Prices pump up oil production

Annual survey finds drilling, well activity up across Kansas

As gasoline prices peaked above $3 per gallon this summer, Kansas oil producers already were well on their way toward pumping more crude.

The heightened prices simply made their work even more urgent.

“Drilling activity is way, way up,” said Tim Carr, chief of the energy research section of the Kansas Geological Survey, based at Kansas University. “When the price goes up, production goes up. It’s as simple as that.”

This year’s oil production in the state is poised to reach 35.7 million barrels, up 5.3 percent from 2005, Carr said. The total value of the state’s oil production this year will rise to $2.2 billion, up 22 percent from a year earlier.

It means another $400 million in revenue, he said, that doesn’t even include all the money spent adding wells, repairing old ones and otherwise pumping oil out of the ground and into pipelines for eventual use in gasoline or other products.

“It’s a lot of economic activity,” he said.

Carr has seen evidence of the increased activity in his office. Graduate students working for the survey are being snapped up by oil companies looking for petroleum engineers, he said.

Companies often come calling with salaries of at least $80,000 a year. One recently hired a grad student for $95,000, plus a five-figure signing bonus.

Other companies are offering to pay off student loans – payment by payment, not in one lump sum.

“That way they sew them up for several years,” he said. “They’re smart.”

Production in Douglas County has been on the decline since at least 1995, when 156 wells pumped out 73,927 barrels, according to data compiled by the survey. Last year’s totals: 261 wells, producing 29,193 barrels.

Through August of this year, the county already had 272 wells in place, with 24,463 barrels out of the ground.

While Douglas County represents only a tiny fraction of the state’s totals, the increased activity is indicative of a statewide industry that once again is surging after a decade of production declines that began in the mid-1980s and started to turn around in 1999.

“An average well in Kansas produces less than three gallons a day,” Carr said. “When the price goes up, people start working on them.

“If a pump breaks (when oil prices are) at $10 a barrel, you let it sit there. If it breaks at $60 a barrel, you’ve got a guy out there in an hour – if you can find somebody, and get the equipment.

“It’s crazy out there.”

Other energy sectors analyzed by Carr, in his year-end report:

l Natural gas. Production should end the year at 369 billion cubic feet, down from 381 billion cubic feet a year ago. Coupled with a drop in prices from last year, this year’s production will be expected to bring in $2.4 billion, down $400 million from 2005.

l Coalbed methane. While overall natural gas production is down, one segment of that market – coalbed methane, primarily in southeast Kansas – is projected to end the year with production of 23 billion cubic feet. That would be up from 5 billion cubic feet from a year ago.