A 60-year-old record was broken in 2014 as oil production in Colorado reached a preliminary total of nearly 83 million barrels, and the new mark is likely to stand for a while.
The center of Colorado’s oil boom is Weld County, just north and east of Denver, where horizontal drilling and hydraulic fracturing have opened access to long-known reserves that were previously too expensive to exploit because they are buried deep in shale rock formations. The combination of improved technology and $100 per barrel prices made the oil and gas accessible and affordable, spurring a huge influx of drilling operations in the area.
Production from the Niobrara shale and Wattenberg gas fields in northeast Colorado and the Green River Formation and Sand Wash Basin in the northwest part of the state contributed to a 27 percent increase over the previous year’s output, surprising even experts like Colorado Oil and Gas Conservation Commission director Matt Lepore. Quoted in the Denver Business Journal, Lepore said, “I did not think we would see a 20 percent increase, year over year, and we are well beyond that.” He added that as numbers are updated, the total production could actually be higher.
But those numbers aren’t likely to be repeated this year. In a textbook example of supply-and-demand economics, the abundance of oil in the market and a worldwide decline in demand caused prices to free-fall to barely over $50 per barrel by the end of 2014, a level that has carried into the first quarter of 2015. Faced with a 60 percent drop in price, producers are cutting back dramatically on the number of rigs operating in Colorado, laying off hundreds of workers in the process. And it’s not likely that the state will see 2014 levels in the near future as producers leave oil in the ground as they wait for prices to come back up.
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