Laramie to add rig as the region’s drilling activity remains minimal
Laramie Energy reportedly will begin operating a local drilling rig before the end of this year, boosting the minimal level of natural gas development the region has been seeing.
Par Pacific Holdings, which has a 42.3 percent ownership interest in Laramie, reported the drilling plans in its recent quarterly earnings report.
The rig addition would boost the local rig count to four, after just three rigs generally have been in operation locally this year. Ursa Resources, Caerus Oil and Gas and Terra Energy Partners have been operating one rig each.
That meager rig count has meant drilling had begun on just 100 wells this year in Garfield County as of Oct. 1, according to Colorado Oil and Gas Conservation Commission data. Thanks to low natural gas prices, drilling activity hasn’t been that slow in the county since 1999, when 94 wells were drilled. Last year, 173 wells were drilled in the county. Drilling in the county peaked in 2008, at 1,689 wells.
No wells have been drilled this year in Mesa or Rio Blanco counties. One was drilled in Gunnison County.
Declining gas production and soft market pricing are resulting in a $17 million one-year drop in oil and gas property tax collections for Garfield County’s government, or a 35 percent reduction, the county recently reported.
Garfield County’s annual gas production peaked at more than 700 billion cubic feet in 2012 before starting a steady decline. It had about 557 bcf of production last year and about 334 bcf this year through September, according to Commission data.
By way of comparison, total gas consumption last year in the United States was 27.3 trillion cubic feet, the federal Energy Information Administration reports.
Garfield had been leading the state in annual gas production before being barely eclipsed by Weld County last year. Much of the state’s drilling activity has shifted in recent years from Garfield County to Weld County because of the more oil-rich geology there, but a lot of gas also is produced during oil drilling.
Garfield currently has more than 11,000 active wells, second statewide but about half the number of active wells in Weld County.
Drilling permit activity in Garfield County is ahead of last year’s pace, at 446 issued through Oct. 1 compared to 532 for all of last year. The Commission had issued 50 permits this year in Rio Blanco County, six in Gunnison County and none in Mesa County through Oct. 1. Permits are good for two years, and 126 were approved for Mesa County last year.
Laramie is among the local oil and gas companies excited about the prospects for developing natural gas in the Mancos shale formation. The U.S. Geological Survey this year increased by about 40-fold, to 66 trillion cubic feet, its estimate of the undiscovered, technically recoverable gas resource in the Mancos shale in western Colorado’s Piceance Basin. But the level of drilling that’s likely to occur in the Mancos or in shallower sandstone formations where much of the local gas development has been concentrated continues to hinge on what happens with natural gas prices.