21-04-04

The Rocky Mountains are saturated with natural gas, but the problem is bringing it to the surface. There aren't enough steel pipes or even fine sands needed to extract the gas that is trapped between layers of hard rock.

Local gas producers say the shortage of materials could slow down drilling and fracing in the Rockies -- and ultimately affect gas production. Fracing is the pumping of material into wells to increase gas production.
"I would be surprised if everyone hit their (production) targets," said David Kornder, CFO of Patina Oil & Gas Corp. "It is going to be difficult, given the shortage in materials."

Colorado is expected to produce a record 3 bn cfpd of gas in 2004, up 10 % from a year ago, estimates the Colorado Oil and Gas Conservation Commission. A cf is a standard measure of gas, and 6,000 cf of gas is the equivalent of one barrel of oil.

Companies use sand to prop open the fractures they make in layers of rock to improve the flow of natural gas into underground pipes.The sand is usually imported on freight cars from neighbouring states such as Kansas, Texas and Utah. But supply has tightened in recent months, as demand from gas producers has skyrocketed.

Moreover, surging steel prices in the US have increased the cost of steel products such as pipes and tubes used in gas drilling. Even the modest number of rigs -- Colorado has 43, compared with New Mexico's 61 and Wyoming's 63 -- is a factor. A rig rotates a pipe from the surface to drill a new well to explore for, or produce, natural gas.

“The cost of drilling and completing wells is going up, said Ken Wonstolen of the Colorado Oil and Gas Association. "People are scrambling to find sand supply, but I don't know if the shortage is severe enough to shut down the rigs."

Denver-based firms, including Evergreen Resources, Patina Oil & Gas, and Western Gas Resources, have purchased most of their materials for 2004 in advance.
"Evergreen has not experienced any shortage because we anticipated a supply shortage," said Mark Sexton, the president and CEO. "We have our own freight cars and sand storage facilities. But most companies are operating at full capacity, and that is causing a shortage in pipe and sand supply."