Oil and gas production in Texas has risen to near-record levels thanks to higher-than-anticipated crude prices and gas production that are, at least partially, a product of increased global instability and geopolitical turmoil.
In fact, a new report from the Texas Alliance of Energy Producers says that Texas’ oil production is on track to top the all-time record set in 1972. This is a mark many once believed to be as unassailable as the most “unreachable” record in all of sports: basketball legend Wilt Chamberlain’s 100-point single game NBA scoring record set 10 years earlier in 1962.
Previously unrecognized or discounted political instability, war and other geopolitical concerns in the Iraq, Iran, Syria, Israel, Afghanistan, Pakistan, China, North Korea, Vietnam, Ukraine, Russia and parts of both Africa and South America are all now viewed as having significant potential to disrupt global oil supplies. As a result, oil prices have risen above $100 and remained there in recent months. That, in turn, further has energized production work in Texas’ oil fields, which were already on a five-year growth binge driven by technical breakthroughs in drilling techniques.
Previous Energy Forecast Now Doubtful
Karr Ingraham, the Texas Alliance of Energy Partners economist who, only a couple of years ago, was forecasting a slow decline in Texas energy production in the face of declining prices, now believes the exact opposite. In presenting his new analysis of Texas energy production prospects at Houston’s Petroleum club, Ingraham said that a “fairly dramatic set of circumstances” would now be required to prevent Texas oil and gas products from topping their 1972 production record by 2016.
And the state easily could blow far past 42-year-old oil and gas production record in an even shorter time frame if the United States, in response to the growing global turmoil, were to raise or eliminate the restrictions on the exportation of crude and/or liquefied natural gas, Ingraham said. Neither Congress nor the Administration is actively debating a definitive proposal to lift those restrictions, but there are growing suggestions that what effectively is a Ukrainian civil war could change that.
European Turmoil Threatens Gas Supply, Offers U.S. Opportunity
Currently Europe depends heavily on Russian natural gas that flows via Ukranian-based pipelines, but Russia’s annexation of Crimea from Ukraine earlier this year has threatened this agreement. Russia is supporting and supplying Ukrainian rebels who want to separate Eastern Ukraine from the rest of the country and, presumably, merge with Russia. That places Europe’s access to Russian gas and oil under increasing threat. Should European nations turn up the political and economic pressure on Russia over its involvement in the Ukrainian civil war, they risk having their access to Russian gas and oil reduced or cut off. That risk could be offset, at least partially, by significant new access to exported American crude and LNG.
The Texas Petro Index, developed by Ingraham to measure oil and gas industry job numbers, rig counts and production totals in a two-decade long historical context, has risen to 308. That’s an all-time record for the TPI. Growth has “returned with a vengeance” this year, Ingraham said.
There are now 891 active oil and gas rigs operating in Texas, up 6 percent from a year earlier. Total oil and gas employment at Texas now stands at 297,800 full-time equivalent jobs – a number that excludes contract workers not paid directly by oil and gas companies. That exclusion exists because the Texas Workforce Commission, which produces the jobs numbers the TPI uses, does not count such contractors in its oil and gas workers category.
Most of that growth is occurring in the oil sector. About 92 percent of the active rigs in Texas are seeking oil, largely because low prices for natural gas make drilling for oil far more profitable. Still, gas production has risen some in the last year, largely as a byproduct of the increased oil drilling activity. Gas well completions dropped by 22 percent from the year-earlier period, to just 316, but oil drillers now almost universally seek to capture “casinghead gas” released as byproduct of oil drilling operations.
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