Colorado’s cooling natural-gas boom likely will chill further by year’s end.
The number of state permits approved to drill new wells — when projected through the end of 2009 — is expected to drop by 11 percent from last year, according to the Colorado Oil and Gas Conservation Commission.
The projected decline is “a reflection of gas prices, which have come down at least 50 percent from last summer,” said Jim Magill at Platts Gas Daily newsletter. “Part of the problem is the lack of pipelines. Also, there is uncertainty over Colorado’s new oil and gas regulations.”
The state approved 1,602 permits to drill wells from Jan. 1 to March 23 this year, commission staff said in a report issued March 30.
At that rate, the commission estimates that it will approve 7,130 permits in 2009 — 11 percent lower than the record 8,027 permits it approved in 2008.
But the number of approved permits could be even lower — up to a 33 percent drop from 2008 — when estimates are based on the number of permit applications submitted.
Commission director David Neslin warned that projections aren’t always reliable.
“It’s difficult to extrapolate (permits) for 12 months based on the number for three months,” he said, “since we are in a recession and commodity prices have declined.”
The first quarter saw robust permit activity, likely because companies rushed to lock them in before a majority of new, stricter drilling rules took effect April 1, Neslin added. Permits are valid for one year.
Gov. Bill Ritter on Wednesday signed drilling rules giving the commission greater oversight of energy companies.
And given the slowdown in drilling activity, the number of permit approvals could wane the rest of the year, Neslin said.
Colorado’s gas rig count was 52 the week ending April 17, compared with 123 six months earlier, according to Houston-based Baker Hughes Inc.
EnCana Oil & Gas (USA) trimmed its investment in Colorado from $700 million in 2008 to $400 million this year, partly because of new drilling rules, spokesman Doug Hock said.
“We have cut down investment by 10 percent in Texas and Louisiana, 30 percent in Wyoming,” Hock said. “That’s where you see the connection with the rules in Colorado, where we cut back 40 percent.”
Gargi Chakrabarty: 303-954-2976 or gchakrabarty@denverpost.com
