Energy Industry in Texas Riding High Again
Aug. 9–Not since the 1980s have so many rigs been drilling into Texas soil.
The health of the Lone Star State’s energy industry can be gauged by the number of rigs operating both onshore and in offshore state-controlled waters. For the month of June, Texas averaged 609 rigs.
It is the first time Texas actually broke past the 600-rig mark since the energy bust wiped out much of the state’s industry 20 years ago, said Karr Ingham, a petroleum economist for the Texas Alliance of Energy Producers.
According to the alliance — which issues an annual petroleum index that factors in rig counts, employment rates and oil and gas prices to measure how robust the energy business is — Texas energy companies are faring better today than they have in the past 10 years with a score of 179.
The alliance, a trade group made up of independent oil and gas producers, says at this time last year, the petroleum index was 150.
The index hit a low of 84 in 1999 when the state’s energy industry had to absorb the effects of low oil prices, which had slumped to $8.65 per barrel in December 1998.
Now that oil and gas prices are riding high — 43 percent and 53 percent in the last year, respectively — Texas has rebounded.
So far this year, the state has produced $8.4 billion worth of oil, up 41 percent, and $17.6 billion worth of natural gas, up 9 percent.
High commodity prices are leading to the staggering sales numbers and pushing Texas oil and gas companies to operate at a fevered pace to produce all they can, Ingham said. Even so, the overall amount of oil and gas pumped from the ground is in decline because Texas fields are so mature.
Despite those declining production levels, Ingham says Texas remains vital to meeting U.S. energy demands.
“We are an energy-hungry and energy-dependent country. Regardless of where we’re headed in the future, today this economy is still based on oil and gas,” he said. “But it’s not just our nation any more. The whole world is being driven by it.”
Ingham said for all the talk of financial discipline within energy companies, big and small, many want to put more money into drilling today.
The only reasons small- to mid-sized operators aren’t doing more exploratory work are that equipment is getting so expensive and there is a shortage of rigs.
“We’d like to pretend we’ve all learned our lessons from the 1980s but, frankly, I don’t think we’re all that smart,” Ingham said.
Also, the index reports some conflicting trends.
For example, in the first six months of the year, employees involved in extracting oil and gas dropped by half a percent, but support staff for the energy business grew by 6 percent.
In commenting on the new energy bill, signed by President Bush on Monday, Alex Mills, president of the alliance, said that although the trade group represents oil and gas companies, it favors all kinds of domestic energy production.
“That would include nuclear, coal … even wind and solar,” he said. “This group was founded 75 years ago. I’ve gone back into meeting minutes and … from the beginning, this group has been concerned about the effects of imported oil.”
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