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(Kim Raff | The Salt Lake Tribune) Ralph Walker, an oil truck driver for Flying J, fills up his truck with oil from an oil pumping station in Newfield Exploration Company's oil fields in Monument Butte near Roosevelt, Utah on August 9, 2012.
Giant operation in Utah gives rise to oil boom, though challenges loom.

Energy » Newfield Exploration producing lots of crude amid hurdles

First Published Aug 18 2012 09:33 pm • Last Updated Nov 30 2012 11:32 pm

Myton • The center of Utah’s latest crude oil boom is a tiny hamlet in eastern Utah, built more than a century ago near the only bridge that crossed the Duchesne River.

It is here in Myton (pop. 659), on the outskirts of Roosevelt, that the largest oil-producing company working in the state is developing 230,000 acres of fields — nearly one-third the size of Rhode Island.

At a glance

Unita Basin: Newfield Exploration Co.

Ranking » Largest oil producer in Utah by twice over second- and third-ranked companies combined

Platforms » Running three rigs in Monument Butte, four in nearby Central Basin in eastern Utah

Producing wells » More than 1,800 in Monument Butte; exploratory work in newly acquired Central Basin

Firm » Based in Texas, with operations in Rocky Mountains, mid-continent, Texas, Gulf of Mexico, Malaysia, China

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Newfield Exploration Co., an independent energy company based in The Woodlands, Texas, has invested more than $1.7 billion in its Utah holdings, producing a low-sulfur oil the consistency of boot polish. In Salt Lake City, 175 miles to the west, three of the state’s five refineries are planning upgrades or expansions to process more of this Utah crude —most of it supplied by Newfield.

The crude is so thick that it must be heated to get it out of the well bore. Each day, about 100 insulated tanker trucks pump the oil from Newfield’s surface tanks at wells dotting gravel roads that wind their way through flatlands, canyons and majestic buttes.

The company supplies nearly 30 percent of Utah crude — twice the amount produced by second-and third-ranking Resolute Natural Resources and El Paso E&P combined. In all, about 75 percent of the state’s crude is coming out of the Uinta Basin — and that total is expected to increase, given the number of new wells, said John Rogers, an associate director with the Utah Division of Oil Gas & Mining.

The boom created by all this activity is generating two distinct feelings in the region — one, that this aura of oil prosperity may actually endure for a few years, and, the other, that amid this time of plenty there are more than a few challenges to worry about.

"I’ve seen five or six booms and busts," said Ken Bassett, the city manager of nearby Vernal, a 35-year veteran of local government. "But this time, I believe the boom will be consistent — without a bust."

Of course, with the good almost always comes some bad, including the fact that despite all the development generated by Newfield and others, infrastructure in the oil-rich Uinta Basin is minimal at best. Day and night, oil tanker trucks rumble along U.S. Highway 40, speeding the high-maintenance crude to Salt Lake’s refinery row, adding to environmental concerns associated with the rise in production. Hotel rooms in the region typically are booked two to four weeks in advance.

The largest municipality is Vernal, 40 miles to the east of Newfield’s Myton headquarters. But even that hardscrabble town has no major rail line, and its population has yet to break past 10,000 souls.

"I can see crude oil production increase tenfold over the next five years, but the question is what do we do with it?" said state Sen. Kevin Van Tassell, R-Vernal. "We can continue to add congestion on the highways, but in the long run this is not sustainable."

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For now, the drilling goes on.

Full bore • Newfield is running three rigs in the shallow Green River formation on its Greater Monument Butte holdings with nearly 1,800 productive wells pumping about 25,000 barrels of oil per day. Each rig can drill 45 wells to 90 wells per year.

Monument Butte, comprising 80,000 acres, is known as a water-flooded secondary recovery area, referring to a common method of extraction in which water is injected back into a reservoir to increase pressure and stimulate production.

Daryll Howard, vice president of Newfield Rocky Mountain Business Unit called Monument Butte "the largest federal secondary-recovery unit in the lower 48 states."

To the north, Newfield also has four rigs in its nearby Central Basin area, acquired last year to target oil in deeper geologic formations. This area, 80,000 acres of private lands and about 60 ,000 acres from deals with the Ute Tribe, is producing 7,500 barrels of oil per day.

"We’re getting encouraging results from horizontal wells," said Steve Campbell, Newfield vice president of investor relations. "A lot of our growth in the next several years will be driven by the Central Basin."

The company estimates that there are 6,000 potential wells on its holdings with 700 million barrels of oil in place.

"It’s very important for America to have more crude production," said Leslie Haines, editor-in-chief for the Houston-based Oil and Gas Investor. "Newfield used to produce mostly natural gas, but like many companies it has had to diversify to have a mixture of both oil and gas. It’s an important asset for Newfield."

In December, Newfield signed a seven-year deal to provide 18,000 barrels of oil a day to Tesoro’s Salt Lake refinery, which plans to double its current capacity within the next two years. The next month, Newfield inked a 10-year contract with HollyFrontier Corp. to supply 20,000 barrels a day. HollyFrontier plans to process 40,000 barrels daily after 2016, up from its capacity of 10,000 barrels a day. In addition, Chevron is updating its refinery to take more Utah crude, but declines to release figures.

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