While gas production in the Midcontinent region has been declining steadily over the last decade and is projected to drop another 3.5% this year, there has been a surprising increase in the pace of drilling and a renewed interest in exploration and development, said Energy and Environmental Analysis Inc. (EEA) in its Monthly Gas Update.

EEA predicts that there will be a 211 MMcf/d decline in production from the Midcontinent to about 6.16 Bcf/d on average in December of this year from about 6.38 Bcf/d this January. The region, which includes Oklahoma (61% of 2003 production), Kansas (15%), Texas District 10 (14%, Arkansas (7%) and Texas District 8A (3%) has seen its gas production tumble nearly 30% in the last 13 years from 9.2 Bcf/d in 1990 to 6.5 Bcf/d in 2003, when the region made up about 13% of the Lower 48 total.

“With the exception of 2000, each year since 1990 has experienced a decline in gas production,” EEA said. “The average annual decline rate for the region since 1990 has been about 200 MMcf/d.”

EEA said the majority of the production decline has occurred in Oklahoma, which has seen its daily production fall from 5.7 Bcf/d in 1990 to 4 Bcf/d in 2003. Kansas saw the second largest drop at almost 400 MMcf/d (28%) since 1990. Arkansas’ production has fallen 19% since 1990 or 100 MMcf/d. Texas District 10, the panhandle region, has declined by almost 460 MMcf/d (34%) and Texas District 8A has remained steady.

Looking at the producing basins, EEA found that Anadarko basin production declined from 5.89 Bcf/d in 1990 to 4.4 Bcf/d in 2002, while Arkoma basin production dropped from 1.5 Bcf/d to 1 Bcf/d over the same period. However Arkoma production has remained flat since 1999, while the Anadarko continues to decline.

Coalbed methane production (CBM) growth is helping to keep the Arkoma steady. About 52% of the CBM in the region comes from the Arkoma. CBM is basically still in its infancy. It averaged about 65 MMcf/d in 2002 but by year-end it was at 79 MMcf/d and in 2003 reached 97 MMcf/d. It is expected to reach 109 MMcf/d in 2004 and could continue to see substantial growth in the future.

“The Cherokee Basin in southeastern Kansas has been the location of a considerable amount of [CBM] activity and drilling in the past few years by Devon, Quest Resources, Evergreen and other,” EEA said. “Most of the coals are less than 2,500 feet deep and the coal seams are thin at 2 feet or less. The Kansas Geological Survey has indicated that there is as much as 6.6 Tcf of [CBM] gas in place in the state.” The Cherokee had only about 5 MMcf/d of CBM production in 2002 but in 2003 CBM grew to 50 MMcf/d.

EEA predicts that Oklahoma production will continue gradually declining, falling to 3.86 Bcf/d by the end of the year from 3.92 Bcf/d in January. Kansas production is expect to fall to 0.97 Bcf/d by the end of the year from 0.95 Bcf/d currently. Arkansas production should remain steady at 0.44 Bcf/d. Production from the Texas Panhandle should drop from 0.97 Bcf/d to 0.81 Bcf/d by the end of the year and the Texas 8A region should see its production drop slightly to 0.19 Bcf/d in December from 0.20 Bcf/d currently.

Despite the expectations for continued declines, EEA said signs of renewed interest are encouraging. “In contrast to the deep Anadarko basin wildcat exploration activity of the late 1970s and early 1980s, current activity is focused on more conservative targets such as coalbed methane and extensions to existing fields; but some companies are pursuing exploration objectives,” said EEA.

Contrary to the Rockies, the Midcontinent does not have pipeline constraints, and wellhead prices are attractive. The National Petroleum Council study also indicates that the region has a large amount of gas potential.

“In addition with continued high wellhead prices, both conventional and tight gas development in the Anadarko and tight gas in the Arkoma basin are expected to ramp up substantially over the long term.”

As Chesapeake Energy, a leading Midcontinent producer, put it recently, the region has good infrastructure, long-lived multi-pay reserves, a 95% drilling success rate, favorable regulatory structure, low drilling costs and “excellent potential, especially below 15,000 feet.”

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