Statistics recently released by the Oklahoma CorporationCommission (OCC) show gas production in the state has slowed itsdecline in recent years, with last year inching downward to itslowest level since 1968. However, OCC Commissioner Bob Anthony saidhe sees no cause for alarm and expects to see little or no furthererosion 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 indicatefor 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 havedeclining production. There’s no reason to believe that in anoverall sense it will be declining.”

Oklahoma’s current moderately declining production is due tosome of the state’s exports being displaced by Canadian gas andcoalbed methane production, Anthony said. Oklahoma exports abouttwo-thirds of its production, a greater percentage than that ofTexas and Louisiana. “The picture nationally is a growing orexpanding market, and because of that I’m willing to state althoughour production has flattened out in recent years that it’s stillfundamentally strong and it’s still a fundamentally important partof our economy in Oklahoma.”

Bruce Bell, chairman of the Midcontinent Oil &amp GasAssociation of Oklahoma, attributed the decline in production to anumber of factors. Until about three years ago, gas productionallowables 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 todrill deeper to find the gas they’re looking for. “These deeper gaswells are very expensive, and when you restrict production early inthe life of the well, it makes it more difficult to justify theexpenditure of the capital.” Deeper wells are now eligible for taxincentives, but more is needed, Bell said. “We are also seeingcertain key players in the state that are not as active as they hadbeen in the past. Many of the integrated companies have sold offtheir Oklahoma production and are not doing new drilling. That isvery definitely a significant component of our decliningproduction.”

That leaves the bulk of deep-well drilling up to smallerproducers who have less access to the capital needed to drill deepwells.

Oklahoma is unbundling its upstream gas industry and plans tounbundle the downstream next. Unbundling is seen by the OCC as anopportunity to turn the state’s gas supply into an economicdevelopment tool. Fertilizer manufacturing operations consume thegreatest share of gas in the state. Lumber processing is anotherbig end user, Anthony said. “I think because we have this resourcebase we’re trying to encourage those types of industries.

“I think that our unbundling and competition rules will enhanceopportunities for our Oklahoma producers. We have had producers andoperators who have transmission or storage facilities orcapabilities who have not necessarily participated in serving ourgas utility industry. And now that we’re having unbundling andcompetitive bidding, they’re given greater opportunity toparticipate.”

Joe Fisher, Houston

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