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Multiple Idle Wells Await Production
A new study by the Interstate Oil and Gas Compact Commission reports the number of idle gas and oil wells nationwide has jumped by more than 58,000 in four years to 343,030 wells in 2000, which illustrates the impact of low oil and gas prices over the past few years and the potential for increased marginal well production over the next few years.
Idle wells are not currently producing but many still can produce. In fact, the vast majority of the wells currently idle are not producing because they have been unprofitable due to depressed commodity prices and high environmental compliance costs over the study period, IOGCC stated. If those factors are improved or eliminated, production will return. "Many state regulators developed programs that allowed operators to idle wells for longer than normal to save these wells from being permanently sealed because of poor profitability," said IOGCC Executive Director Christine Hansen.
Now that the oil and gas markets have recovered, many marginal wells are likely to be brought back on stream given favorable regulatory and environmental factors.
For the oil market, the idle wells represent more of a drop in the bucket, but for the gas market the impact of adding marginal well production could be significant, according to the IOGCC. "Six states (Arizona, Illinois, Indiana, Louisiana, New York and Ohio) have average production from marginal gas wells that is less than 10 Mcf per day, while the national average daily production per marginal gas well is 15.6 Mcf. Assuming gas wells idle with state approval could produce an average of 10 Mcf per day, the resulting increase of 156,000 Mcf per day could be significant for some states."
In comparison, if all of the nearly 95,000 oil wells that are idle with state approval were returned to production at an average of one barrel per day, it would represent a 1% increase in domestic production.
The IOGCC study, "Produce or Plug: The Dilemma Over the Nation's Idle Oil and Gas Wells," focuses on how states might encourage producers to bring their marginal wells back into production and discusses the issues related to plugging orphaned wells, or those in which the operator has gone out of business. Orphaned wells represent 17% of idle wells and the cost of plugging them all would be a significant financial burden on the states. The ultimate goal for states is to have every well produce for as long as possible, while ensuring wells that have outlived their productivity, or are a threat to the environment, are plugged and abandoned, IOGCC said. The IOGCC represents governors of 30 states and promotes the conservation and efficient recovery of domestic oil and gas resources while protecting the environment.
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