Read Our Latest Energy Market Insights – Go There >>

Cheyenne Connector Increases DJ Running Room

On September 12, Tallgrass Energy Partners (NYSE:TEP) announced an open season for its Cheyenne Connector natural gas pipeline which will add at least 0.6 Bcf/d of gas takeaway from the DJ Basin to interconnect with Cheyenne Hub in Wyoming. The project is expected to be in service in 3Q 2019.  Due to strong comparative economics, BTU Analytics expects 1.1 Bcf/d of gas production growth in the DJ Basin between September 2017 to YE 2020 (see Upstream Outlook). Combined with anticipated gas growth from the Permian Basin and increased Northeast production with the completion of Rover, US flow patterns will continue to change, driving DJ Basin producers to look for new markets and new pipeline projects.

Historically, Colorado Interstate Gas Company (CIG), owned by Kinder Morgan (NYSE:KMI), has received the lion’s share of processed DJ Basin production. From there, CIG serves regional demand and delivers to a variety of pipelines to facilitate movement out of the region. However, without further projects, CIG may be facing capacity constraints that could limit DJ Basin production growth, providing the rationale behind the Cheyenne Connector.

Additionally, the Cheyenne Connector provides Rockies Express Pipeline (REX) access to incremental gas volumes that can flow east on REX out of the Rockies.  Despite an uptick in throughput from an annual average perspective, average eastbound flows on REX have been declining since 2010 when flows averaged 1.7 Bcf/d compared to 1.2 Bcf/d YTD in 2017 out of a design capacity of 1.8 Bcf/d.

The current oil price environment, paired with growth from low cost gas production in areas like the Marcellus, Utica, and the Haynesville are likely to continue to pressure Rockies oil and gas plays outside of the DJ Basin, limiting growth and leaving space for DJ Basin gas to increase utilization on eastbound REX.

However, with the recent completion of Rover, trouble may loom at the end of REX.  In 2017, as Rockies gas has faced increased pressure and displacement from West and Pacific Northwest markets, eastbound flows on REX have increased. Now that Rover has begun partial service, this outlet will become more congested and could significantly impact realized prices for Rockies gas producers.

Stay tuned to our Energy Market Commentary on the far-reaching impacts of Rover over the coming weeks, and for more in-depth analysis, request a sample of our Northeast Gas Outlook.

Share This Article

Share on facebook
Share on twitter
Share on linkedin
Erika Coombs is Senior Manager of Energy Markets at BTU Analytics. She leads the team to deliver energy-market analysis and provides BTU Analytics’ customers with critical information for a variety of energy markets including oil, gas, and NGLs from wellhead to downstream markets. She also oversees BTU Analytics’ oil and gas product suite which includes research on upstream, midstream, breakeven economics, and commodity pricing dynamics. She holds an M.S. in Mineral and Energy Economics from the Colorado School of Mines.

Recommended for You

Log In

Energy Market Insights

Receive Free Energy Market Insights When They Are Published