Barry Smitherman, chairman of the Texas Railroad Commission, testified in Washington, D.C., June 6 before the Energy and Commerce Committee of the U.S. House of Representatives about how some federal policies of the U.S. Environmental Protection Agency are “misguided and detrimental” to energy production in Texas.
“Mr. [Al] Armendariz’ agenda was seemingly politically driven and not based in sound science,” Smitherman said. “The scare tactics that he employed against the operators and residents of Texas were factually and scientifically baseless and appeared to merely be an attempt to shut down oil and gas drilling in our state.”
Smitherman reaffirmed his commitment to a full investigation of Region 6 during Armendariz’ tenure as administrator to determine if that office harmed Texas’ economy and energy future. “I hope that EPA begins to listen to and work with state and local regulators who know best the circumstances, the underground geology, and the facts present in those states,” Smitherman added.
Armendariz, who recently resigned as administrator of the EPA south central region, reportedly was scheduled to appear before the committee, but his appearance was cancelled. Samuel Coleman, a native of Shreveport, La., and graduate of Prairie View A&M University, was appointed interim administrator to replace Armendariz.
Smitherman was appointed to the Railroad Commission of Texas in July 2011 and was elected chairman in February 2012.
Strong growth in U.S. crude oil production since the fourth quarter of 2011 is due mainly to higher output from North Dakota, Texas and federal leases in the Gulf of Mexico.Total U.S. production during the first quarter of 2012 topped six million barrels per day (bbl/d) for the first time in 14 years.
After remaining steady between 5.5 million and 5.6 million bbl/d during each of the first three quarters of 2011, the U.S. Energy Information Administration estimates that U.S. average quarterly oil production grew to more than 5.9 million bbl/d during the fourth quarter and then surpassed six million bbl/d during the first quarter of 2012. The last time U.S. quarterly oil production was above six million bbl/d was October-December 1998.
After passing California in December 2011 to become the third largest oil producing state, North Dakota jumped ahead of Alaska in March 2012 as the state with the second largest oil output. Texas remains No. 1.
Total U.S. energy consumption in homes has remained relatively stable for many years as increased energy efficiency has offset the increase in the number and average size of housing units, according to the latest Residential Energy Consumption Survey (RECS).
The average household consumed 90 million British thermal units (Btu) in 2009 based on RECS data. This continues the downward trend in average per-household energy consumption of the last 30 years.
Improvements in efficiency for space heating, air conditioning, and major appliances have led to decreased consumption per household—despite increases in the number of homes, the average size of homes, and the use of electronics. Newer homes tend to feature better insulation and other characteristics, such as double-pane windows.
The average energy expenditure for a New Jersey household was $3,065, more than twice as much as the $1,423 for the average California household due mainly to the higher demand for heating in New Jersey. The average for Texas households is slightly above the national average of $2,024.
Centurion Pipeline, an oil-gathering, common carrier pipeline and storage system with about 2,750 miles of pipelines from southeast New Mexico across the Permian Basin to Cushion, Okla., recently launched three new pipeline projects.
A subsidiary of Occidental Petroleum, Centurion is developing two new 12-inch pipelines serving the Delaware and Permian Basins. The new pipelines will gather crude oil from the Wolfbone, Bone Springs, and Wolfcamp production fields near Pecos and deliver it to Crane, Ector, and Midland for transportation to key markets. In addition, several initiatives are underway to increase Centurion’s transportation capacity and to upgrade its facilities.
Centurion also is building a new 16-inch pipeline system serving the Permian Basin.The system will gather crude oil from the Wolfberry production fields north of Midland and deliver it to Midland for transportation to key markets. This project will provide crude oil producers with alternative transportation from these areas and enable Centurion to connect to other pipeline systems, including the Mesa pipeline, to provide access to key market centers.
Concho Resources Inc., an independent oil and natural gas company, said in May it has entered into a definitive agreement to acquire all the oil and natural gas assets of Three Rivers Operating Company and certain affiliated entities for $1 billion in cash.
Three Rivers is a privately-held exploration and production company with approximately 310,000 gross (200,000 net) acres in the Permian Basin, including large positions in Concho’s core northern Delaware Basin play and the Midland Basin Wolfberry play, in addition to the emerging southern Midland Basin horizontal Wolfcamp and Cline shale plays.
Timothy A. Leach, Concho’s chairman, CEO, and president, said, “Combined with our existing portfolio, these assets give the company nearly 750,000 net acres across the Permian Basin with exposure to some of the most exciting oil plays in the U.S.”
The acquisition is expected to close in July.
FROM THE RAILROAD COMMISSION OF TEXAS
The Texas average rig count as of May 18, 2012, was 934, representing about 49 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 427 million barrels of oil and 7.2 trillion cubic feet of natural gas.
The commission’s estimated final production for March 2012 is 41,912,707 barrels of crude oil and 520,471,756 Mcf (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary March 2012 production totals of 36,649,796 barrels of crude oil and 455,874,359 Mcf of gas well gas by a production adjustment factor of 1.1436 for crude oil and 1.1417 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the RRC for April 2012 was 380,609,453 Mcf compared to 351,611,671 Mcf in April 2011. The May 2012 gas storage estimate is 389,568,577 Mcf.
The RRC Oil and Gas Division set initial June 2012 natural gas production allowables for prorated fields in the state to meet market demand of 10,140,681 Mcf (thousand cubic feet). In setting the initial June 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 June 2012 is reported.
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
West Texas Intermediate (WTI) crude oil spot prices averaged more than $100 per barrel for the first four months of 2012. The WTI spot price then fell from $106 per barrel May 1 to $83 per barrel June 1, reflecting market concerns about world economic and oil demand growth. EIA projects the price of WTI crude oil to average about $95 per barrel over the second half of 2012 and the U.S. refiner acquisition cost of crude (RAC) to average $100 per barrel—both almost $11 per barrel lower than last month’s forecast. EIA expects crude oil prices to remain relatively flat in 2013.
This forecast is based on the assumption that U.S. real gross domestic product (GDP) grows by 2.2 percent this year and 2.4 percent next year, while world oil-consumption-weighted real GDP grows by 3.1 percent in 2012 and 3.5 percent in 2013. The recent economic and financial news that points toward weaker economic outlooks could lead to lower economic growth forecasts and further downward revisions to EIA’s crude oil price forecasts.
EIA has lowered the average regular gasoline retail price forecast for the 2012 April-through-September summer driving season to $3.60 per gallon from $3.79 per gallon last month. EIA expects regular gasoline retail prices, which averaged $3.53 per gallon in 2011, to average $3.56 per gallon in 2012 and $3.51 per gallon in 2013.
EIA expects U.S. total crude oil production to average 6.3 million barrels per day (bbl/d) in 2012, an increase of 0.6 million bbl/d from last year, and the highest level of production since 1997. Projected U.S domestic crude oil production increases to 6.7 million bbl/d in 2013.
Natural gas working inventories ended May 2012 at an estimated 2.9 trillion cubic feet (Tcf), about 31 percent above the same time last year. EIA’s average 2012 Henry Hub natural gas spot price forecast is $2.55 per million British thermal units (MMBtu), which is $0.10 per MMBtu higher than last month’s forecast. EIA expects that Henry Hub spot prices will average $3.23 per MMBtu in 2013.
Based on the outlook from the National Oceanic and Atmospheric Administration for the current Atlantic hurricane season, EIA estimates median outcomes for total shut-in production in the Federal Gulf of Mexico during the hurricane season (June through November) of about 4.5 million barrels of crude oil and 9.5 billion cubic feet (Bcf) of natural gas. Actual shut-ins are likely to differ significantly from this estimate depending on the number, track, and strength of hurricanes as the season progresses.
by Garner Roberts