Tallgrass Holds Open Season for Pony Express Pipeline Capacity

The Denver-Julesburg Basin isn’t the Permian — no argument there. But like its much bigger brother in West Texas and southeastern New Mexico, the DJ Basin has been a hotbed of M&A in both the upstream and midstream sectors. Among DJ producers, Chevron, Civitas Resources and Occidental Petroleum (Oxy) are now the top dogs, with big hopes for the future there. And, as we’ll discuss in today’s RBN blog, a handful of midstreamers have taken on leading roles in crude oil and gas gathering (and processing) in Weld County, CO, the heart of the basin.

The Denver-Julesburg (DJ) Basin of the Niobrara shale in Northeast Colorado is one of the hottest crude plays around at the moment. RBN expects DJ Basin crude production to nearly double from 235 Mb/d in August 2014 to 450 Mb/d by the end of 2019 – an increase of 215 Mb/d. That growing production has sparked an infrastructure-planning spree with 4 pipeline project announcements in the last two months that could add a whopping 600 Mb/d of takeaway capacity from the DJ to Cushing by 2017. On top of that rail-loading capacity is also expanding in the DJ. Today we describe the new midstream expansion plans.

The rig count in the Niobrara Shale’s Denver-Julesburg (DJ) Basin has doubled in the past year, and crude oil production has been rebounding modestly in recent months. Most of the activity in the play is concentrated in super-hot Weld County, CO, where 23 of the DJ Basin’s 29 active rigs are set up. But with crude prices below $50/barrel, will the DJ make a real comeback, or will production sag again, just like it did after the big price declines of 2014-15? And what about Niobrara-related midstream infrastructure? Even some of the more optimistic forecasts leave the region with far more pipeline takeaway capacity than it needs. Today we consider recent developments in the Rocky Mountain region’s most important shale play and what they mean for exploration and production companies and midstreamers.