NGI - REX Looks to Reload With DJ Output in Competitive NatGas Landscape

October 16, 2017 - NGI's Daily Gas Price Index

REX Looks to Reload With DJ Output in Competitive NatGas Landscape

By: Jeremiah Shelor

After seeing production declines in recent years, the Rockies region often goes overlooked in the North American natural gas supply landscape, overshadowed by the impressive growth in the Marcellus and Utica shales, and the promise of new associated gas output from oil-directed drilling on the Gulf Coast and Midcontinent.

It was a decade ago that Rockies supply, enticed by premium pricing in the Northeast, inspired the construction of the 1,700-mile cross-country Rockies Express Pipeline (REX) to transport gas west-to-east from Wyoming to Ohio.

Today REX is known more for its role in providing crucial east-to-west takeaway capacity out of the 24 Bcf/d Appalachian Basin…

Read the full article here: http://www.naturalgasintel.com/articles/112099-rex-looks-to-reload-with-dj-output-in-competitive-natgas-landscape

…Tallgrass has already secured long-term precedent agreements from affiliates of leading DJ producer Anadarko Petroleum Corp. and from DCP Midstream LP to move 600 MMcf/d on Cheyenne Connector, which could come online by 3Q2019. The projects could potentially add up to 1.3 Bcf/d of capacity into REX west-to-east out of the DJ.

Tallgrass projections show associated gas production out of the Rockies, driven by the DJ and to a lesser extent Wyoming’s Powder River Basin, rising over the next few years. Tallgrass’s Vice President of Business Development Doug Walker said during the Midwest LDC Forums in Chicago last month that the midstreamer thinks DJ gas output could grow by 1.5 Bcf/d by 2020, up from roughly 1.8 Bcf/d produced currently.

That jives with a recent analysis by RBN Energy LLC analyst Sheetal Nasta, who said the DJ is showing signs of a rebound driven by improving oil prices after activity in the Niobrara fell during the downturn.

“Through the first half of the 2010s, oil production from the Niobrara in Colorado and Wyoming -- including the DJ and Powder River Basin (PRB) plays -- rose rapidly,” Nasta said in a recent note to clients. “...By 2014, competition for existing oil pipeline capacity in the region was intensifying and it was clear that more capacity would be needed if the infrastructure in the region was to support more production growth.”