NGI The Weekly Gas Market Report / NGI All News Access

Economy, Prices Send Rockies Gas Output Plummeting

January 18, 2010
/ Print
| Share More
/ Text Size+

BP plc's U.S. arm plans to cease natural gas drilling in La Plata County, CO, for at least six months to pursue development opportunities elsewhere in the United States, the company said Thursday. The news comes as states across the country reported that gas output fell by double digits in 2009 from 2008.

A BP spokesman told NGI that the company in February will idle its final drilling rig in La Plata County, which in recent years has been one of the most prolific gas regions in the state. However, BP's operations in Colorado have never been considered large; most of its Rockies production is focused in the Jonah Field of Wyoming.

"We always look at how to use our financial capital in the best ways," the spokesman said. "The decline in prices and demand and the opportunity to invest that drilling capital in other parts of the country presented themselves at the same time."

One area where BP plans to focus instead of Colorado is in Texas. In the Texas Panhandle, BP's gas operations in the Anadarko Basin include about 1,500 wells and associated facilities including the Sunray and Hemphill gas processing plants. In the Permian Basin BP operates more than 1,200 gas wells. BP also operates more than 900 gas wells in East Texas and northwestern Louisiana, including in the Haynesville Shale.

BP's decision to stop drilling in La Plata County is "only temporary," said the spokesman. BP will continue to submit permits for new drilling, and it should have a backlog of about six months of drilling permits when it again ramps up operations. BP also has 55 wells in the county that it has drilled but not added to sales, and those wells are to be brought online in the coming months.

According to county officials, two drilling rigs now are in operation in La Plata County, compared with 10 rigs at this time a year ago.

But Colorado is not alone. The entire Rocky Mountain region saw a huge decline in drilling between 2008 and 2009, according to the Colorado Oil and Gas Conservation Commission (COGCC). The American Petroleum Institute reported gas drilling fell across the country (see related story).

In a report issued this month the COGCC said by the end of July 2009 there had been a 94% drop in drilling in Montana, a 73% drop in Utah and a 63% drop in Wyoming.

"Given that drilling activity has declined throughout the region, staff would argue that the economy in general, and natural gas prices in particular, appear to be the primary driver of the current decline in oil and gas activity in Colorado," the COGCC report stated.

Among other things, the slumping economy has led to mandatory furlough days across Colorado's state agencies. The COGCC's offices were closed under a mandatory furlough on Friday.

Gas output in Wyoming declined in 2009 for the first time since 1997, according to the Wyoming Oil and Gas Conservation Commission.

Wyoming's gas production in 2009 fell to 2.1 Tcf, down from the 2008 record of 2.3 Tcf. Even with the decline in output, last year was the second-best on record for the state's gas industry, said the commission. Wyoming is the Rocky Mountain region's top gas producing state.

Nearly a quarter of the gas produced in Wyoming is from coalbed methane. Most of the rest of the gas production is from conventional wells. Gas output increased steadily from 1998 through 2008, nearly doubling over that period.

Fewer wells also are being drilled, said the Wyoming office of the Bureau of Land Management. The agency said it processed 2,162 gas and oil permits in 2009, which was down from 3,681 in 2008, and the lowest number since 2003.

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus