With Texas’ Permian Basin quickly becoming old news, oil explorers are increasingly looking towards Wyoming’s Powder River Basin. Here, big oil producers have found an excellent combination of cheap land, less-congested pipelines and most important, large quantities of oil.
The Powder River Basin was increasingly eyed up over the years by Big Oil as their next big target, especially prior to 2014 when oil prices were soaring. However, with prices then waning, interest quickly followed, and many drilling plans were abandoned. With US crude oil prices ballooning since then, there has been a big rush for land in oil-rich areas, especially in the Powder River Basin.
In the last month especially, Oklahoma based firm Rebellion Energy has spent over $100 million for over 19000 acres of land in Wyoming while the likes of Vermillion Energy and Navigation Powder River LLC have spent $150 million and $10 million on land respectively.
Furthermore, another potential reason for the massive interest in the Powder River Basin is a future deciding vote in the neighbouring state of Colorado on whether to increasingly limit the drilling of oil by increasing the buffer zone between dwellings and O&G wells to 2500 feet. If the vote is passed to increase the buffer zone, then drilling will become all but impossible in the state of Colorado, pushing more investors over state lines into Wyoming, where laws are far friendlier to oil and gas extractors. With the NPL gas project being agreed this week and 3500 wells soon to follow, an estimated $17 billion is being estimated as being brought in by the project, a huge amount for a state with such a small population like Wyoming has.
Representatives from Juniper Capital Advisors, the financial backers behind Navigation Powder River LLC, stated their thoughts on the Powder River Basin to Reuters. They claimed that the Powder River was in a similar position to the one the Permian Basin was in a few years ago before it exploded into the fastest growing oil region in the world. However, with real estate at an all-time premium, the Powder River is much more appealing.
In large part due to the Permian’s successes, the USA has quickly become the world’s largest producer of crude oil with rising export rates. However, the level of production is quickly outpacing the infrastructure surrounding it. This problem is particularly prominent in the Permian, where producers such as ConocoPhillips and Noble Energy are being forced to either relocate their rigs or halt production entirely until there is more pipeline volume available. Even with oil prices risen over the past year, producers in the Permian have been forced to mark down their oil to pipelines in Oklahoma. As a result, oil from the Midwest and Rocky Mountains has now been valued at more than $17 expensive per barrel than oil from the Permian.
With the Permian having reached its limits, Wyoming can now be expected to have a major increase in drilling operations. With Colorado pushing away from an oil-friendly policy, a friendly incoming governor to drilling expansion and high oil prices, Wyoming is in a perfect place to capitalise on an oil rush. This time however, there seems to be no signs of the rush receding.
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(Sourced from Haley Zaremba at oilprice.com)