An Analysis of Utah Oil and Gas Production, Leasing, and Future Resources
The following summary describes results from an ongoing project to gather information on historical oil and gas production quantities, oil and gas production patterns, and projected future production capability for the state of Utah. The project draws from publicly available government reports, the BLM's LR2000 database, and the Utah Division of Oil, Gas and Mining production databases. The goal of this effort is to assess Utah's past and future role as a producer of oil and natural gas, and to identify important regions for oil and gas production.
This summary first presents an analysis of both recent and long-term historical oil and gas production patterns over the state of Utah. Next, areas that have been under federal oil and gas lease are shown, with higher-valued areas identified. Finally, a summary of projected in-ground reserves based upon estimates from various U.S.G.S reports is given. The analysis shows that most oil and gas is produced in a few well-defined regions, all of which are outside of proposed wilderness areas. Additionally, calculations show that undiscovered resources outside the regions of current production are minimal.
Historical Oil and Gas Production
Utah has seen substantial oil and gas exploration since natural gas was first discovered in 1891. Oil and gas production took off in earnest during the mid 1940s [1]. Since production first started, over 13,500 wells have been drilled, covering much of the state, as shown in Figure 1. Total oil production as of October 2003 has been 1.24 billion barrels (BBO); total gas production has been 7.65 trillion cubic feet (TCF). The United States presently uses approximately 19.6 million barrels of oil (MMBO) a day and 62 billion cubic feet (BCF) of natural gas a day [2]. Thus, over the past 65 years, enough resources have been produced to supply the U.S. with oil for just over two months and gas for about four months at today's rate of consumption.
Recently, Utah's annual production of oil has been about 15.3 MMBO, equal to 0.7% of total U.S. oil production; recent annual gas production equaled 273 BCF, equal to 1.4% of total U.S. gas production [3, 4]. These yearly production amounts are enough to supply the U.S. with oil for less than 19 hours and gas for 4.4 days. These amounts are in line with Utah's historical production levels. To put things in perspective, a 1% increase in fuel economy standards would save 30 MMBO annually, which is twice as much oil as Utah produces [2]. Thus, in the big picture, Utah, statewide, does not provide a substantial amount of oil or gas to the United States. Historical production records, in combination with U.S.G.S. estimates of undiscovered oil and gas resources within the state of Utah, strongly suggest that annual production of oil and gas will not rise substantially above these numbers.
The Division of Oil, Gas and Mining (DOGM) maintains historical records of oil and gas production for each well within Utah. Using the DOGM database, a map illustrating the locations of historical oil and gas production has been constructed. This map uses a standard method of looking at total production from an energy standpoint: the barrel of oil equivalent (BOE). While various conversion factors between natural gas and oil exist depending on the qualities of the specific crude oil and natural gas, one barrel of oil has approximately the same energy content as 6,000 cubic feet of natural gas. For this map the Energy Information Administration's conversion factor of 5,600 cubic feet of natural gas per barrel of oil was used, yielding a more conservative (higher) estimate of production.
Figure 2 shows Utah's cumulative oil and gas production as of October 2003; the map is color-coded to show the relative production levels of areas of exploration. Each box represents the total cumulative oil and gas production in BOE within one public land survey system (PLSS) section, an area typically about one mile on a side. This map shows there are approximately seven "hot spots" of production in Utah, with the remainder of the production activity yielding little or no oil or gas. The hot spots include the following fields or groups of fields: the Anschutz group, the Bluebell-Altamont group, the Natural Buttes group, Drunkards Wash, Lisbon, and Greater Aneth. As shown in Figure 3, taken together, these hot spots have produced over 95% of Utah's total oil and gas. Thus, the oil and gas produced outside of these areas, including the entirety of the proposed wilderness area, represent less than 5% of Utah's historical oil and gas production.
These regions of higher productivity and regions of little or zero productivity remain approximately the same when only recent production activity is considered. Figure 4 illustrates the distribution of oil and gas production from 2001 to October 2003. Figure 5 identifies the areas accounting for 95% of the oil and gas production during this period. Again less than 5% of Utah's recent oil and gas production comes from outside these moderately productive fields.
Looking at expected (mean) and median well productivity gives an idea of what types of production levels are typical of wells within the productive or the unproductive areas. Since drilling began, 13,529 wells have been drilled in the state of Utah. Of these wells, 5,115 (38%) have produced no oil or gas. However:
- 6,977 of the 13,529 total wells are inside the regions responsible for 95% of the cumulative oil and gas production. Of these wells, the median production is 96,000 BOE and the average production is 366,000 BOE. Eleven percent of these wells produced no oil or gas.
6,552 of the 13,529 wells are outside the regions responsible for 95% of the cumulative oil and gas production. Of these wells, the median production is zero BOE and the average production is 27,000 BOE. Sixty-three percent of these wells produced no oil or gas.
Thus, based upon historical production data, wells drilled outside the seven moderately productive areas are six times more likely to be dry, and have an expected production level less than one-tenth that of wells drilled inside of the historically productive areas.
A common misconception is that some of the wells near the proposed wilderness areas are top producers in the state. For example, the Long Canyon #1 oil well (API #4301915925) has sometimes been falsely claimed as the top producing oil well in the state. Ranked at number 209 for oil production -- and number 275 for oil and gas production combined -- Long Canyon #1, pumping since 1962, has produced only 11% as much oil as the actual top oil producer in the state, named "Anschutz Ranch East W29-06A" (API# 4304330250). The Anschutz Ranch East W29-06A well, located near the Wyoming border, has a cumulative production of 9,722,014 bbls and has been pumping only since 1983 -- only half as long as Long Canyon #1. W29-06A has also been the most productive for natural gas, producing 279 BCF in its 20 years of production. The top 250 producers, identified using the DOGM databases, are illustrated in Figure 1 along with all the other drilled wells in Utah.
Market-Based Valuation of Federally Leased Areas
The BLM holds federal lease sales at least quarterly for oil and gas exploration. Since the Reform Act of 1987, all eligible parcels must be first offered for competitive bidding before they may be uncompetitively leased [5]. During the bidding process, prospective lessees would not be expected to bid on parcels randomly. Instead, the bid price for a parcel would likely reflect the anticipated value of future oil production based upon, for example, knowledge of the underlying geology. This hypothesis was confirmed through analysis of the BLM's LR2000 lease bid data and the DOGM's production database. A regression analysis showed that the average amount of oil and gas produced on federal leases more than triples as the average federal lease bid price doubles.
Figure 6 shows the average bid per acre for all federal oil and gas leases over the state of Utah since 1987. Note that the minimum competitive bid price per acre is $2.00; sections with an average bid price per acre of less than $2.00 have parcels awarded by a noncompetitive (zero) bid. Thus, looking at Figure 6, a vast majority of the federal oil and gas leases in the proposed wilderness area are either awarded through a noncompetitive lease sale or sold for the minimum value at competitive auction. In either case, based upon the very low to zero bid prices, it is clear that most of the lessees of these parcels have little expectation that there will be substantial future production on their leases.
Figure 7 shows a map of all currently authorized federal oil and gas leases in Utah; the leases are color coded to denote whether any oil or gas is presently being produced. Many of the producing leases were leased a long time ago and remain authorized because they are producing. This map shows that contrary to popular belief, a large portion of the leasing and exploration on federal lands provides very little benefit in terms of actual oil or gas production.
The future of oil and gas production in Utah
Future oil and gas production estimates fall into three categories: proven reserves, inferred reserves, and undiscovered resources [* see citation below]. As described earlier, to date Utah has produced 1.24 billion barrels of oil and 7.65 trillion cubic feet of natural gas. The entire state of Utah currently has proven oil reserves of 271 million barrels (1.2% of U.S. proven oil reserves) and proven natural gas reserves of 4.6 TCF (2.5% of U.S. proven natural gas reserves) [6]. Utah's inferred or grown reserves are not publicly available, since these data are proprietary. However, using publicly available production records, field age records, and proven reserve estimates, an estimate for inferred oil and gas was derived according to the method in [7]. This estimate projects that an additional 641 MMBO and 6.08 TCF of gas will be extracted from within or immediately adjacent to existing fields in addition to the proven reserves. Thus, the total amount of oil and gas in or near the existing areas of large-scale production is estimated at 912 MMBO and 10.68 TCF respectively -- enough oil to supply the country for less than seven weeks and enough natural gas to supply the country for about five and a half months.
Undiscovered resources reflect estimates of oil and gas in areas distinct from existing oil and gas fields. The U.S.G.S. periodically provides estimates of these undiscovered oil and gas resources. The U.S.G.S. estimates are divided into areas called provinces that are defined throughout the United States. Five of these provinces extend into Utah: the Eastern Great Basin province, the Wyoming Thrust Belt province, the Southwestern Wyoming province, the Unita-Piceance Basin province, and the Paradox Basin province. Within each province, regions with potentially undiscovered petroleum resources are defined. These regions are called plays, in earlier estimates, and assessment units in more recent estimates [8, 12]. By their very nature, the existence of or quantity of any undiscovered resources cannot be known. To address this issue, the U.S.G.S. estimates are given by a range of numbers from low to high, the highest estimated values being extremely unlikely. The median value, or middle value, is used for the present estimates; there is a 50 percent probability of fewer resources than the median, as well as a 50 percent probability of more resources than the median.
Figure 8 shows a map of the amounts and locations of U.S.G.S.-estimated median undiscovered resources, in barrels of oil equivalent, including contributions from all five provinces [13, 14]. Table 1 shows the amount of oil and gas resources that are estimated to lie within the entire state of Utah, as well as the proposed wilderness area, broken down by play or assessment unit. The estimated amount of technically recoverable undiscovered resources in the entire state of Utah is 436 million barrels of oil (MMBO) and 15,668 billion cubic feet of natural gas (BCF). This is enough to supply the U.S. with oil for about three weeks, and enough gas to supply the U.S. for 8.5 months. Importantly, within the proposed wilderness area there is only an estimated 85 MMBO and 1495 BCF of gas technically recoverable and as of yet undiscovered -- this is enough to supply the U.S with oil for about 4.25 days and gas for 24 days. The undiscovered natural gas resources within the proposed wilderness area represent less than 10% of the undiscovered natural gas within the state.
Note that these estimates represent technically recoverable resources, i.e. resources producible using existing technology without regard to the economic viability of recovering the resource [8, 12]. As such, these numbers are conservative, since a large portion of these reserves will not be economically viable to extract. For example, much of the undiscovered natural gas is from unconventional formations. Unconventional formations typically call for nontraditional development practices, require substantially more drilling to extract resources, and have much smaller recovery factors than conventional natural gas formations [8, 12].
Conclusion
Utah has historically played only a marginal role in U.S. oil and natural gas production, presently meeting 0.7% of the country's oil needs and 1.4% the country's natural gas needs. As a marginal producer of oil and gas resources, Utah does not contribute meaningfully to U.S. energy independence -- twice as much oil would be saved by a 1% increase in U.S. fuel efficiency than Utah currently produces statewide. USGS estimates of undiscovered resources show that Utah will continue to play only a marginal role as a producer of oil and gas.
Furthermore, the undiscovered oil and gas within the proposed wilderness area is a small fraction of an already small statewide number: it represents less than 4.25 days of U.S. oil consumption and less than 24 days of U.S. natural gas consumption. Thus, U.S. energy independence and energy prices will not be affected by halting current and future federal oil and gas leasing within the proposed wilderness area until the final disposition of these sensitive lands is decided.
[*] In essence, proven reserves are estimated quantities of resources that are expected to be recoverable in future years from known reservoirs under existing economic and operating conditions. Inferred reserves are extrapolated reserve estimates reflecting projected amounts of oil or gas quantities that will eventually be extracted within or abutting existing fields. Undiscovered resources are estimates of resources postulated to exist from geologic information and theory to exist outside of known fields [8].
References
1. "Utah! 100 years of exploration ... and still the place to find oil and gas," Utah Geological Survey, Department of Natural Resources, Public Information Series 71, 2001.
2. Annual Energy Review 2001, Energy Information Administration, Department of Energy.
3. Petroleum Supply Annual 2001, Volume 1, Energy Information Administration, Department of Energy.
4. Natural Gas Annual 2001, Energy Information Administration, Department of Energy.
5. Land Use Planning and Oil and Gas Leasing on Onshore Federal Lands, National Academy Press, 1989.
6. "U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves 2001 Annual Report," Energy Information Administration, U.S. Department of Energy, November 2002.
7. E. D. Attanasi, "Inferred oil and gas reserve estimates for the United States," U.S.G.S. Open-file report 01-447, December 2001.
8. U.S. Geological Survey, "1995 National Assessment of United States Oil and Gas Resources: Overview of the 1995 National Assessment of potential additions to technically recoverable resources of oil and gas - onshore and state waters of the United States," U.S.G.S. Survey Circular 1118, Denver, CO, 1995.
9. T. C. Chidsey, Jr., "Major oil plays in Utah and vicinity: quarterly technical progress report," U.S.G.S., prepared under U.S. Government Contract Number DE-FC26-02NT15133, January 2003.
10. D.L. Gautier, G.L. Dolton, E.D. Attanasi, "1995 National Oil and Gas Assessment and Onshore Federal Lands," U.S.G.S. Open-File Report 95-75-N, January 1998.
11. "Assessment of Undiscovered Oil and Gas Resources of the Uinta-Piceance Province of Colorado and Utah, 2002," U.S.G.S. Fact Sheet FS-026-02, March, 2002.
12. U.S.G.S. "Executive Summary - Assessment of undiscovered oil and gas resource of the Uinta-Piceance Province of Utah and Colorado, 2002," U.S.G.S. Digital Data Series DDS-69-B.
13. U.S.G.S. National Oil and Natural Gas Assessment Web page: 1995 GIS data and Assessment results for the Paradox, the Eastern Great Basin, and the Wyoming Thrust Belt provinces: http://energy.cr.usgs.gov/oilgas/noga/index.htm
14. U.S.G.S. National Oil and Natural Gas Assessment Web page: 2002 GIS data and Assessment results for the Uinta-Piceance Basin and the Southwestern Wyoming provinces: http://energy.cr.usgs.gov/oilgas/noga/index.htm
