US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War
From Saturday’s WSJ:
U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859, and is set to surge even more in 2013. Daily crude output averaged 6.4 million barrels a day last year, up a record 779,000 barrels a day from 2011 and hitting a 15-year high, according to the American Petroleum Institute (API), a trade group. It is the biggest annual jump in production since Edwin Drake drilled the first commercial oil well in Titusville, Pa., two years before the Civil War began (see chart above).
The U.S. Energy Information Administration predicts 2013 will be an even bigger year, with average daily production expected to jump by 900,000 barrels a day. The surge comes thanks to a relatively recent combination of technologies—horizontal drilling and hydraulic fracturing, or fracking, which involves pumping water, chemicals and sand at high pressures to break apart underground rock formations.
Together, they have unlocked deposits of oil and gas trapped in formations previously thought to be unreachable.
That has meant a resurgence of activity in well-established oil regions, such as West Texas’s Permian basin, as well as huge expansions in areas that had been lightly tapped in the past, such as North Dakota’s Bakken shale region. The Bakken has gone from producing just 125,000 barrels of oil a day five years ago to nearly 750,000 barrels a day today.
The benefits of the surge in domestic energy production include improving employment in some regions and a rebound in U.S.-based manufacturing.
MP: Actually, the API’s estimate of a 779,000 barrel per day (bpd) increase in domestic oil last year is pretty conservative compared to year-end comparisons of EIA data for weekly US oil production. Compared to oil output at the end of 2011 (5.846 million bpd), US oil production increased by 1.139 million bpd last year to almost 7 million bpd during the last week of December 2012. Alternatively, using the EIA’s four-week production averages show an increase of 1.063 million bpd from December of 2011 to December 2012. The reason that the yearend comparison shows a much higher annual increase in US oil production (about 1 million bpd vs. 779,000 bpd) is that domestic oil production accelerated during the second of last year – crude oil output increased 14.6% during the second half of 2012 compared to the 4.2% increase during the first six months.
The record increase in oil output last year reminds us the US oil and gas industry continues to be at the forefront of the otherwise sub-par economic recovery, and without that sector’s strong growth in output and jobs, the economy’s sub-par performance would be even more lackluster. The 1 million bpd increase in domestic oil production last year has delivered a powerful energy-based economic stimulus to the economy, creating thousands of new direct, shovel-ready jobs in oil and gas activities, and igniting many spinoff business and indirect jobs throughout the oil and gas supply chain like the “oil-by-rail shipping boom.” The future of the US economy over the next few years looks a lot brighter because of America’s surging domestic energy production.
- US oil production grew more in 2012 than in any year in the history of the domestic oil industry back to the Civil War (aei-ideas.org)
- Energy facts of the week: oil production highest since 1994, oil imports lowest since 1992, and oil jobs highest since 1988 (aei-ideas.org)
- Eagle Ford Shale helps boost U.S. oil production to 15-year high (transwestern-sa.typepad.com)
- Oil Industry Beats Buffett in Railroad Investments Surge: Energy (bloomberg.com)
Deep Down, Inc., an oilfield services company specializing in complex deepwater and ultra-deepwater oil production distribution system support services has been successful in its proposal to a major international umbilical manufacturer for the manufacture, installation and commissioning of a portable umbilical carousel.
The project has an estimated value of $4 million in revenue to Deep Down and is scheduled for delivery in the second quarter of 2013, with procurement of long lead items commencing this month.
Ron Smith, Chief Executive Officer of Deep Down, Inc. stated, “We are delighted with this opportunity. We currently have outstanding quotes in excess of $30 million for our carousel design and this project further recognizes that we are a leading provider of innovative umbilical solutions to the oil and gas industry.”
- Houston, Texas: Deep Down Receives Multiple Services Contracts (mb50.wordpress.com)
Falling oil prices halted a 30-month growth spurt in Texas’ oil and gas industry boom in June, a new industry report shows.
The Texas Petro Index, which has measured job numbers, rig activity, production totals, wells completed and other related figures across nearly two decades, dropped for the first time since a rush to draw oil from shale caused a surge of drilling in Texas.
The index fell to 270.4 in June from its recent peak in May of 271.5, which was the highest since rapid industry growth pushed it to a record 287.8 in October 2008.
A trend of declining oil prices added to already low natural gas prices to push the Petro Index down, said Karr Ingham, an economist for the Texas Alliance of Energy Producers, which released the study Tuesday.
He said the number of active oil and gas rigs in Texas has fallen further in recent weeks to 900, the lowest level since September 2011, as companies have reassessed expensive operations that are no longer yielding high returns.
Not coincidentally, he said, oil prices have fallen from near $100 in early 2012 to about $79.08 in June. Benchmark crude lost $1.72 Tuesday to end the day at $88.06 per barrel.
Companies may have grown more cautious about aggressive drilling operations, but the leveling off doesn’t necessarily mean a bust is on the horizon, said Michelle Michot Foss, chief energy economist for the University of Texas Center for Energy Economics.
“They’re trying to get a feel for what the price trajectory could be and it’s affecting decisions,” Foss said. But, she added, “I think you would need a much, much more substantial fall in prices to see a really serious drop in activity.”
Texas employment in the fossil-fuel exploration and production industry hit a record of 251,600 in June, Ingham said. But he noted some indicators that point to possible contraction ahead. Texas crude oil production is at its highest level since 1999, but the weakening world economy is pushing demand down, he said.
That has left resource prices languishing.
The recent 30-month rise in the Texas Petro Index was almost exclusively fueled by oil drilling because low prices have curtailed natural gas production relative to its levels in previous expansions.
The monthly average value of Texas oil and gas production exceeded $9 billion in 2008 but has been around $6 billion during the most recent peak in the index, Ingham said.
During the current shale-driven boom, however, employment has soared well above levels in October 2008, he said.
If declining prices bring about a further reduction in drilling activity, Ingham said, “employment will ultimately be affected and there’s of course no way it could not be.”
Turmoil in Europe and a weakening domestic economy have also affected the industry by depressing oil prices, Ingham said.
“All of these terrible things happened in the second quarter and sort of threw a little bit of rain into our parade,” he said.
But Texas oil prices and drilling activity may not be as influenced by broad economic trends as they may have been by recent pipeline developments, said Ed Hirs, a professor of energy economics at the University of Houston.
A recent increase of pipeline capacity bringing oil to the U.S. Gulf Coast may also be pushing prices down, he said.
“Right now you’ve got more domestic supply coming online than the country is accustomed to handling,” Hirs said.
The alliance’s index dates to 1995, when the index was set at a base level of 100.
- Texas oil, gas producers on the cusp of a slowdown? (fuelfix.com)
- Government departments told to prepare for budget revamp if oil prices stay low (calgaryherald.com)
- Drilling activity trending down (mysanantonio.com)
- Eagle Ford a contender for top U.S. play (mb50.wordpress.com)