Natural gas fields on Colorado’s Western Slope have been battered by low prices for almost six years, but turning that gas into liquid and selling it in Asia may be a way to revive the region’s fortunes.
“Liquefied natural gas is one of the best options we’ve seen,” said David Ludlam, executive director of the West Slope Oil & Gas Association, a trade group.
What is buoying Western Slope hopes is the proposed Jordan Cove LNG plant in Coos Bay, Ore.
The plant’s developer, Calgary-based Veresen Inc., last fall spent $1.4 billion to buy 50 percent of the capacity in the Ruby Express Pipeline, which carries Wyoming and Colorado gas to Oregon.
“This is a rare opportunity to acquire a large interest in a core U.S. pipeline asset,” Veresen CEO Don Althoff said when the deal was announced in September.
A delegation of Western Slope officials and industry representatives are set to meet with Veresen’s Althoff in June, Ludlam said.
Western Slope operations have been hit particularly hard by sagging prices because they produce “dry gas” with little of the more valuable oil and petroleum liquids.
There are 54 applications for LNG plants, according to the U.S. Department of Energy. Only 12, including Jordan Cove, are on track for development, said Andrew Bradford, CEO of Lakewood-based BTU Analytics.
“Exports can help stabilize the market,” said Andrew Ware, director of strategic projects for Houston-based Cheniere Energy, a large LNG plant developer.
“If you’ve been in a dry gas play, like western Colorado, you’ve been through some tough times,” Ware said.
Ware was in Denver on Monday to mark the launch of the Rocky Mountain chapter of Our Energy Moment, a trade group promoting LNG. The event included a panel discussion led by former Gov. Bill Ritter on the future of the natural gas industry.
The price for natural gas plummeted in 2008 under the pressure of a recession-stalled economy and growing natural gas supplies from new shale formations.
Pennsylvania, which wasn’t a significant producer among the states a few years ago, now is the second largest after Texas.
“That growth has come at the expense of marginal producers,” BTU’s Bradford said.
The Rockies Express pipeline, which was built to carry Western gas to the East, has been reversed to carry Eastern gas to the Midwest.
Western Colorado natural gas production dropped about 14 percent between 2012 and 2014, according to state data, and as few as five drill rigs are now operating in the region, Ludlam said.
Spot prices of natural gas are hovering around $2.80 for a thousand cubic feet of gas, compared with an average price of $8.90 in 2008.
“I don’t know what price we need to reanimate Western Slope operations, but it is a lot more than what we are seeing,” said Tisha Schuller, president of the Colorado Oil & Gas Association.
In February, the price of LNG for export was $13.10 per thousand cubic feet, according to the federal Energy Information Administration. Ware said the price of LNG includes $3 per thousand cubic feet for liquefication and another $1 to $3 for transportation.
“This is a big chance for the Western Slope,” Ludlam said. “Even if Jordan Cove uses Canadian gas, it is going to free up another West Coast market.”
Mark Jaffe: 303-954-1912, mjaffe@denverpost.com or twitter.com/bymarkjaffe
