologic layers, or “benches,” only a few thousand feet below the surface, low per-well drilling costs, and direct pipeline access to the crude hub in Cushing, OK. Production growth in the D-J has spurred a rapid build-out of crude gathering systems and other infrastructure, especially in Colorado’s Weld County, the epicenter of D-J activity, which is located a short drive northeast of Denver. Today, we begin a series on existing and planned pipeline networks to move D-J crude from the lease to regional hubs and takeaway pipes.
For the past few years, the Denver-Julesburg Basin in northeastern Colorado and southeastern Wyoming has been like a backup vocalist to the Permian, the U.S.’s crude-production superstar; the D-J gets no limelight and not-so-much love. Remember, though, that many of those who started out as background singers later emerged as stars in their own right. Cher, for example, sang backup on the studio recording of The Ronettes’ “Be My Baby” in 1963, two years before Sonny & Cher hit the top of the charts with “I Got You Babe.” Whitney Houston provided backing vocals for Chaka Khan and Lou Rawls before she became famous, and Phil Collins played the drums and sang backup for Genesis for five years until lead singer Peter Gabriel left the band and Collins stepped into his shoes, giving Genesis a new lease on life in the process.
We think it’s time to give the D-J its due. As we said in our Rocky Mountain High? Drill Down Report earlier this year, the D-J Basin is the more prolific of the two main production areas in the Rockies’ Niobrara Shale, the other being the Powder River Basin in northeastern Wyoming. Crude oil is the focus of drilling-and-completion work in the D-J, though the basin’s wells also produce large volumes of associated gas — a rich mix of natural gas and natural gas liquids — that only augment the wells’ crude-related revenue. Most of the oil produced in the D-J comes from three hydrocarbon-packed benches — the Niobrara B, the Niobrara C and the Codell — with smaller volumes coming from the Niobrara A layer. In Weld County, the beating heart of the D-J, these benches lie only 5,000 to 8,000 feet below the surface, which helps keep drilling costs relatively low: less than $5 million a pop, on average, according to the folks we’ve talked to. In contrast, per-well costs in the Bakken average around $7 million, and in the Permian they average close to $8 million.
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