Piceance Basin: with as much as an estimated 300-plus trillion cubic feet of gas resource in place, Colorado's Piceance Basin may well be the biggest natural gas play in North America.(Cover Story)

Publication: Oil and Gas Investor

Publication Date: 01-AUG-05

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COPYRIGHT 2005 Hart Publications, Inc.

Cut by numerous deep valleys and canyons, the stratified plateaus and mesas of western Colorado are not only home to large oil-shale deposits, but one of the biggest accumulations of natural gas in North America.

In this region, the 6,000-square-mile, gas-rich Piceance Basin straddles the Colorado River and Interstate 70 in Garfield and Mesa counties and extends northward into Rio Blanco County and south into Gunnison and Delta counties.

Essentially a huge fluvial system that contains a large, vertically stacked sequence of sands and shales that were deposited by meandering river systems during the Cretaceous age some 70 million years ago, the Piceance is a basin-centered gas trap that may contain as much as 200- to 300-plus trillion cubic feet (Tcf) of gas resource in place.

Operators that have flocked to the Piceance in recent years are hoping to recover 60% to 80% of that estimated potential, mainly from the 1,700- to 2,400-foot-thick, gas-bearing sequence in the Williams Fork section of the Mesaverde formation; the Williams Fork typically occurs at depths ranging from 4,500 to 8,500 feet in the basin.

Currently, Mesaverde drilling activity in the Piceance is principally along a west-to-east fairway in the Grand Valley, Parachute, Rulison and Mamm Creek fields where the Williams Fork and lower Rollins, Cozzette and Corcoran sections of the Mesaverde lend themselves to drilling wells on 10-acre subsurface spacing.

"The risk in this play isn't drilling a dry hole; the risk is all technical," says one geologist. "Very simply, we have to pay attention to drilling and completing our wells properly, and the better we get at that, the better our economics become."

At present, drilling multiple directional wells from single pads and crafting more advanced completion technologies are allowing operators like EnCana and Williams to achieve average per-well recoveries of 1.2- to 1.4 billion cubic feet (Bcf).

However, this is no longer a play for such large independents and industry giants like ExxonMobil and Chevron. Today, the basin is witnessing the entry of smaller operators like Bill Barrett Corp. and privately held Laramie Energy. In addition, XTO Energy this July announced it's entering the Piceance through a partnering agreement with ExxonMobil.

All these industry players recognize one simple fact: the Piceance--in terms of gas-resource-potential--may well be the place to drill in the Rockies for the next 10 years.

Big potential

EnCana Oil & Gas (USA) Inc., the Denver-based arm of Calgary's publicly held EnCana Corp., entered Colorado's Piceance Basin in February 2001 when it acquired Ballard Petroleum. Through that purchase, it obtained some 100,000 net acres, estimated natural gas reserves of 130 Bcf and daily gas output of 21 million cubic feet from about 130 wells producing primarily at Mamm Creek.

After subsequent acquisitions, including the $2.7-billion buy of Tom Brown Inc. in May 2004, the company today holds some 1 million net acres in the Piceance, of which 795,000 are undeveloped. Daily gas production, meanwhile, has ramped up to 320 million cubic feet from about 2,500 wells; proved reserves, to 1.6 trillion cubic feet equivalent.

This may sound like a lot of growth, but for this operator it's just the opening round in unlocking the huge potential of the Piceance.

"We and others believe there's more than 300 Tcf of gas resource in place in the Piceance, some 90 Tcf of that beneath our own holdings in the basin," says Roger Biemans, president of EnCana Oil & Gas (USA). "It's our hope to ultimately recover between 60% and 70% of that resource potential."

While Mamm Creek, south of the Colorado River, represents 75% of the EnCana arm's current Piceance production, the majority of its future upside is north of the river, in the operator's North Parachute project and its Eureka play.

"The continuous resource-play component of the Piceance Basin is a fluvial sand deposit of Cretaceous age, with the Williams Fork formation in the Upper Mesaverde being the predominant producing zone," he says.

In Mamm Creek, this formation occurs at an average depth of 8,500 feet, and slightly deeper as one moves from the valley floor toward the North Parachute project area and the top of the...

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