RIFLE, Colo. — Oil and gas producers have known for decades that a massive bounty of natural gas lies beneath western Colorado's mountains. Getting at it, however, can be costly and complicated.
With a potential gain of 1 billion cubic feet per day of output from its leased land in the deepest part of the gas-rich Piceance Basin — which would be about 2 percent of all U.S. gas production — Exxon Mobil Corp. spent the last decade perfecting a way to drill less for more gas.
Now, the Irving-based behemoth is ramping up its Piceance project with more drilling and with new, largely automated gas gathering, treatment and monitoring facilities.
Armed with the financial heft to shrug off low natural gas prices that have prompted other Piceance producers to move out or slow down, Exxon Mobil is running seven rigs, five more than two years ago.
“Now that we have this level of rigs, we can drive down costs,” said Jim Branch, Exxon Mobil's Piceance Project executive.
The Piceance is a bowl-shaped underground basin that covers 6,000 square miles in five counties on both sides of the Colorado River.
Its allure isn't new. Southern Union Gas drilled the first well there in the mid-1950s.
The federal government exploded nuclear bombs underground there in the late 1960s and early 1970s, hoping to unleash natural gas and to demonstrate the bombs had peacetime uses. The explosions yielded no gas other than some of the radioactive kind, and public opposition squelched the blasts. So, Piceance activity was light until recent years, when technological advances caught up with the challenges of getting at so-called “tight gas” trapped in pockets of concrete-like sandstone in remote mountain areas.
Despite natural gas prices that have fallen below $3.50 per million British thermal units from last year's highs of $13, Exxon Mobil is banking on the Piceance for years to come. The company has leased about 300,000 acres of mostly federal land that Exxon Mobil says could contain 45 trillion cubic feet of gas. That's about twice the amount of gas consumed in the U.S. each year, according to the U.S. Energy Information Administration.
“That potential is huge,” said Fadel Gheit, an analyst with Oppenheimer & Co. “They are doing it in the methodical Exxon way. Exxon is very bullish on natural gas globally, not only in the U.S., and they are putting their money where their mouth is.”
‘Elegant ballet'
Exxon Mobil spent a decade tinkering with technology used to extract gas elsewhere to adapt it to the Piceance. The company came up with a way to drill deep, then blast holes in the pipe next to pockets of gas. A mixture of chemicals and water shoot into the well at high pressure to crack open the rock, while sand that's mixed in holds the fissure open so gas can flow.
The process involves repeated fractures in up to 50 zones that contain gas pockets on the way back up the well, like opening an elevator door on various floors, to maximize gas flowing from each well.
“We use the term ‘elegant ballet' because we can actually do multiple wells now,” Branch said. “The key to improving the cost is to keep this equipment working constantly.”
That process, combined with directional drilling that deviates from a straight vertical line, means Exxon Mobil can drill up to 20 wells per site. That translates to fewer rigs sharing space with the basin's mountains, pinyon pines, sagebrush and grazing cattle.
The company says the method dramatically cuts operational costs. Exxon Mobil won't disclose the Piceance project costs, except to say that it's part of the company's plan to spend $125 billion on projects over five years, including $29 billion this year.
Exxon Mobil is among many producers in the Piceance. Others include EnCana, Williams, XTO Energy and Chevron.
Williams tried Exxon Mobil's technology in 2006 but found no cost benefits above what the company was already doing, spokesman Jeff Pounds said.
Exxon Mobil began increasing its Piceance presence two years ago. At the peak of construction, 600 workers were on the payroll. Now, about 60 employees run the operations, mostly from a control center, while contractors do the heavy lifting with drilling and seismic imaging.
Falling gas prices
Work in the area has slowed since natural gas prices dropped.
“We had 105 rigs in the basin last year; now, there are 25,” said Shawn Brennan, manager of Houston-based Enterprise Products Partners' new gas treating plant in the basin.
Besides moving gas, Brennan said, the company's Piceance operations extract up to 70,000 barrels a day of natural gas liquids, such as propane, butane and ethane, which can be sold outright or used in processing at refineries and chemical plants.
“That's a lot of diversity to weather the markets as they are now,” he said.
Exxon Mobil faced some lingering ill will when establishing its gas operations. In the early 1980s, the company had a major oil shale operation in the Piceance. That decade's oil bust prompted an abrupt pullout, throwing the Rifle-area economy into a tailspin for years.
To make itself more welcome, the company donated $500,000 to help pay for a new helicopter ambulance pad at a hospital in Grand Junction.
Co-existing
Other community service outreach efforts include an academy for math and science teachers in area public schools and an annual sheepdog championship competition.
“We were certainly mindful of that history,” Branch said. “I know there is some legacy there, but it has not complicated our work here.”
For the ranchers in the Piceance, it's sometimes a challenge to co-exist.
Exxon Mobil and some other producers try to limit traffic by busing workers in to work and having them live on site for 14 days, like offshore crews. The companies replant grass and trees after clearing right of way for pipelines, and cattle guards prevent free-roaming livestock from wandering too close to plants.
Larry Robinson, 63, a third-generation rancher, said he sees evidence of environmental sensitivity, but there's no way to pretend the producers aren't there.
“The solitude's gone, and we're getting more and more wells and more and more pipelines, more and more compressors,” Robinson said. “It isn't like it used to be for us, and I don't think it will ever be the same.”
kristen.hays@chron.com
http://www.chron.com/disp/story.mpl/business/6525226.html
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