Oil & Gas News

EOG scales back in the Uinta Basin

uinta basin

A massive natural gas project in the Uinta Basin that promised as much as $1 billion in state royalties over its lifetime is off the table for now due to a variety of factors, especially plummeting natural gas prices.

Uinta Basin

Credit: shaleexperts.com

About nine years after it proposed a 43,000-acre natural gas project in the Uinta Basin of Utah, EOG Resources said it was hitting the pause button, citing changes in the gas market and drilling technology and the drop in prices since in the region since the project was announced.

BLM already had completed a draft environmental impact statement (DEIS) on the project, which EOG had initially proposed in 2009.

“In sum, the speed of technological and engineering advances in directional and horizontal drilling, combined with significant changes in natural gas commodity prices have outpaced the viability” of the proposal, wrote Ken Boedeker, vice president and general manager of the company’s Denver division.

The company, which “is re-evaluating the location, scope and nature of future development in and around the project area plans to drill “significantly fewer wells per year” than called for in its development plan submitted to BLM.

The project as proposed would have added to the 1,247 oil and gas wells already drilled in the area, with development of 2,808 oil and gas wells that would be drilled over 15 years.

Over its 60-year production life, the project would have produced an estimated 4.17 trillion cubic feet of natural gas and 600 million barrels of condensate, which is used to make diesel, jet fuel and heating fuels.

The Ute Indian Tribe, which asserts authority over the project land because it is within the tribe’s historic Uncompahgre Reservation, said it was pleased with project’s withdrawal.


Platt’s reported that EOG’s cooling enthusiasm for drilling in the Uinta Basin is reflective of trends in gas production and prices, which both have been on a downward trend since EOG proposed the Greater Chapita Wells in 2009.

Gas production in the play has fallen steadily, particularly over the past three years, according to Platts Analytics data. After averaging about 1.06 Bcf/d from 2010 to 2015, basin-level production has since dropped to 770 MMcf/d and has averaged just 680 MMcf/d this year to date.

As it currently stands, basin-level production is projected to average below 600 MMcf/d through 2020 at the current rig count.

In recent months, however, things have started to turn around. Internal rates of return in the Uinta have increased to about 10% for June, up from 6% at this time last year. Additionally, the rig count in the basin has increased modestly from this time last year as well, averaging eight rigs for 2018 compared with seven in 2017.

Meanwhile, with US production figures routinely hitting new highs, gas prices in the region have lost more than half their value since 2009.

On December 31 of that year, the Questar, Rockies pricing point was trading at $5.425/MMBtu and Kern River Opal was moving at $5.435/MMBtu, according to Platts pricing data.

On Friday, those points were being traded at $2.19/MMBtu and $2.26/MMBtu, respectively.


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