VERNAL — Utah's largest producer of crude oil plans to spend $500 million in the state this year as it ramps up its drilling and assessment operations.
Newfield Exploration Co. has earmarked one-third of its 2012 budget for operations in the Uintah Basin, according to Daryll Howard, vice president of the company's Rocky Mountains division.
"It's a key year for us," he said. "We have growth plans for the Uintah Basin, just domestic oil growth plans, that will be just north of 20 percent growth."
Newfield purchased the Monument Butte field, which straddles the Duchesne-Uintah county line, in 2004 from Inland Resources for $575 million. The field is a "foundational asset" for the company "with a decade or more of drilling opportunities," Howard said.
"We have seven (drilling) rigs running in the Basin today," he said, an increase from the company's traditional five-rig program.
"We'll continue to increase that rig fleet as our assessment plans unfold and create development opportunities," he said. "We have a vision for nine-plus rigs in 2013."
Howard was in Vernal on Thursday to present a $250,000 donation to Uintah Basin Applied Technology College. The money will be used to expand the school's Petroleum Technology program, said UBATC President Mark Walker.
"We're very appreciative that they're willing to support the ongoing instruction that we do here," Walker said.
"With their generous donation of money, time and equipment, that allows us to be that much better," he added.
Lelilah Longhair, one of the UBATC students who will benefit from Thursday's donation, also praised Newfield.
"What this (donation) means to me is that they are taking a vested interest and they care about the community," she said.
Houston-based Newfield has accounted for roughly one-third of the oil produced in Utah in each of the past three years, according to the state Division of Oil, Gas and Mining, which makes it a major contributor to state coffers.
Utah receives more than $10 million in state royalty payments and severance taxes annually from Newfield, and between 2005 and 2010, the state received more than $50 million in ad valorem and production taxes from the company.
Duchesne and Uintah counties derive more than $5 million annually in tax revenues from Newfield as well.
The Ute Indian Tribe also benefits financially from the company's operations. Between 2007 and 2010, Newfield paid more than $5 million in taxes, fees and bonuses, and more than $20 million in royalties to the tribe.
One historic challenge for Newfield has been securing sufficient refining capacity for the black wax crude oil found in the Uintah Basin. Because of its high paraffin content, it is too thick to be put through a pipeline the way light, sweet crude oil is.
This means it must be quickly trucked to refineries in insulated tankers. But, in the past, refiners haven't always been willing to take all of the oil Newfield could produce.
The company believes it has solved that problem, Howard said. In January, it signed long-term supply contracts with HollyFrontier Corp. and Tesoro Corp., which operate two of the five refineries in Utah.
The 10-year agreement with HollyFrontier calls for Newfield to supply the refinery with 20,000 barrels per day beginning in 2014. HollyFrontier plans to spend $225 million to expand its Woods Cross refinery to accomodate the increase in black wax crude deliveries.
The Tesoro contract, which is a seven-year deal, calls for Newfield to provide 18,000 barrels per day. The increased shipments are slated to begin in 2013, upon completion of a $180 million expansion of Tesoro's refinery.
Chevron Corp. is also in the process of expanding its Wasatch Front refinery to better handle the processing of eastern Utah's thick, waxy crude oil.
"We will continue to work with our local refineries," Howard said, "and also look for other opportunities outside of just the Salt Lake City market."