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Is Colorado Ground Zero For The Next Shale Gas Boom?

Colorado fracking

A new estimate from the U.S. Geological Survey finds that Colorado could actually hold 40 times more natural gas than previously expected.

The so-called Mancos Shale formation holds an estimated 66.3 trillion cubic feet (tcf) of natural gas, sharply up from the 1.6 tcf in the previous 2003 estimate. The Mancos formation is part of the greater Uinta-Piceance Province, and the large upward revision puts the Mancos basin second only to the Marcellus Shale in terms of the largest total gas reserves in the U.S.

“We reassessed the Mancos Shale in the Piceance Basin as part of a broader effort to reassess priority onshore U.S. continuous oil and gas accumulations,” said USGS scientist Sarah Hawkins, lead author of the assessment. “In the last decade, new drilling in the Mancos Shale provided additional geologic data and required a revision of our previous assessment of technically recoverable, undiscovered oil and gas.”

For now, prices are likely to be too low for companies to begin drilling to any large extent. According to David Ludlam of the West Slope Colorado Oil and Gas Association, drillers probably need natural gas prices near $3.50 per million Btu (MMBtu). That is much higher than Henry Hub spot prices, which have traded near $2/MMBtu for the last several months, although they have surged lately as storage levels are climbing much slower than expected for this time of year. Natural gas prices jumped to $2.60 on Thursday after the latest data from the EIA showed another smaller-than-expected inventory build. Related: Billionaire Investors Back A Gold Price Rally In 2016

But even if prices did rise to those levels needed for Colorado’s Mancos Shale, producers would have trouble finding a way to get that gas to market. The best bet would be for LNG export terminals on the West Coast, but previous proposals for such projects have gone nowhere. The Jordan Cove LNG export terminal in Oregon recently was denied a federal permit and is stuck on the drawing board.

That suggests that the Mancos Shale may not be developed in the near-term despite the massive volume of natural gas that the formation holds.

(Click to enlarge)

By Charles Kennedy of Oilprice.com

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Leave a comment
  • CapitalistRoader on June 11 2016 said:
    So, 66 * 10^12 new supply divided by 25 * 10^6 current US annual consumption equals 2.64 million years of consumption. Or is my math off?

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