Energy economist Karr Ingham called the rebound in late 2011 and early 2012 of the price of a barrel of crude oil “a movement of prices” not “a price spike.” He told the Midland Reporter-Telegram, “It is a movement of prices, particularly oil, to a new plateau.”
Ingham said the monthly average rig count for the three districts of the Texas Railroad Commission in West Texas averaged 350 for the first 11 months of 2011—up 50.9 percent from 232 for the same period in 2011.
“These are clearly historic times for the region in oil and gas exploration and production activity,” he said, “made entirely possible by the advancement of technology and price, which makes it affordable and economic to employ that technology.
“The new normal is $70, $80, or $90 oil,” he continued.
Scott Milliren, president of MD Cowan, Inc., an Odessa-based rig manufacturer, added, “It will put more of a strain on the existing rig fleet if natural gas kicks in.”
Based on information it received, the Eagle Ford Task Force said the Carrizo Wilcox Aquifer in South Texas appears to contain enough water resources to support oil and gas drilling activities, including hydraulic fracturing, in the Eagle Ford Shale while meeting all other projected uses.
“Our task force has found water sourcing in South Texas is currently not an issue,” Texas Railroad Commissioner David Porter, who appointed the task force, said. “We will continue to study best practices for water management in the region to help mitigate any future issues.”
Data presented to the 26-member group indicated that drilling and completions in the Eagle Ford Shale account for approximately 6 percent of the water demand in South Texas, while irrigation accounts for 64 percent and municipal uses account for 17 percent. The industry reportedly has reduced the amount of water it uses to hydraulically fracture wells to an average of about 11 acre-feet of water from about 15 acre-feet.
Industry experts told the task force that about 2,600 to 2,800 new wells are expected to be completed annually in the Eagle Ford Shale at peak demand.
Task force member Mike Mahoney of Evergreen Underground Water Conservation District said, “We have seen water levels drop this past year due to the drought, which has caused everyone to pump more groundwater. However, we do not see groundwater pumping for oil and gas drilling and completions as a significant contribution to the decline in water levels, when compared to overall pumping.”
The 2012 Annual Energy Outlook from the U.S. Energy Information Administration shows that natural gas and renewables are gaining an increasing share of U.S. electric power generation, production of domestic crude oil and natural gas is growing, reliance on imported oil is decreasing, U.S. natural gas production is exceeding consumption, and energy-related carbon dioxide emissions are remaining below their 2005 level through 2035.
The EIA’s acting administrator, Howard Gruenspecht, said the findings “reflect increased energy efficiency throughout the economy, updated assessments of energy technologies and domestic energy resources, the influence of evolving consumer preferences, and projected slow economic growth.”
Key findings include:
Domestic crude oil production is expected to grow by more than 20 percent over the coming decade. Domestic crude oil production increased from 5.1 million barrels per day in 2007 to 5.5 million barrels per day in 2010.
With modest economic growth, increased efficiency, growing domestic production, and continued adoption of nonpetroleum liquids, net petroleum imports make up a smaller share of total liquids consumption. U.S. dependence on imported petroleum liquids declines primarily as a result of growth in domestic oil production of more than 1 million barrels per day by 2020, an increase in biofuel use of more than 1 million barrels per day crude oil equivalent by 2024, and modest growth in transportation sector demand through 2035. Net petroleum imports as a share of total U.S. liquid fuels consumed drop from 49 percent in 2010 to 38 percent in 2020 and 36 percent in 2035.
U.S. production of natural gas is expected to exceed consumption early in the next decade. The U.S. is projected to become a net exporter of liquefied natural gas in 2016, a net pipeline exporter in 2025, and an overall net exporter of natural gas in 2021.
Concho Resources, Inc., said it is acquiring producing and non-producing assets in the Wolfberry trend in the Permian Basin from Petroleum Development Corp. for $175 million. The purchase, expected to close in 2012’s first quarter, will increase Concho’s net acreage in the Wolfberry by 20 percent by adding about 10,200 net acres in Andrews, Ector, and Midland counties.
Price Moncrief of Concho told the Midland Reporter-Telegram, “We felt like this package folded in nicely with our existing portfolio.” The newspaper said that with the addition of this “mostly-oil field,” Concho plans to increase its 2012 capital budget to $1.37 billion from $1.3 billion and add two rigs in 2012 and another in 2013.
According to the Graham Leader, North Central Texas College is moving much of its associates degree and certification program in oil and gas production from Bowie to Graham.
Steve Burnett, director of these educational programs for NCTC, told the newspaper, “We’re filling a need that the industry has told us they have. They’re looking for educated and motivated employees, and we give them the skill to work in the industry.”
FROM THE RAILROAD COMMISSION OF TEXAS
The Texas average rig count as of Jan. 20, 2012, was 918, representing about 47 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 385 million barrels of oil and 7.1 trillion cubic feet of natural gas. The commission’s estimated final production for November 2011 is 32,846,052 barrels of crude oil and 494,232,858 Mcf (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary November 2011 production totals of 29,900,821 barrels of crude oil and 444,414,044 Mcf of gas well gas by a production adjustment factor of 1.0985 for crude oil and 1.1121 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the RRC for December 2011 was 415,347,128 Mcf compared to 412,041,298 Mcf in December 2010. The January 2012 gas storage estimate is 406,152,651 Mcf.
The commission’s Oil and Gas Division set initial February 2012 natural gas production allowables for prorated fields in the state to meet market demand of 10,145,965 Mcf (thousand cubic feet). In setting the initial February 2012 allowables, the commission used historical production figures from previous months and producers’ demand forecasts for the coming month, then adjusted the figures based on well capability. These initial allowables will be adjusted after actual production for February 2012 is reported.
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
The EIA expects the price of West Texas Intermediate (WTI) crude oil to average about $100 per barrel in 2012, almost $6 per barrel higher than the average price last year. Based on recent futures and options data, the market believes there is about a 1-in-15 chance that the average WTI price in June 2012 will exceed $125 per barrel and about a 1-in-50 chance that it would exceed $140 per barrel.
For 2013, EIA expects WTI prices to continue to rise, reaching $106 per barrel in the fourth quarter of next year. EIA’s forecast assumes that U.S. real gross domestic product (GDP) grows by 2.0 percent in 2012 and 2.4 percent in 2013, while world real GDP (weighted by oil consumption) grows by 2.9 percent in 2012 and 3.7 percent in 2013.
This is the third consecutive month in which the forecast of average household expenditures for heating fuels has been lowered because of the continuing unusually warm weather for most of the U.S. Average household heating oil expenditures are now expected to increase by only 1 percent this winter heating season (Oct. 1 to March 31) compared with last winter. Natural gas (by 11 percent) and propane (by 5 percent) expenditures are projected to decline, and electricity expenditures are 4 percent lower than last winter’s levels.
EIA expects regular‐grade motor gasoline retail prices to average $3.55 per gallon in 2012, compared with $3.53 cents per gallon last year, and then average $3.59 per gallon in 2013. During the April through September peak driving season each year, prices are forecast to average about 7 cents per gallon higher than the annual average. Recent options and futures price data imply that the market believes that there is about a 1-in-4 chance that the U.S. average pump price of regular gasoline could exceed $4 in June of this year.
Natural gas working inventories continue to set new record seasonal highs and ended January 2012 at an estimated 2.86 trillion cubic feet (Tcf), about 24 percent above the same time last year. EIA’s average 2012 Henry Hub natural gas spot price forecast is $3.35 per million British thermal units (MMBtu), a decline of about $0.65 per MMBtu from the 2011 average spot price. EIA expects that Henry Hub spot prices will average $4.07 per MMBtu in 2013.
Compiled by Garner Roberts