Awash in oil, U.S. and Utah set a new course

When it comes to oil, a dramatic shift is under way in America, and Utah is playing a role.

Improved technology in both the oil fields and under vehicle hoods are big reasons why rising energy production in the state and nationally is helping the country not only more than meet demand but also is putting it on course to reduce oil imports to historic levels.

Along the way, gas prices have fallen 50 cents or more in the state in the past month as oil stockpiles grow, reducing the pressure on fuel costs, at least for the time being.

This year, Utah crude oil production is estimated to top 29 million barrels, marking a steady increase since 1989. By comparison, the lowest output according to record-keeping going back 36 years came in 2003 at 13 million barrels, when drillers ran into a familiar boom-and-bust cycle common in the U.S. oil industry. Highs were registered in 1985 (41 million barrels) and in 1976 (35.4 million barrels).

"Historically, we've had more than one boom-and-bust cycle," said John Rogers, associate director of the Utah Division of Oil, Gas and Mining. "But production has steadily been increasing recently, largely through better technology."

In fact, production is up in the country a whole to a level that the United States could overtake Saudi Arabia to become the world's biggest oil producer before 2020, and might be energy independent a decade later, according to a recent forecast by the International Energy Agency.

The radical reshaping of the nation's energy picture means that the U.S. could become a net exporter of oil around 2030, the global organization said.

For its part, monthly crude oil production in Utah has risen from 59,000 barrels per day in January 2010 to 85,000 barrels at the end of 2012, the highest level since 1988, according to a December report by the nonpartisan U.S. Energy Information Administration. That's an increase within the past two years of 44 percent.

Driving the increase in the state and nationwide, says the agency, is the growing use of horizontal drilling and hydraulic fracturing — the much-debated practice of pumping water, sand and chemicals down well bores to crack open fissures and boost the flow of oil and natural gas. The procedure allows oil companies and their partners to reach previously untapped pools of energy with money-saving efficiency, but the technique also has raised environmental concerns related to groundwater pollution.

A review of the drilling effort and its impacts is under way by the Environmental Protection Agency, which is testing wells, reviewing company data and examining chemicals used in the process, but its results aren't expected until 2014.

Up to this point, horizontal drilling and fracking have since 2010 helped push up production in the top oil-producing states of Texas and North Dakota by 58 percent (an increase of 500,000 barrels per day) and 40 percent (an increase of 250,000 barrels per day), respectively. But smaller-volume states, including Oklahoma, New Mexico, Wyoming, Colorado and Utah, also are contributing to the rise in domestic crude oil production.

In Utah, the Texas-based Newfield Exploration Co. has an active drilling campaign under way, developing more than 6,000 promising locations, company officials say. Production in eastern Utah has nearly quadrupled since 2004, rising from 7,000 barrels of oil per day to 27,000 barrels.

"Newfield's Unita Basin operations are extremely important to the company's oil growth, and as Utah's number one producer of oil, we're proud of the partnership that we have with the state in producing this valuable asset," said company spokesman Keith Schmidt.

The way Lee Peacock, director of the Utah Petroleum Association, sees it, higher production has myriad benefits. In addition to providing good-paying jobs, it's generating tax revenue for local, state and the federal government, as well as royalties for mineral owners.

"The story of crude oil in Utah is good news for the state," he said.

In January, the company announced a 10-year deal with HollyFrontier Corp. to provide the Woods Cross refinery in the Salt Lake Valley with 20,000 barrels per day produced from Newfield's Uinta Basin properties. In addition, Tesoro Corp., which is planning to invest $180 million to expand its Salt Lake City refinery's capacity, has signed a similar agreement with the oil exploration and production company.

Nationally, oil production is averaging nearly 6.5 million barrels per day — the highest volume in nearly 15 years.

Amid this increase in output, other forces are at work that are having huge impacts on traditional supply-and-demand scenarios.

For one, consumer demand is down, helped by "greater vehicle efficiency and greater use of clean energy," EIA Administrator Adam Sieminski said in a statement explaining evolving consumer preferences. This trend is the result of a variety of factors, including changes in consumer behavior, increased use of domestic biofuels (ethanol and biodiesel) and strong gains in domestic production of crude oil and natural gas plant liquids.

In addition, the Obama administration has finalized regulations that will force automakers to nearly double the average gas mileage of all new cars and trucks sold by 2025.

The rules mean that all new vehicles would have to get an average of 54.5 miles per gallon in 13 years, up from 28.6 mpg at the end of last year. The requirements will be phased in between now and then, and automakers could be fined if they don't comply.

These and other moves are gradually helping cut energy imports, according to the EIA's report. The net import share of total U.S. energy consumption is estimated at 9 percent by 2040, compared with 19 percent in 2011 and 29 percent in 2007.

Other key findings in the report:

Crude oil • U.S. production, particularly from tight, complex oil operations, is expected to rise sharply over the next decade, with an annual growth averaging 234,000 barrels per day through 2019.

Gasoline • U.S. consumption is expected to be lower in 2013, reflecting the introduction of more stringent average fuel economy standards for autos and increased use of natural gas in heavy-duty vehicles.

Renewable fuel • The share of electricity generation from renewables is expected to grow from 13 percent in 2011 to 16 percent in 2040.

Carbon dioxide • Emissions are expected to remain more than 5 percent below their 2005 levels through 2040, with improved efficiency and a shift away from the most carbon-intensive fuels.

dawn@sltrib.com

twitter@DawnHouseTrib —

Utah crude

Monthly production • Has grown by 44 percent since January 2010

Barrels per day • 59,000 barrels in 2010 to 69,00 barrels in 2011, now 85,000 barrels

U.S. • Nearly 6.5 million barrels per day, the highest level since 1998

Source: Energy Information Administration —

Gas prices in Utah

Week ending 1/04/13 • $2.96

Week ago • $3.07

Month ago • $3.48

Year ago • $2.95

Record high • $4.22 (July 18, 2008)

National averages

Week ending 1/04/13 • $3.30

Week ago • $3.28

Month ago • $3.38

Year ago • $3.29

Record high • $4.11 ( July 17, 2008) —

Find low-priced gasoline

Go to UtahGasPrices.com or SaltLakeGasPrices.com