U.S. PRODUCTION

Oil output flat, but gas is up

U.S. crude and condensate production was essentially unchanged for 2001. Although the table below shows slightly negative numbers for the Lower 48 and the U.S. as a whole, the table is an estimate based on preliminary data, especially the last three to six months. Thus, revisions could easily change the results a tenth of a percentage point or two. If oil production does prove negative, it will mark the ninth consecutive year of decline. Although a small gain was expected in 2001, an upward revision of 2000’s output – about 32,000 bpd – erased all of that. Thus, 2000 and 2001 were better than expected, although still negative.

Alaska, usually the perennial disappointment, appears noticeably brighter, as we estimate a drop of less than 1%, which is much less than its usual 7% – 10% plunge. Another bright spot was Texas and Louisiana, which together – including federal offshore areas – produced an estimated 25 million more barrels last year than in 2000. This was due to improved recovery, extensions in existing fields and production from Alpine field. At year-end, BP began producing the first federal OCS oil from its Northstar project. The field straddles the state / federal boundary, with about 16% lying in the federal side.

The best hope for stemming the decline in Alaska remains opening of the Alaska National Wildlife Refuge (ANWR) to exploration, but that seems hopelessly mired in Washington politics. According to a recent USGS report, there is a 95% probability of at least 5.7 billion bbl of recoverable oil. For 2002, EIA forecasts 5.78 million bpd of production – less than a 1% drop if our 2001 estimate holds

On the negative side, Colorado appears to have produced 2.7 million bbl less last year, a 14.4% drop. Oklahoma and Wyoming each showed about a 2 million bbl/yr, while both Alabama and Kansas dipped about 1 million bbl/yr.

Natural gas. During 2001, high natural gas prices together with a "sure thing" perception of gas markets, further emphasized gas drilling, which set a record at 19,000 wells. However, since mid-year, gas-directed drilling has been dropping. Dry gas reserves rose an historic 6% in 2001, and estimated production grew 1.7% to 19.3 Tcf. In 2002, gas production is forecast to be flat to slightly up.

Last winter’s near-panic for gas supply has turned into a bit of a gas glut – at least for the short term. By mid-January 2002, gas storage levels were remarkably high, while normal winter temperatures in the U.S. were not to be found. Wellhead prices – above $8/Mcf a year ago – have slipped to less than $2 in some cases. See Len Parent’s article on page 72 for more details.

Coalbed methane production continued its annual increase of about 5% – 10% in 2001 and now stands at about 1.5 Tcf/yr. It accounted for nearly 8% of U.S. dry gas production in 2001. Coalbed methane drilling is one of the factors that helped bolster the number of wells drilled in 2001. Development was especially active in New Mexico, Colorado, Utah, Montana, Wyoming, Alabama and Virginia.