STORY COURTESY PIPELINE JOURNAL (COMMENTARY)
In Texas, oil and natural gas are synonymous with boom and bust. A new field or a new technology brings a drilling rush and spectacular wealth. Then, just when nearly everyone has borrowed to the max, the bottom falls out.
Not this time, says John Auers, an oil analyst with Turner, Mason & Co. engineering consultants in Dallas.
“This is a more sustainable and potentially longer-lasting boom,â€ he said. “The early â€™80s were great times, but they became bad pretty fast. I donâ€™t think thatâ€™s going to happen going forward.â€
The men and women pushing double and triple the former amount of oil out of underground Texas in the last few years try not to call it a boom, because booms go bust.
But itâ€™s hard to find a better word for it.
In 2009, Texas oil production averaged less than 1.1 million barrels a day, according to the U.S. Energy Information Administration. Last year, production averaged 2.6 million barrels a day. In December, it was nearly 2.9 million barrels a day. The state produced $110 billion worth of oil and natural gas for the year.
The Texas Railroad Commission, which regulates the oil and gas industry, uses a more conservative set of production numbers than the federal government. But Chairman Barry Smitherman says the state is on the road to producing 5 million barrels a day before 2023.
The all-time peak for the state came in 1972, when production averaged 3.4 million barrels a day.
So how is this time different?
First off, because many people in the industry think Smitherman is right. Pioneer Natural Resources of Irving says it is sitting on one of the worldâ€™s largest oil reservoirs in the West Texas Permian Basin.
Auers agrees. “The Permian is really the monster of all of them, and theyâ€™re really just getting going,â€ he said.
The Eagle Ford basin, running from Laredo to Corpus Christi, produced hardly any oil in 2009. Now, by federal estimates, itâ€™s producing more than 1.3 million barrels a day. Producers say these are early days at these oil plays. Drillers have dramatically improved the efficiency of their wells as they learn more about the best way to use fracking and horizontal drilling.
Another reason this time might be different is that Texas is seeing large capital investments from conservative industrialists, who are betting more than $75 billion on energy abundance. Steel, plastics and petrochemical plants are going up along the Gulf Coast.
Some of these investments are in Corpus Christi, where memories of hard times run deep.
Chinaâ€™s Tianjin Pipe Co. expects to begin production from a $1 billion mill near Corpus Christi later this year. Nearby, Voestalpine, Austriaâ€™s largest steelmaker, is planning a $700 million iron ore processing plant.
Cheniere Energy is building a $10 billion liquefied natural gas plant to export Texas gas to Asia. Planning is underway to raise the cityâ€™s Harbor Bridge from 135 feet to 208 feet by 2017 to accommodate larger vessels.
The Eagle Ford is “definitely a big game changer for South Texas,â€ said Jim Lee, an economist at Texas A&M-Corpus Christi.
“Itâ€™s never better here,â€ he said. “The housing market has never been this strong. Construction, both industrial and residential, has never been this strong. Weâ€™re just trying to cope with the growth down here.â€
Many still question the consequences of new drilling technologies on the environment. And a price collapse could push all of this off the tracks.
But â€” maybe? â€” this time is different.