Texas oil production rose by almost 100 million barrels in 2012 over the previous year, to the highest level in two decades. It was the fifth consecutive year with an increase.
Despite a drop in oil prices last spring, economist Karr Ingham predicts production will rise again in 2013.
Ingham offered a look at the state’s energy industry Monday as he presented the Texas Petro Index, the snapshot he developed to track trends for the Texas Alliance of Energy Producers almost 10 years ago.
The 3,300-member alliance receives monthly updates from Ingham, covering rig counts, drilling permits, well completions, industry employment and other factors.
Townes Pressler, chairman of the alliance, suggested the numbers portend the future for energy-producing
regions across the country.
“The plays are huge,” he said. “The Marcellus. The Bakken. Texas will never be the same, at least South Texas, after the Eagle Ford.”
But they also represent the shifting fortunes that anyone who has spent time in the oil and gas business learns to deal with.
For 2012, Texas producers delivered an estimated 604 million barrels of crude oil, up from 509 million barrels in 2011. That compares with 613 million barrels produced in 1992. But oil production had slid to 391 million barrels in 2007, as drillers shifted to natural gas to take advantage of rising gas prices.
Those rising prices didn’t last. Natural gas prices ended 2012 at $2.73 per thousand cubic feet, down 31.5 percent from the previous year and down dramatically from just a few years earlier. Natural gas prices ended trading Monday at $3.29. Natural gas production dropped by 7 percent in 2012, and Ingham speculated prices would have to rise to $5 per thousand cubic feet to lure drillers back.
Kenneth Floyd, a partner at the East Texas-based natural-gas firm AC Exploration, agreed. He said it’s been hard for small companies like his to shift to natural gas liquids, a strategy pursued by many gas drillers stung by low gas prices. Predicting the future is more complicated than reporting the past, but Ingham gave it a try.
Crude oil prices peaked in March 2012 at about $103 a barrel, and Ingham said he expects prices to remain $85 to $90 a barrel for the next year. They were up slightly Monday, as benchmark oil rose 56 cents to $96.44 on the New York Mercantile Exchange. “I hope we see a continuation of what we’re seeing now,” Ingham said. “A stabilization of rig counts. Stable but high levels of employment.” His figures show employment in the oil and gas production, drilling and service sectors rose 10 percent between 2011 and 2012, to 248,642. Employment in the oil and gas extraction sector was up 15 percent, to 102,258.
Still, Ingham said, “there are a few cracks beginning to show.”While employment in the extraction sector is still rising, employment in the other sectors is starting to slip, he said. Overall, Ingham said, the outlook forTexas’ oil industry remains strong.
“There’s little doubt we’re seeing a crude oil renaissance,” he said. “Every consumer in the state and the country and the planet ought to be happy about that.”