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Colorado Gas Output Up -- Despite Lower Rig Count

More stringent drilling rules and low natural gas prices -- which led to some well shut-ins last year -- failed to deter Colorado's natural gas production, which grew in 2009 from 2008, according to the Colorado Oil and Gas Conservation Commission (COGCC).

Gas output year/year (y/y) rose an estimated 4.4% to 1.6 Tcf, the COGCC reported. Oil production also was up y/y by an estimated 1.6% to 28.9 million bbl.

Last year Colorado Gov. Bill Ritter signed into law regulations that overhauled rules for the state's drillers (see NGI, March 30, 2009). Many of the rule revisions were considered minor, but producers fought changes that give more weight to wildlife habitat and migration, environmental protection and public health and safety.

Last May the Colorado Oil & Gas Association (COGA), which represents producers in the state, filed a lawsuit asking for the rules to be invalidated (COGA vs. COGCC, No. 09-CV-4435). The lawsuit claimed that the COGCC did not accurately determine how much it would cost to implement the rules and questioned whether the COGCC "accurately and publicly" forecast what it would cost the state to enforce the new rules. A Denver judge in November ruled that the lawsuit could move forward (see NGI, Nov. 16, 2009).

Energy analyst Tudor Pickering Holt & Co. Inc. (TPH), which publishes the Weekly Rig Roundup, compares rig data from several sources, including RigData, Smith Bits and Baker Hughes Inc. In the report published last Monday (Feb. 1), TPH said in Colorado's Piceance Basin, 25 rigs were in operation for the week ending Jan. 29, with 23 drilling for natural gas.

Comparatively, at the end of March 2008, 87 rigs were running in the Piceance Basin, which was the same number of rigs running at year-end 2008, TPH reported.

Colorado producers appear to be producing more gas from fewer wells, but across the country, TPH said U.S. land drilling "keeps marching higher." The data for the week ending Jan. 29 "marked the fifth consecutive week of gains with RigData plus-54 rigs, Smith Bits plus-eight rigs, and Baker Hughes plus-35 rigs."

The uptick in drilling "was 80% driven by gas-directed activity," said TPH, but the oil rig count also rose by 15 rigs from the previous week. The "gas-directed rig count is plus-14% year to date versus the oil rig count [which is] up 4%."

The largest regional gains, according to TPH, occurred in South Texas, up 19 rigs; the Midcontinent, up 11 rigs; and East Texas/North Louisiana, and the Texas Gulf Coast, up seven rigs each. Gulf of Mexico drilling also gained four rigs in the week ending Jan. 29 and now has 60 rigs working.

Meanwhile, the Canadian rig count gained 16 rigs for the week ending Jan. 29 and now has a total rig count of 562, which is 35% higher versus 1Q2009, TPH said.

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