News Release, Kansas Geological Survey, Dec. 18, 1998
And the impact on the Kansas economy could be significant.
Statistics for the first half of the year show that oil production has dropped to slightly more than 2 million barrels per month, said Tim Carr, chief of the Survey's petroleum research section.
Based on those figures, geologists predict that production for the entire year of 1998 will be about 29 million barrels. That's a drop of about 10.8 million barrels, or 27 percent, from production levels in 1997 of 39.8 million barrels.
Oil production in the state has been declining for a number of years, primarily because Kansas is a "mature" oil and gas producing state, one that has been explored and has produced oil for more than century. However, annual declines have generally been in the range of one or two million barrels per year.
"This year's decline of 10 million barrels is unprecedented," said Carr. Researchers directly attribute the drop to lower prices. Prices were below $15 per barrel--generally considered the break-even level for oil production in the state--for much of the first half of 1998. In the past few months they have dropped even lower, to less than $10 per barrel.
Based on an average price of $11.76 per barrel for the year, the 1998 value of Kansas oil production will be about $342 million. The value of oil produced in 1997 was $742 million. That 53% drop in the value of oil produced is, then, the result of a combination of lower production and lower prices.
Carr also estimated that the drop in oil prices and production would have a dramatic impact on employment in the oil patch. He said that the industry employed about 6900 people in 1997, but might lose as many as 3600 employees by the end of 1998.
"What we're witnessing is a collapse in the Kansas oil industry," said Lee Gerhard, Survey director and state geologist. "New drilling is all but non-existent, and many producers are slowing or stopping production, hoping for higher prices."
Natural gas production in the state is also down in 1998, though not nearly so much as oil. Carr estimated that 1998 production would total 630 billion cubic feet, down about 60 billion cubic feet from 1997's total. The average price for gas is also down, from $2.18 per thousand cubic feet in 1997 to $2.03 in 1998.
Carr attributed the decrease in gas production to lower prices and lessening pressures in the Hugoton Natural gas field in southwestern Kansas.
"The drop in revenue from oil and natural gas in 1998 will amount to more than $600 million," said Carr. "That's going to have a significant impact on the Kansas economy, on employment, and on tax revenues." Story by Rex Buchanan (785-864-3965) For more information, contact Tim Carr (785-864-3965)