Colorado Natural Gas and LNG

By DENNIS WEBB/The Grand Junction Daily Sentinel

Saturday, April 04, 2009

An expansion of liquefied natural gas imports could drive down prices further this year, a Denver gas broker says.

That would bode poorly for western Colorado, where John Harpole, president of Mercator Energy, said drilling rig numbers already have dropped 71 percent in the past six months.

Speaking at the Club 20 spring meeting Saturday, Harpole said a 30 percent increase in liquefied natural gas capacity is coming online.

That gas can be transported by ship rather than pipeline. If imports of it increase enough, the price of natural gas could fall later this year to $1.50 per million British thermal units, about one-fourth of what it was a year ago, Harpole said.

Harpole said some of that gas would come from countries that otherwise would be forced to dispose of excess gas by flaring it off.

“By capturing it and selling it, at least they’re making something on that gas,” Harpole said.

Already, Harpole said, drilling activity in western Colorado has been hampered by factors such as limited pipeline capacity and uncertainty surrounding the state’s new oil and gas regulations.

Problems such as pipeline capacity eventually will go away, but Harpole said the new regulations will be permanent.

He said the question is what the state is doing to encourage natural gas producers to stay.

“That’s why I drove over here at 4 o’clock in the morning, because I wanted to ask a man who isn’t here right now that very question,” Harpole said.

Harpole served as a substitute luncheon speaker Saturday after aircraft and weather problems forced Gov. Bill Ritter to cancel plans to come to Grand Junction.

However, Ritter defended the new regulations in his speech that was prepared for the Club 20 meeting and released by his staff.

“I believe these rules will allow the industry to grow and move forward in a sustainable, 21st century way that is compatible with other West Slope sectors like tourism and recreation.

“I believe these rules strike the right balance, a balance that recognizes the importance of a healthy industry and the importance of healthy communities, water supplies and wildlife,” Ritter said.

The governor said his administration is working on helping develop uses for Colorado’s natural gas, including seeking speedy federal regulatory approval of an interstate pipeline project and pursuing legislation to extend a hybrid-vehicle tax credit to compressed natural gas cars and trucks.