Low-volume oil and gas operations continue to contribute significantly to the nation's energy supply, according to the 2007 Interstate Oil and Gas Compact Commission (IOGCC) national study "Marginal Wells: Fuel for Economic Growth."
For calendar year 2006, marginal wells (those that yield less than 10 barrels of oil or 60 Mcf/d of natural gas) produced nearly 1.03 billion barrels of oil and 14.9 Tcf of gas. The report shows that while marginal gas production decreased slightly from the previous year, the number of marginal gas wells rose by 3%. Marginal oil production increased by 4%.
According to the report, between 1996 and 2006 the year that saw the greatest number of marginal gas wells was 2006 with 296,721; 1996 saw the fewest, with 168,702. In 1996 the greatest number of marginal gas wells, 4,671, were plugged/abandoned. In 2000 the fewest gas wells, 3,534, were plugged/abandoned. Average daily production from marginal gas wells has ranged from a low of 15 Mcf/d in 1997 and 1999 to a high of 16.7 Mcf/d in 2005.
Pennsylvania has the most marginal gas wells, about 49,750, while Texas has the most gas production from marginal wells, 320,508,067 Mcf, and Arizona has the greatest average daily production per marginal gas well, 39.7 Mcf.
The IOGCC report outlines the economic benefits both oil and gas marginal wells create. In 2006, states collected more than $1.2 billion in severance taxes from producing marginal wells, money that in many states is used for education. On a national level, every $1 million of marginal oil and gas produced creates nine jobs, according to IOGCC.
However, even at current prices the small operators that typically run marginal wells find them expensive to maintain, according to the report. In 2006, plugged and abandoned marginal wells resulted in a loss of $1.77 billion in economic output, $369.2 million in earnings reductions and 8,223 jobs.
"We must assure that appropriate efforts are made to extend the life of marginal wells so energy from domestic sources will continue to be available to all citizens of the nation," said Roy Edwards, executive director of the Oklahoma Marginal Well Commission, which co-funded the report.
"Marginal wells supply quality jobs, valuable tax revenue and much-needed energy to our states and the nation," said Gerry Baker, IOGCC acting executive director. "The states, industry and federal government must work together to make certain marginal well operators and the states that regulate them have the information and tools necessary to ensure they are not prematurely abandoned."
The full report is available from IOGCC at www.iogcc.state.ok.us/PDFS/2007-Marginal-Well-Report.pdf.
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