Marginal wells continue to boost US supply, IOGCC finds

Marginal wells continue to play an important role in boosting US oil and gas supply, according to the latest report from the Interstate Oil & Gas Compact Commission.

By OGJ editors
HOUSTON, Oct. 16 -- Marginal wells continue to play an important role in boosting US oil and gas supply, according to the latest report from the Interstate Oil & Gas Compact Commission. In 2006 marginal wells produced nearly 1.03 billion bbl of oil and 14.9 tcf of natural gas, IOGCC said.

The report, "Marginal Wells: Fuel for Economic Growth," also stated that while marginal gas production decreased slightly from the previous year, the number of marginal gas wells rose by 3%. And marginal oil production increased by 4%.

Furthermore, IOGCC's report outlines the economic benefits that these wells create. It said in 2006 states collected more than $1.2 billion in severance taxes from producing marginal wells. On a national level, every $1 million of marginal oil and gas produced creates nine jobs, it said.

However, even at current prices, the small operators which typically run marginal wells find them expensive to maintain, according to the report. In 2006, plugged and abandoned marginal wells resulted in a loss of $1.77 billion in economic output, $369.2 million in earnings reductions, and 8,223 jobs.

"We must assure that appropriate efforts are made to extend the life of marginal wells so energy from domestic sources will continue to be available," said Roy Edwards, executive director of the Oklahoma Marginal Well Commission, which cofunded the report.

IOGCC Acting Executive Director Gerry Baker said, "The states, industry, and federal government must work together to make certain marginal well operators and the states that regulate them have the information and tools necessary to ensure they are not prematurely abandoned."

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