Falling Price Of Oil Affecting Kansas' Economy

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Oil and gas exploration is second only to agriculture in Kansas, and could be heading for a drop off.

While the dramatic price drop in oil is helping the consumers, it's causing drillers to rethink next year's drilling plans.

"Many of the projects people are exploring for will require a higher price than we have right now to justify drilling over the life of the project," said Dave Dayvault, Kansas Independent Oil & Gas Association Chairman.

In addition to being the chairman for the Kansas Independent Oil & Gas Association, Dayvault is the chief financial officer for Abercrombie Companies, an oil and gas exploration company in Wichita.

He points out that Kansas oil producers get about $10.50 less per barrel than th day's closing price on the New York Mercantile Exchange (NYMEX).

He also says that 10-15% of Kansas oil wells only produce one or two barrels of oil per day. With the drop in oil, some producers will consider capping some of those oil wells.

So, what about oil exploration in Kansas since the drop in price?

In August, the number of rigs in operation was 115. Last week, there were 116 rigs in operation. Although Kansas has not seen a drop off yet, there is evidence one could happen after the new year.

"What we hear is that most people are continuing with the programs that they set up for 2008. But they expect to curtail their exploration activity significantly in 2009," Dayvault said.

The most likely outcome will be fewer people working in the state's oil patch, lower taxes coming into state coffers, and less oil being found for future demand.


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