06-07-05
Oklahoma's least productive oil wells are becoming increasingly important as total production continues to decline across most of the country, energy industry experts say. Oklahoma oil production slipped about 1.4 % in 2004 to 63.7 mm barrels, mirroring a similar decline across the onshore United States.
Bruce Bell, chairman of the Mid-Continent Oil and Gas Association, said the
decline is caused by two interrelated issues.
"If you look at the rig count, 85 to 90 % of the active drilling rigs are
looking for natural gas," he said. "That all has to do with the fact that the US
is a very mature oil province. The easy oil has been found. Oil is now harder to
find in any large quantity, and it's generally difficult to extract."
Natural gas faces a similar problem, but significantly increased drilling over the past two years has allowed production to break even and increase slightly last year. Such a turnaround, however, is unlikely for crude oil, Bell said.
"It would appear no amount of drilling will actually increase our oil production
in the onshore US," he said. "It is very likely that if prices remain high that
increased drilling will slow the rate of decline, but to be able to reverse it
does not appear likely."
The declining production levels are making the state's least productive wells -- also known as marginal wells -- increasingly important, said Liz Fajen, executive director of the Oklahoma Marginal Well Commission.
"I think marginal production will always be a mainstay in the state because some
of those wells have been producing for 50, 60, 70 years and may have been making
2 bpd for about 40 of that," she said. "But they may make two bpd for another
40."
Marginal wells are defined as those that produce less than 10 barrels of oil or fewer than 60,000 cf of natural gas per day. Individually, the less-active wells may seem insignificant, but together, they supply about 30 % of the country's oil production and about 70 % of the oil pumped out of Oklahoma soil.
Numerous marginal wells were shut in during the late 1990s when the price of
crude dipped below $ 10 a barrel. With costs of $ 11 to $ 20 to produce a barrel
of oil from a typical marginal well, many operators couldn't afford to keep
their wells operational.
Improved technology and soaring commodity prices, however, have allowed
energy companies to expand the production of certain marginal wells and, in some
cases, reopen wells that were shut in during the industry's down years.
"Every bpd is that much more that comes from domestic production," said David
Spencer, administrative engineer for Tulsa-based Calumet Oil. "Some of these
wells may have been producing one to five bpd 10 years ago, but with new
technology, we may be getting five to 10 bpd now."
Calumet has been aggressively buying and expanding marginal wells for years. The company bought a field of marginal wells in 1996 that was producing less than 500 bpd. Today it is pumping out more than 1,400 barrels each day.
While the demand for drilling and well-servicing equipment has driven up
marginal well operators' costs over the past two years, the expenses have not
caught up with ballooning oil sales prices, Spencer said. Even so, he said it is
more difficult to get into marginal wells now than it was just a few years ago.
"Competition is much increased," he said. "It is much harder to purchase some of
the older fields, so in the past couple years, we have turned internally more
towards enhancing our existing wells."
Bell said, "It is even more crucial now than ever that we do everything we can to save those wells and keep them producing.”
“Once you plug a well, it is often just not economically feasible to go back and
put it back into production."
Source: The Daily Oklahoman