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Midstream providers trying to keep up with demand

Zach Koppang | Shale Plays Media

The midstream oil and gas services industry is having trouble keeping up with production in the Denver-Julesburg Basin, according to a recent report by the Greeley Tribune.

The midstream sector of the oil and gas industry includes the systems put in place between production and distribution, such as pipelines and other transportation from production wells to refineries. Horizontal drilling production continues to surpass expectations, but the lack of infrastructure necessary to move the product from one area to another is slowing how quickly the resources are able to reach the market.

Tracy Hume reports:

Craig Rasmuson [COO of Synergy Resources] pointed out that lack of gas line capacity directly impacts oil production. “If you are not moving gas at the right rate, then you are not making oil. The gas is the natural transporter of the oil to the surface. So if you are only able to move two-thirds of the gas, because the pressure’s only allowing two-thirds into the line, then you are only making two-thirds of your oil,” he said, “So it does slow the production process.”

Although companies such as Noble Energy report that recent midstream capacity upgrades have been beneficial, processing facility downtimes have resulted in higher pipeline pressures in some parts of the region.

Some companies have begun to develop their own midstream infrastructure. For example, in 2006 Anadarko acquired Western Gas Resources Inc. and Kerr-McGee Corp., a $1.6 billion deal that secured midstream gathering capabilities. Other operators, however, will often outsource their midstream needs to companies such as DCP Midstream. Despite the gradual improvements in transportation capabilities, pipelines continue to run at high pressures and production projections are downplayed to account for the lack of infrastructure.

Click here to read the full report.

Related: Energy Pipeline: Injection well demand outpaces capacity in Weld

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