Natural gas: the billion dollar payoff |

Natural gas: the billion dollar payoff

So just how lucrative are the natural gas wells being drilled south of Rifle by EnCana Oil and Gas USA?Energy efficiency expert Randy Udall, director of the Community Office for Resource Efficiency in Pitkin County, has taken a stab at the numbers using information from an article in the Oil and Gas Journal.The lifetime production of a new gas well in the South Piceance Basin is between 20 and 30 years. Over that time an average well produces about 1 billion cubic feet of methane. Consumers’ prices for natural gas have hovered lately around $5 and $6 per thousand cubic feet.At those prices, the gross income per well is $5 million to $6 million for production of 1 billion cubic feet. EnCana drilled 275 wells in 2004 in the Mamm Creek Field. Assuming all are typical producers, the company will gross about $1.375 billion over the lifetime of just those wells. The company plans to drill about that many wells again in 2005.Joel Fox, EnCana’s team leader in the South Piceance gas fields, said Udall’s numbers per well are in the ballpark. But he noted that while EnCana shoots for production of 1 billion to 1.1 billion cubic feet of gas over the lifetime of a well, it sometimes only produces 500 million cubic feet.”The production is variable,” he said.Fields west of Mamm Creek, in the Rulison area, have been more productive, typically averaging 1.5 billion cubic feet.In addition, Fox said, there are maintenance costs for wells and compressor stations, which keep the gas flowing through the pipelines, and pipeline fees. They all eat into the gross revenues just like insurance and taxes affect a person’s paycheck, he noted.

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