Colorado’s Front Range is sitting on top of as much as a billion barrels of oil, which could inject $4 billion a year in revenues into Colorado’s economy, according to one estimate.
Houston-based Anadarko made the oil-reserve estimate based on 11 horizontal wells it drilled in the Wattenberg Field in Weld County.
The company put the range of the reserves as equivalent to 500 million to 1.5 billion barrels of oil — about 70 percent of the production in oil, the rest in natural gas.
“This is going to have huge implications for the economy of Colorado,” said Pete Stark, vice president for industry relations at IHS, a Denver-based consulting firm.
A reserve that size could generate 150,000 barrels a day and, assuming oil is $80 a barrel, provide more than $4 billion in annual revenues, Stark estimated.
The total value of goods and services produced in the state in 2010 was $235.15 billion.
“Anadarko’s announcement today shows once again that Colorado is a leader in the energy sector of our country’s economy,” Gov. John Hickenlooper said in a statement Monday. “We are thrilled to see the company plan a significant investment in Colorado.”
Anadarko’s wells had initial production averages of 800 barrels a day — with the best well producing 1,100 barrels a day.
The wells were drilled in the Niobrara formation, which is more than 6,000 feet deep and runs from El Paso County to the Wyoming border.
To get oil from the shale layer, companies drill horizontally through a formation and “hydrofracture” the well — pumping in water, sand and chemicals under pressure to break up the rock.
Anadarko said it also found oil in the neighboring Codell formation. While a “significant” shale discovery, it is smaller than the 9 billion-barrel reserve in North Dakota’s Bakken Field, Stark said.
Anadarko plans to quadruple its drilling pace to 160 wells a year and drill between 1,200 and 2,700 wells in the Wattenberg Field.
The cost of each well has averaged between $4 million and $5 million, said John Christian sen, an Anadarko spokesman.
The Anadarko estimate is just for the 100-square-mile Wattenberg Field, which includes Weld County and small parts of Adams, Broomfield, Boulder and Larimer counties.
Anadarko is also doing exploratory drilling in Arapahoe County, and Chesapeake Energy has filed plans to drill in Elbert and Douglas counties.
Ultra Petroleum is set to drill exploration wells in El Paso County.
“The Anadarko results don’t say anything about the prospects to the south,” said Ward Polzin, a managing director at Tudor, Picking & Co., an energy investment bank.
The Wattenberg was always seen as the most promising area, Polzin said.
“What this does is give drillers through the area more confidence,” Polzin said.
The prospect of accelerated drilling raises concerns among environmental groups.
“The announcement is a mixed bag,” said Gary Wockner, director of the Clean Water Action and Clean Water Fund in Colorado. “Every well that is drilled takes more water and poses pollution from fracking fluids.”
“We think the economics of these wells are very good,” Christiansen said.
Anadarko holds interests in more than 350,000 net acres in the Wattenberg Field and operates more than 5,200 existing wells.
Outside the Wattenberg, Anadarko holds another 550,000 acres in Colorado.
Courtesy: The Denver Post