The oil industry in Kansas is big business. And as the price of a barrel of oil continues to climb it likely will only get bigger. This is a mixed blessing, however, for Kansas oil producers.
According to KIOGA, Voice of the Kansas Independent Petroleum Industry’s November/December 2007 newsletter, the Kansas oil and gas industry is almost a $4.7 billion industry in the state. And it’s growing. The newsletter also stated that more than 5,500 drilling permits were issued in Kansas last year.
Matt Cross, co-owner of Buckeye Corporation, which has headquarters in El Dorado, said it is a good time for the oil industry in Kansas. The Buckeye Corporation sells general oil field supplies and has six stores in Kansas, including one in Madison.
“Of course with increased cash flow in the industry we’re going to see our sales increase,” Cross said. “The activity level probably for the last four years has just continually increased and it’s due to the oil price. When the price of oil rises, our sales will rise.”
Cross said the increase in the Kansas oil business is a state-wide trend.
“Times are good right now,” he said. “I can’t deny that ... We’re in an up cycle right now.”
Cross said he’s seeing the biggest increase in business in Southeast Kansas in coal bed methane.
“We’ve seen a rather large increase in sales in that area due to coal bed methane,” he said.
But, the increase in demand for oil is a double-edge sword. Cross said the increase of business around the state also is driving up costs.
“One thing I have noticed is the cost of everything else has increased,” he said, adding that Buckeye also has a production company. “We’ve seen our cost increase.”
These cost increases include the cost to drill, the cost of servicing and repairing oil wells, the cost of manpower and the cost of fuel.
“ ... The economics haven’t really changed because our lift costs have increased along with everything else,” he said.
LeRoy Thompsen of Lamont said he is paying a lot more for supplies to keep his oil rigs running these days, he said.
“You used to be able to get a pump for under $100,” Thompsen said. “But you can’t get one for (under) $1,000. And that’s just the pump.”
Thompsen, who has been in oil production for nearly six decades, said if prices don’t go down on supplies and parts, some oil wells, especially from smaller operations, could be shut down.
“It’s just kinda the way it is,” he said, adding that he has about 25 oil wells he tends to.
Cross said the increase in costs can prevent some people from getting into the business.
“Sometimes the cost to drill and the cost of completing a well can be so high it will deter somebody from that investment,” he said.
Forrest Cheever, of Cheever Well Service in Madison, agrees.
“About everything has gone up in price,” Cheever said. “Of course the taxes have doubled. It’s quite a deal. It has run our expenses up. Equipment is going up. I know everything has went up and it’s gonna go up again after the first of the year.”
Cheever has been in the oil business since 1959. His company works on oil wells in Kansas.
“That’s all we do,” he said.
Cheever said it’s not just the price of parts that has gone up — it’s also the cost of licenses.
“They went up last year,” he said. “For instance, I have to buy a KCC tag for my truck that I use to do the work. It doubled last year.”