Rocky Mountain High? - A Midstream Build-out Frenzy in the D-J and Powder River

Crude oil production in the Rockies’ Niobrara region is up by more than 50% since the beginning of last year, spurred on by higher oil prices, ample oil pipeline takeaway capacity, and other positive factors. Natural gas and NGL production in the Niobrara — which includes both the Denver-Julesburg (D-J) Basin and the Powder River Basin (PRB) — has been rising too, to the point that there’s a scramble on to develop new gathering systems, gas processing plants as well as gas and NGL pipeline capacity. A number of exploration and production companies are upbeat about the region’s prospects; so are some midstreamers. But there’s a dark cloud on the horizon — at least in Colorado, where voters will decide in a few weeks whether to significantly restrict where new wells can be drilled. Is the Niobrara poised for continued growth or not? Today, we kick off a new series on Rockies production, infrastructure and prospects.

Gross production of natural gas in the Niobrara region topped 5 Bcf/d for the fourth consecutive month in November 2018, according to the Energy Information Administration, and it's estimated that regional output this month will hit another record: nearly 5.2 Bcf/d. These production gains, and the concentration of new wells in or near Weld County, CO — the epicenter of the Niobrara’s Denver-Julesburg Basin — are straining the ability of existing gas processing plants to keep up, and spurring the rapid development of new processing capacity. The scale of the build-out in the D-J is impressive: some 2.7 Bcf/d in new cryogenic plants are either under construction or in various stages of pre-construction planning in northeastern Colorado. Today, we continue our review of Rockies crude oil, gas and NGL production and infrastructure, this time focusing on gas-processing needs in the sky-high D-J.

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.