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News Release, Kansas Geological Survey, March 13, 2009

Kansas Oil and Gas Production Rises in 2008

LAWRENCE--Kansas oil and gas production jumped almost 10% in 2008 following record-high crude oil and natural gas prices last summer, according to estimates from the Kansas Geological Survey at the University of Kansas.

In 2008, an estimated 39.4 million barrels of oil were produced in Kansas compared to 36.6 million barrels in 2007, said Tim Carr, emeritus geologist at the Survey. Gas production increased from 370 billion cubic feet (Bcf) in 2007 to 378 Bcf in 2008.

Due to rising prices followed by increased production, the value of the 2008 Kansas oil and gas production was worth nearly $1.9 billion more than in 2007.

The 2008 value is estimated at $6.58 billion compared to $4.7 billion in 2007. Of the 2008 value, $3.53 billion was oil--up $1.19 billion from 2007--and $3.05 billion was natural gas--up $69 million.

After peaking at $147 a barrel in July, the price of crude oil was back down below $40 a barrel by the end of December, modifying production gains.

"Crude oil prices have been hovering in the $35 to $45 range in recent times," said Survey geologist Lynn Watney. "Even though the rate of decline has been tapering off, the drop in value will translate into decreases in production activity, at least in the short term. If overall job losses slow or reverse, these declines could also reverse."

If oil and gas prices hold at their present range throughout 2009, however, the value of oil and gas will decrease significantly and will have a negative impact on economic activity and tax revenue, Carr said.

Natural gas, which averaged a record $10.82 per thousand cubic feet in June 2008 was down to a monthly average of $5.87 per cubic feet by December, the latest data available.

"Gas prices have been slowly falling since October," Watney said. "Natural gas is actually undervalued compared to oil in terms of heating value, or the amount of energy released during combustion. That will probably not change if the economy continues to slow and gas storage remains high."

County by county, central and western Kansas lead in oil production while southwestern Kansas produces the most natural gas.

Ellis County continued to be the top oil producer at the end of November 2008 when the latest data for counties was available. Barton County moved up two spots to number two followed by Rooks, Russell, Haskell, Ness, Graham, Finney, Stafford, and Butler counties.

Nine of the top ten gas-producing counties were in the Hugoton Gas Area. Stevens County led, followed by Grant, Kearny, Haskell, Finney, Morton, Seward, Wilson, Barber, and Stanton counties. Wilson County in southeastern Kansas moved onto the top 10 list last year with the rise in coalbed natural gas production.

The majority of the state's natural gas is produced in southwestern Kansas from the Hugoton Gas Area, the most widespread gas area in the Western Hemisphere.

Although production from the Hugoton has steadily declined about 10% a year since 1996, government rule changes--allowing closer spacing of wells, for example--and continued refinement of reservoir modeling by scientists to better locate the remaining gas are expected to extend the life of the field.

The main offset to declines in Hugoton production has been increased production from underground coal beds in southeastern Kansas, which now provides nearly 13% of the state's natural gas. Coalbed natural gas, also called coalbed methane, is a relatively recent phenomenon.

"Prior to 2001, coalbed natural gas production was not significant," said Survey geologist David Newell. "Since then, production from coalbeds has been increasing between 35 to 45% every year in Kansas. The percentage increase per year is decreasing though, so I expect it will peak within the next five years."

Story by Cathy Evans, (785) 864-2195.
For more information, contact Lynn Watney, (785) 864-2184.

Kansas Geological Survey, Public Outreach