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Gas processing plant opens, provides more capacity to move natural gas

DCP Midstream this year has significantly increased capacity for natural gas processing northeast of Greeley. For many, it couldn’t have happened fast enough.

Oil and gas exploration company executives have lamented high line pressures in the Wattenberg Field — which lies in the heart of Greeley and Weld County — for a couple years. Natural gas gathering lines are buried throughout Weld. The higher the line pressure, the harder it is to get the oil and gas out of the well and off to market. For years, excess product meant extra flaring, which no producer wants. They might as well be throwing bricks of cash in the fireplace.

DCP Midstream’s O’Connor Plant, which opened in 2013 south of Kersey, was supposed to be the relief valve, allowing for an additional 110 million cubic feet of natural gas processing capacity per day in an increasingly high-volume field. The plant underwent an almost immediate expansion the following year to allow for another 50 million cubic feet per day processing capacity.

That still wasn’t enough, but Lucerne II already was being built about 4 miles northeast of Greeley. The $250 million gas processing plant came online in June.

“I think you’d hear from a lot of (executives) … this plant from their perspective was possibly a little late,” said Bill Johnson, vice president of North and Permian Business Unit Operations of DCP Midstream. “Our perspective was it was timed right. It’s a very large investment, so we have to know the gas will be there and we can recoup some of that investment.”

The plant opening gave DCP Midstream the capacity to process 800 million cubic feet of natural gas per day out of the Wattenberg Field, and more than 55,000 barrels per day capacity to process natural gas liquids, such as butane and ethane. The plant brought the company’s assets to a total of nine processing plants in the Wattenberg, representing an 80 percent increase in the company’s gathering and processing capacity in the past two years.

For many producers, it was an agonizing wait.

In a Noble Energy third-quarter earnings release, officials noted the importance of the plant’s opening:

“Accordingly, line pressures in the northern part of the field, particularly in and around the company’s Wells Ranch area, have been reduced by up to 100 psi,” the earnings release stated.

“… As a result of the reduction in field line pressures, the company’s legacy vertical well production averaged nearly 25,000 barrels of oil equivalent per day in the third quarter, which is a high point over the past year and an increase of more than 5,000 barrels of oil equivalent per day versus pre-Lucerne-2 rates,” the release stated. Barrels of oil equivalent means all the product that comes out of the well, which includes crude, natural gas and natural gas liquids.

The anticipation built as company executives discussed the obstacles in their field in the last year.

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Scot Woodall, CEO and COO of Bill Barrett Corp., said in a second-quarter 2015 earnings call, said the Lucerne II plant quickly provided a significant development in his company’s production.

“Definitely Lucerne II is going to help us. Almost all of our gas flows toward Lucerne II, and since it has had some pretty good run times here of recently, I think we are observing a plus-or-minus 100 psi drop in wellhead pressures because of Lucerne II,” Woodall said in an earnings call.

DCP Midstream is a must-run business, officials explain, but they don’t build processing plants for the sake of building them. They need to know the demand is there and it will stay there to justify the expense and time. The gas processing plants take two years to build. The plants essentially filter the gas and clean it up to certain levels, and they’re about to come up on a busy season with the typical cold temperatures in the winter.

“The gas that comes out of the ground isn’t suitable to be sent straight into houses to be burned as natural gas,” Johnson said. “It has water, contaminants, other things. We basically take the liquids out, the water out, process it so it meets a standard so in everyone’s house, it burns the same. If we just took what came out of the ground, some would burn hot, some wouldn’t burn well at all, and it would be a mess. We clean it up and standardize it and sell it.”

Most of the gas that comes out of the ground in Weld is consumed locally, but it does get shipped to the greater markets.

Demand continues to grow, even in an industrywide downturn. That demand has allowed DCP Midstream to broaden its reach, officials say, that will keep flows moving, even in the case of system hiccups.

The company has strategically located its plants in and around Greeley, all connected and at the ready.

“One of the cool things about our system and the service we offer, you’ll see all bigger, newer plants are connected by these lines, which allows us to move gas from gathering and process it at almost any one of those plants,” Johnson said.

A map of DCP’s service area a year ago showed a growing issue with high line pressures, on the western or more urban fringes of the Wattenberg Field.

“Producers were getting a little frustrated with us for not having lower pressures,” Johnson said.

The additional processing capacity at Lucerne II has reduced line pressures to the point that operators could bring online even old legacy wells that were shut in for some time, said Lucerne II Plant Manager Tauna Rignall.

“Some of our customers have been able to restore some of their old wells,” she said.

While the company contemplates a 10th plant, it’s also in the process of building a pipeline that will help producers on the fringes.

Even today, officials contemplate a potential 10th processing plant in the Wattenberg Field — a permit to build already is on the books. The big question will be demand.

Certainly, this recently slowdown will be a big player in that decision. DCP earlier this year cut its ranks by 20 percent.

“We have an idea out there and a permit filed to build a Mountain View plant, but you can see we don’t have a date,” Johnson said. “It’s really based on the needs of our customers and their timelines. We kind of stand ready to be able to build that plant, permitted and it will depend on the activity in the basin and the needs of the customers.”

This article was written by Sharon Dunn from Greeley Tribune, Colo. and was legally licensed through the NewsCred publisher network.