Encana suspends drilling in Western Colorado

Kelly Sloan
Kelly Sloan

Kelly Sloan, The Business Times

Previously one of the most active energy development companies in Western Colorado, Encana has announced it’s suspending drilling operations in the Piceance Basin.

Sandy Kent, community relations director for Encana, confirmed the company has no plans for drilling in 2014, although production operations will continue at existing wells. Encana also will complete the few remaining wells drilled in 2013.

The suspension follows a company restructuring earlier this year that saw a 20 percent work force reduction across the board and the shift of 75 percent of capital into five oil plays in North America. One of those plays is the Denver-Julesburg Basin on the Front Range of Colorado, home to the oil-rich Niobrara formation.

Natural gas prices remain low in North America mainly due to an abundance of supply caused by advances in drilling and production techniques. Horizontal drilling and staged hydraulic fracturing has freed enormous quantities of oil and natural gas from shale formations previously thought to be un-recoverable. Low natural gas prices contrast with relatively high oil prices, making oil-bearing formations more attractive to operators.

Kent characterized the suspension in drilling in Western Colorado as “taking a break” in the Piceance. She said it’s difficult to say what the future holds. “We are constantly reassessing our positions. But for now we are taking a break in 2014 from any drilling.”

The move doesn’t affect a joint venture agreement between Encana and Nuccor Steel calling for the drilling of up to 4,000 natural gas wells in the region in the next 20 years. “Nuccor was part of the discussion,” Kent said. “The suspension was a mutual decision.”

The drilling suspension appears to be a factor in oilfield services giant Schlumberger reportedly shutting its Grand Junction office. Sources say the company’s wireline division already has decided to move its operations to the Front Range and the cementing division is expected to follow. Schlumberger relocated the bulk of its fracking operations from Western Colorado to the Bakken Field in North Dakota. No one at  the Schlumberger office in Grand Junction could be reached for comment before press deadline.

If Schlumberger does close shut its local operations, approximately 40 jobs will affected.

Kent said no layoffs are planned for Encana, although some drilling-related personnel will be relocated to other plays.

David Ludlum, executive director of the West Slope Oil and Gas Association, said it’s important to look at the bigger picture. “The Piceance is still an enormous resource play with millions of dollars in infrastructure and thousands of producing wells,” Ludlum said. “When prices recover, so will drilling and completions. And we need to keep this in mind for community planning and infrastructure. The best days of the Piceance are still ahead of us.”