Colorado oil, gas production value dips
Aspen, CO Colorado
DENVER ” The total value of oil and natural gas produced in Colorado last year was $6.63 billion, a 24 percent drop from 2006, Colorado Geological Survey estimates show.
A dearth of pipelines kept companies from transporting more gas from Colorado to markets in the Midwest and on the East Coast, which kept the local supply high, petroleum geologist Genevieve Young said. That, in turn, severely depressed prices.
“We had the supply, but we didn’t have the pipelines,” said Young, who compiled the survey’s 2007 oil and gas report. “The lack of export capacity reduced demand, and that’s reflected in the softening of the gas market.”
The agency will release its full report in April.
Colorado set a record $9.39 billion in oil and gas production value in 2005, after hurricanes Katrina and Rita boosted prices of natural gas nationwide.
Since then, weak prices have pulled down production. Total gas production hovered at an estimated 1.132 trillion cubic feet last year, down from 1.198 trillion cubic feet in 2006.
Colorado’s average price of gas was $7.39 per thousand cubic feet in 2005. It was $4.67 per thousand cubic feet last year.
The value of gas – or production multiplied by price – dropped to $5.288 billion in 2007 from $7.345 billion in 2006.
For oil, the value slid to $1.343 billion last year from $1.399 billion in 2006, even though the average price in 2007 was $65.48 a barrel, up from $60.32 a barrel a year earlier.
The $4.4 billion Rockies Express pipeline, which opened last month, is expected to push up gas prices as the pipeline moves gas from Colorado to the Midwest.
EnCana Oil and Gas spokesman Doug Hock agreed the pipeline and strong demand for natural gas nationwide will boost the industry’s outlook.
However, Hock said EnCana this year diverted $500 million of investment originally intended for Colorado to Texas and Wyoming, partly because of the current regulatory environment.
Colorado has been working to overhaul gas drilling rules, and state officials are looking at raising the severance tax on energy producers.
Sen. Chris Romer, a Denver Democrat who supports a ballot initiative to raise the severance tax from 5 percent to 6 percent, said that the decline in oil and gas value can be resolved if the state helps the industry attract new pipeline investments.