OK Production Drops to 20-Year Low but Regulator Not Alarmed
Statistics recently released by the Oklahoma Corporation
Commission (OCC) show gas production in the state has slowed its
decline in recent years, with last year inching downward to its
lowest level since 1968. However, OCC Commissioner Bob Anthony said
he sees no cause for alarm and expects to see little or no further
erosion in succeeding years.
Last year's production was 1.713 Tcf, down from 1.737 in 1996,
1.775 in 1995 and 1.890 in 1994. Production in 1993 was 2.02 Tcf,
and the highest level ever was 2.264 in 1990. "Recent data indicate
for the last three years, production in Oklahoma has been flat,"
Anthony said. "For three years in a row, it's been essentially 1.7.
I do not believe from this point forward that we will have
declining production. There's no reason to believe that in an
overall sense it will be declining."
Oklahoma's current moderately declining production is due to
some of the state's exports being displaced by Canadian gas and
coalbed methane production, Anthony said. Oklahoma exports about
two-thirds of its production, a greater percentage than that of
Texas and Louisiana. "The picture nationally is a growing or
expanding market, and because of that I'm willing to state although
our production has flattened out in recent years that it's still
fundamentally strong and it's still a fundamentally important part
of our economy in Oklahoma."
Bruce Bell, chairman of the Midcontinent Oil & Gas
Association of Oklahoma, attributed the decline in production to a
number of factors. Until about three years ago, gas production
allowables were more stringent than they are now. For larger wells,
production allowables are currently about 65% of open flow.
Oklahoma gas fields are mature, and producers are having to
drill deeper to find the gas they're looking for. "These deeper gas
wells are very expensive, and when you restrict production early in
the life of the well, it makes it more difficult to justify the
expenditure of the capital." Deeper wells are now eligible for tax
incentives, but more is needed, Bell said. "We are also seeing
certain key players in the state that are not as active as they had
been in the past. Many of the integrated companies have sold off
their Oklahoma production and are not doing new drilling. That is
very definitely a significant component of our declining
That leaves the bulk of deep-well drilling up to smaller
producers who have less access to the capital needed to drill deep
Oklahoma is unbundling its upstream gas industry and plans to
unbundle the downstream next. Unbundling is seen by the OCC as an
opportunity to turn the state's gas supply into an economic
development tool. Fertilizer manufacturing operations consume the
greatest share of gas in the state. Lumber processing is another
big end user, Anthony said. "I think because we have this resource
base we're trying to encourage those types of industries.
"I think that our unbundling and competition rules will enhance
opportunities for our Oklahoma producers. We have had producers and
operators who have transmission or storage facilities or
capabilities who have not necessarily participated in serving our
gas utility industry. And now that we're having unbundling and
competitive bidding, they're given greater opportunity to
Joe Fisher, Houston
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