Our Blog

Energy Industry in Texas | Russell T. Rudy Energy LLC

The recent North American Prospect Expo featured a panel discussion with several energy experts offering their views on national energy issues.  “Rigzone” has a lengthy article on the panel’s remarks, but I found the comments relating to Texas especially interesting.  Two of the members of the panel, Christi Craddick, a Texas Railroad Commissioner, and David Blackmon, managing director of FTI Consulting, both offered their insights on the state of the industry in Texas.

Craddick indicated that at the end of 2013, there were 829 rigs running in Texas and the state was producing 1.8 million barrels per day of oil (bopd) and 21 billion cubic feet of natural gas (bcfd).  About 30,000 drilling permits were issued during the year statewide.

While the Barnett Shale in North Texas was once a driving force in industry activity, only 320 drilling permits were issued for this area in 2013 and gas production was around 5 bcfd.  Little growth is expected in the Barnett until the price of natural gas shows a sustainable increase.

On the other hand, the Eagle Ford Shale in South Texas has seen enormous growth recently with 229 rigs running at year end 2013.  4,100 drilling permits were issued throughout the year for the Eagle Ford.  Consequently, this area was producing over 650,000 bopd and 3 bcfd.

However, the real driver of energy industry growth in Texas is the Permian Basin.  With 10-14 plays, as opposed to 1 in the Eagle Ford, the importance of West Texas is obvious.  Half the rigs running in Texas are in the Permian Basin, and Texas accounts for half the U.S. rig total.  Consequently, nearly one quarter of all the rigs in the U.S. are in the Permian Basin.

Blackmon agreed with Craddick that great things are happening in the Texas oil patch.  He pointed out that in mid-2009 Texas accounted for 20% of U.S. oil production, but now produces 36% of the nation’s total.  If Texas were a nation, it would be the 9’th largest oil producer, and 3’rd largest natural gas producer in the world.  Blackmon indicated that “The oil and gas industry, through taxes, has turned severe budget shortfalls that were exacerbated by the recession into a budget surplus of $3 billion.”

In spite of recent industry successes, there are challenges from the political left and environmentalists.  While this is true nationwide, it is especially relevant here in Texas where drought and water shortages are commonplace.  Fracking requires large quantities of this scarce resource, and it is has to be disposed of once it has been used.  Hopefully new technology will enable operators to frack with brackish (vs. fresh) water.  However, the long term seismic implications of injecting used fracking fluids into disposal wells are not known.  Consequently, the Railroad Commission is hiring an expert to study this further.

To read the article in its entirety, please go to www.rigzone.com/news/article_pf.asp?a_id=131671.

February 19, 2014 | Oil and Gas, oil and gas royalties