Rocky Mountain High? Part 5 - Niobrara Production Gains Spur Build-out of NGL Pipelines

Production of natural gas liquids in the Rockies has increased by half since the end of 2012, with the bulk of the output — and those gains — coming from the greater Niobrara play in Colorado and Wyoming. As a result, a number of NGL pipelines out of the Rockies are now running full or close to it, and midstream companies are planning a mix of new pipelines, pipeline expansions and pipeline conversions with the aim of easing takeaway constraints by the latter half of 2019. But, with crude oil prices tanking and crude-focused producers reevaluating their drilling and completion plans, could the Niobrara be headed for an NGL takeaway over-build? In today’s blog, we continue our series with a look at existing and planned NGL pipes out of the Denver-Julesburg (D-J) and Powder River basins.

This is the fifth blog in this series. In Part 1, we discussed the Niobrara’s geography and hydrocarbon production history. By our assessment, the play includes the D-J Basin and the Powder River Basin (PRB), with the heart of PRB in northeastern Wyoming and the D-J taking up much of northeastern Colorado and part of southeastern Wyoming. The Niobrara has been producing oil and gas for more than a century, and crude production hit a record 670 Mb/d in December, and dry gas production now tops 2.9 Bcf/d. In Part 2, we started our review of Niobrara infrastructure with a look at the play’s crude takeaway capacity. Then, we shifted to gas-related infrastructure, focusing on the PRB in Part 3 and the D-J Basin in Part 4. In sum, those blogs made the point that, with production of crude oil and associated gas on the rise, the Niobrara is in dire need of new gas processing capacity, and midstream companies are building or planning some 400 MMcf/d of new gas plants in the PRB and another 1.2 Bcf/d in the D-J, all of which are scheduled to come online by the end of 2019.

That new gas processing capacity will result in the production of increasing volumes of NGLs that will need to be transported out of the PRB and D-J to fractionation hubs in the Conway/Bushton, KS, area and Mont Belvieu, TX. As we noted in the intro to today’s blog, the Rockies as a whole has been ratcheting up its production of NGLs for nearly six years now. Back in January 2013, field production of NGLs in Petroleum Administration for Defense District (PADD) 4 averaged 305 Mb/d, according to EIA; in September 2018 (the latest EIA stats available), production hit a record 446 Mb/d. (PADD 4 is made up of five Rocky Mountain states: Colorado, Wyoming, Montana, Idaho and Utah –– Colorado and Wyoming account for virtually all of PADD 4’s natural gas production and, therefore, its NGL production too.)

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