Drilling activity in the Rocky Mountain region has taken on an international look this year, thanks to the demanding conditions that come with today's current exploration environment.
How international? The first oil well ever drilled in the United States with a Chinese-manufactured rig began operations in early August in Colorado's Piceance Basin.
Faced with a continuing shortage of drilling rigs in the Rocky Mountain region, Presco Inc., a small oil company based in Houston, imported the well from HongHua Ltd. in China.
Kim Bennetts, Presco's vice president of exploration and production, said the AC electrical-driven 1,300 horsepower conventional rig is similar to those in use in Texas oil fields.
Chinese engineers set up the rig near Parachute, Colo. It is scheduled to drill up to four wells this year.
"We had been searching for rigs since last fall and had trouble lining them up," Bennetts said. "The big companies had them all tied up."
GTS Drilling of Houston, a company run by Pakistani immigrants, "asked us if we'd consider China," he said. "We were surprised, but decided to leave no stone unturned."
In January Bennetts traveled to Guangham City, China, to meet and talk with drilling rig supplier HongHua officials and view drilling rigs under construction.
Presco then signed a deal with GTS that acquired the rig and shipped it from China through the Panama Canal to Houston. In July it was trucked to Colorado.
Three Chinese engineers, supervised the setup of the rig; U.S. crews operate the well, Bennetts said.
Presco may bring in two or three more rigs from China during the course of its two-year contract, he said.
More On the Way
Meanwhile, two other Chinese-manufactured drilling rigs are due in eastern Colorado this fall.
The first rig arrived in September and a second one will arrive in November, said Bill Croyle, managing director of Western Energy Advisors, a Denver-based company that is the sales agent for rigs made by the China National Petroleum Corp.
A shortage of rigs has hindered oil and gas drilling across the country.
"We think that in the next 18 months through our efforts, we'll see up to 10 rigs shipped to the region," he said. "These will be mostly equipment, not crews."
Croyle noted the shortage of trained people and equipment for drilling sites in the Rockies.
"Any prudent company will look at all the options," Croyle said. "There's still a shortage of drilling rigs. We skipped a generation-and-a-half of rigs in the United States."
Daily rig rates in the area range from $12,000 to $16,000 a day, he said. A year ago the rate started at $8,500 a day.
"A lot will be flowing into the Colorado and Wyoming region. We've used up whatever slack there is and refurbished equipment, but trained folks are really hard to come by," he said.
Croyle noted some trade schools are gearing up to train drilling rig workers, and Canadian rigs and crews have already arrived to work in the area.
"When we started working with companies looking at China, most of the interest we got was in their people," he said. "All the Chinese crews are highly educated and trained and have at least a two-year college degree. The leader on the rig usually has a bachelor's or master's degree in engineering. Our clients were very impressed with the quality of the crews."
However, Chinese drilling rig crews also are in high demand in China.
"What's likely is we'll get the equipment and a few folks, but mostly Chinese tech representatives," he said.
An Active Year
Currently, there are 80 rigs operating in Colorado, but there is a shortage of 200 rigs in the region.
Brian Macke, director of the Colorado Oil and Gas Conservation Commission that regulates oil and gas drilling and production in the state, said activity has increased dramatically in Colorado in the last year.
So far this year his office has approved 2,300 drilling permits -- which equates to an estimated yearly total of 3,900.
Last year the state hit a record high of 2,917 drilling permits. The projected number for this year would represent a 37 percent increase, he said.
The 2004 number was up 30 percent from the previous year of 2,245 drilling permits, Macke said.
The state's all-time record high occurred in 1981 with 2,378 permits, he noted.
"The Piceance Basin is the most rapidly developing area in the state right now," he said. "Garfield County has 32 percent of the total permits year-to-date."
Meanwhile, Weld County, home of the Wattenberg Field, has 24 percent of the permits.
"That's a total shift from prior years. Historically, Weld County had a third and Garfield County had a fourth. But there's still a lot of interest in Wattenberg Field. It's just the sheer amount of interest in the Piceance Basin that had created the shift," he said.
Macke also noted that there has been a sharp increase and interest in the shallow Niobrara formation in northeast Colorado's Yuma County.
"There have been 350 permits for that already year-to-date," he said. "Last year, the whole total was 237. It's a very sharp increase.
Most of the new interest in drilling in Colorado is in gas reserves. "The production of gas has been about 83 percent of the total production value of oil and gas in the state," he said.
"But we're also seeing more interest in exploring for and developing oil because of high oil prices," he said.
Macke noted that Colorado's neighbor to the north, Wyoming, also is quite active lately. According to a Baker Hughes 2005 rig count through late June, Wyoming's average number of drilling rigs was 72.
New Mexico came in at 76.3; Colorado, 68.5; Utah, 28, and Montana, 24.
In the same period a year ago, Colorado's average rig count was 49.