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On the road in Texas, where oil is king again

The increase in US oil and gas production buys some time in terms of resource scarcity and depletion concerns, Warren writes. The windfall also brings with it time to wisely reflect about what America’s energy landscape should look like for the generations that follow.

By Jennifer WarrenGuest blogger / July 26, 2013

A drilling rig is shown near Kennedy, Texas. Texas’ oil production represents about 25 percent of US oil production, according to the Texas Railroad Commission.

Eric Gay/AP/File

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Jaunt Through West Texas Reveals Oil’s Revival

It was a 102 degree-hot, mid-July, typical summer day travelling on the road to West Texas; a nine-hour, high-speed journey made with numerous gasoline pit stops. Passing by Midland-Odessa, the commercial hub of the Permian Basin, was a stretch of energy mecca some 20 miles or more, filled to the brim on either side with oilfield services firms — transmission gear, pump equipment, fracking services, and other oil and gas-related businesses. Pumpjacks, also known as nodding donkeys, scattered across swathes of the expansive oilfields. Signs with “Home for Your Workforce” in Pecos and Odessa cropped up a couple of times. Workers, and their firms, are settling in for a boom which could last for many years to come, like the second boomlet in the 1970s and early ’80s that followed the Middle East oil crisis. Bust followed boom in Texas to the mid-1990s.

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The Mega-Basin

The scale of energy production in the Permian Basin looks mammoth. The Permian Basin produced more than 270 million barrels of oil in 2010, over 280 million barrels in 2011, and 312 million in 2012. In percentages, production increased 10% in 2011 and 35% in 2012. Texas’ oil production represents about 25% of the U.S. oil production, with the Permian housing 57% of Texas’ oil production, according to the Texas Railroad Commission.

Where there are higher prices or margins possible to justify accessible resources, production will follow. The ability to recover more oil, thanks to technological advances, which include multi-stage hydraulic fracturing, horizontal drilling and carbon dioxide injection, has reversed the declining U.S. production trend of 20-years prior. 

All of the large oil services firms had presences along the Midland-Odessa stretch — Halliburton, Schlumberger, Baker Hughes, and other specialist services firms like Weatherford and Key Energy Services. Don’t forget about storage, distribution and refining, courtesy of publicly-traded, master limited partnership Plains All American Pipeline and Alon Partners’ Big Spring refinery, naming just the most visible energy landmarks captured while driving 75-80 miles per hour. In 2003, roughly 3,000 new permits were issued for drilling; in 2012 there were over 9,000 issued. That’s a 300% increase in new permits issued over the decade.

Crude oil is one of the most active, vital, globally traded commodities in existence. The global energy supply chain for crude oil — its exploration, exploitation, and distribution— is one of the most complex webs of commerce. The U.S.’s revitalized production capabilities will allay some pressure from foreign imports; Nigerian and Algerian light, sweet crude imports to the U.S. have declined because of recent U.S. production. Liquified natural gas imports have trickled downward significantly owing to natural gas production gains from shale gas, from a 2007 high of 770,812 million cubic feet (mmcf) to 175,000 mmcf in 2012. The first half of 2013 looks poised for more reductions.

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