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State isn't a major player in oil industry despite abundant reserves

Published: Monday, Jan. 14 2008 12:18 a.m. MST

Oil drilling in Utah's Uinta Basin has created thousands of direct and indirect jobs and pumped millions of dollars into the local economy.

Scott G. Winterton, Deseret Morning News

If all of Utah's known petroleum sources were developed jointly with Colorado's, the region would rival Saudi Arabia in crude oil production.

Just don't expect it to happen anytime soon, if ever.

Utah's geology is rich in reserves of conventional oil and gas, oil sands (formerly called tar sands) and oil shale — particularly the last. But many factors have prevented the state from becoming a major player in the oil field.

Utah's oil and natural gas production has climbed steadily for years. John Baza, director of the Division of Oil, Gas and Mining, noted that in 2004, the state's oil rigs yielded 14.7 million barrels; in 2005 it was 16.7 million barrels; in 2006, 17.9 million barrels; and for the first six months of 2007, production reached 12.7 million barrels, a rate that would put the year's total at 25.4 million barrels.

"Obviously, oil production is on the increase. I think the new well drilling that's going on is just kind of keeping up," he said. Much of a sharp increase in drilling is because of companies searching for more reserves as older sources are used.

"Drilling is still very active in the Uinta Basin," he added. And while the area had a slight increase over last year's pumping, "it's not what I'd call a real production boom."

Two years ago, a Michigan company, Wolverine Oil and Gas, reported a major oil strike in central Utah. Word quickly spread that it could be the harbinger of a vast new oil region 150 miles long. In 2005, some petroleum pundits predicted production could reach 500 million barrels.

So far, no discoveries much beyond the initial Wolverine strike have been reported.

"It represents a substantial part of the state's oil production profile," Baza said of the Wolverine field. That might be around 10 percent of Utah's total, but it's not an immense boom so far.

"I believe there's 10 or 11 producing wells in the immediate vicinity of the original discovery. So it's just a single field discovery to this point."

Perhaps half a dozen exploratory wells were drilled around this area, but he hasn't seen evidence of much from them. Still, Wolverine continues to drill new wells, and seismic exploration has been going on, which means "they're obviously seeing something that they like," Baza said.

In few parts of the state does the petroleum industry carry as much weight as the Uinta Basin, a vast region of northeastern Utah including Uintah and Duchesne counties.

According to Allen E. Isaacson, research analyst with the University of Utah Bureau of Economic and Business Research, 19.9 percent of the jobs and 34.8 percent of wages in the Uinta Basin of northeastern Utah are directly due to oil and gas exploration and production. When the multiplier effect is considered, such as cars sold to oil-rig workers, the figures jump to 49.5 percent of jobs and 60.1 percent of payrolls.

Total employment in the Basin is 19,852 jobs, with 9,835 directly or indirectly supported by petroleum. All wages combined in the region amount to about $745.7 million yearly; wages paid by oil and gas drillers and service companies, etc., amount to nearly $259.2 million; income from direct and indirect jobs derived from petroleum is $448.2 million.

Work tied to the petroleum economy is "just huge out there," Isaacson said.

"The Vernal High School is teaching night classes just to get people to graduate right now." A 17-year-old can graduate and jump into a $50,000 yearly job, he said.

"They're doing a lot of drilling right now. ... Most of the employment is actually not with the operating companies, you know, it's drilling the wells" or providing petroleum field services.

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