NGI The Weekly Gas Market Report
In response to national concerns over a possible natural gasshortage this winter, the Oklahoma Corporation Commission has givenproducers with unallocated gas wells in Oklahoma the go-ahead tocontinue their increase in production to the limit.
The order which was issued last week will act as an extension ofthe commission’s previous finding to allow unallocated gas wells inOklahoma to produce the greater of 65% of calculated absolute openflow (CAOF) or 2 MMcf/d.
The commission believes these numbers represent the maximumamount a well can physically produce in Oklahoma. CommissionChairman Bob Anthony believes that there is no reason for Oklahomaconsumers to panic. “While the tightening market conditions willundoubtedly be reflected in higher energy prices this winter, allindications are that our state utilities will have an adequatesupply of natural gas to serve their customers during the upcomingheating season,” Anthony said.
Commission Vice Chairman Denise Bode believes that the orderwill be beneficial for consumers and the energy industry, but warnsthat it is not a silver bullet. She points out that even “maximumproduction of existing wells will not replace new production. Thenumbers show gas production is relatively flat. Even though thehigher prices have prompted a renewed interest in exploring foradditional gas, on average it will take at least two years beforewe see any impact on the total output. At the same time, any gaincould be offset by the loss of aging, existing wells. When coupledwith the expected increased demand for natural gas for electricgeneration, it becomes clear a problem exists.”
In relation to the passage of the order, the commission iscalling for actions aimed at addressing problems over the long termas well. “The commission needs to get input from the industry,consumers and other policymakers on other actions we can take toincrease gas exploration and production in Oklahoma to make sureOklahoma consumers continue to be supplied with abundant,reasonably priced energy,” Bode said. “We are planning severalget-togethers here within the next month with both utilities andwith industry and consumer groups to see if we can work together asa team to come up with short term and long term solutions.”
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