Across the United States, there’s “a growing understanding of how to use the technology to get at the resources.”
Domestic crude oil production in the U.S. averaged more than six million bbl/d for the first quarter of 2012 for the first time since 1998. The U.S. Energy Information Administration attributed the milestone to growth of oil production in North Dakota, Texas, and federal leases in the Gulf of Mexico. The increases in Texas came primarily from production in the Permian Basin and Eagle Ford Shale.
John Staub of the EIA said producers and completion companies are “working smarter” in their use of horizontal drilling and hydraulic fracturing with “a growing understanding of how to use the technology to get at the resources.”
The EIA said average daily production in Texas increased from 1.595 million bbl/d in October 2011 to 1.755 million bbl/d in March 2012.
Oil production in New Mexico has increased steadily in the past year as the price of crude oil increased—returning the state near to the levels seen before the recession of 2008. A report by the nonprofit group Headwaters Economics of Bozeman, Mont., analyzed New Mexico’s oil and gas industry from 2000 to 2012.
Chris Mehl of Headwaters attributed declines in production in 2008 and 2009 to price drops, not state regulations. He told the Santa Fe New Mexican that New Mexico’s drilling rig count rebounded better than the neighboring states of Colorado and Wyoming.
As energy demand in the U.S. declines in 2012 for the second straight year, oil exports will increase and imports will fall from 2011 levels. The Oil and Gas Journal said gross imports of crude oil are forecast to dip by 1.3 percent from last year and average 8.8 million b/d. In 2011, crude oil imports declined by three percent from the previous year. Most imports of crude and products last year came from Canada, Mexico, Saudi Arabia, and Venezuela.
U.S. exports of crude and products will increase by four percent to average three million b/d, according to the Journal. (Most of the oil that the U.S. exports has been refined.) “The U.S. continues to be a net exporter of petroleum products,” the Journal said.
Oil prices face downward pressure from elevated output in unconventional deposits, greater production by OPEC members, further slowing of the economy and high unemployment, increased fuel efficiency, larger oil inventories, and reduced driving in part because of increases in the use of home offices and the Internet.
Energy industry analyst GlobalData reported that consumption of natural gas in China is expected to triple in the next eight years from 131.7 billion cubic meters in 2011 to 375bcm by 2020. “The Asian giant will draw from all available sources to keep up with demand,” GlobalData said, “thanks to the country’s desire to increase the share of natural gas in its energy mix.”
China has substantial natural gas reserves of its own, GlobalData said, but demand has outstripped production, making imports essential.
Philadelphia-based Sunoco Logistics Partners announced in June plans for Permian Express, a new project to transport West Texas crude oil to Gulf Coast markets. Phase I of the project will have a capacity of about 150,000 barrels per day. Permian Express could be expanded to at least 350,000 barrels per day.
For Phase I, Sunoco Logistics will offer about 150,000 barrels per day of crude oil service from Wichita Falls to the Nederland/Beaumont markets. Sunoco said Permian Express Phase I will be operational within six to nine months with an initial capacity of 90,000 barrels per day. Full capacity of 150,000 barrels per day is expected within 12 to 18 months.
“Our latest crude project demonstrates once again that our assets are attractively positioned to deliver Permian Basin crude oil to markets sought by producers and refiners,” Michael J. Hennigan, president and CEO, said. “Permian Express is consistent with our strategy of growing ratable, fee-based cash flow.”
A task force of government and industry officials is expected to make recommendations this fall for the Texas legislature to address the damage to roads by oil and natural gas production trucks, according to the Associated Press. The group said local transportation budgets aren’t growing enough to deal with the resulting wear-and-tear on roads and bridges, and the companies aren’t providing enough money to help pay for repairs.
Roger Harmon, county judge for Johnson County, in the Barnett Shale, told the Fort Worth Star-Telegram that large companies such as Chesapeake Energy and Devon Energy in the past voluntarily paid for repairs when presented with before-and-after assessments. But according to Rick Bailey, Johnson County precinct commissioner, “the smaller companies that are more prevalent now are typically stingier.”
Rig activity in the U.S. was 12.4 percent higher in the first half of 2012 than in the same period in 2011, according to the Oil and Gas Journal, but if the drop in oil prices persists operators could begin drilling fewer wells later this year.
The Journal said, “Sagging crude oil prices have joined anemic natural gas prices to cloud the outlook for U.S. and Canada drilling in the rest of 2012.”
FROM THE RAILROAD COMMISSION OF TEXAS
The Texas average rig count as of June 22, 2012, was 938, representing about 49 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 437 million barrels of oil and 7.2 trillion cubic feet of natural gas.
The commission’s estimated final production for April 2012 is 41,711,182 barrels of crude oil and 491,644,000 Mcf (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary April 2012 production totals of 35,939,326 barrels of crude oil and 424,856,550 Mcf of gas well gas by a production adjustment factor of 1.1606 for crude oil and 1.1572 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the RRC for May 2012 was 397,325,849 Mcf compared to 395,952,262 Mcf in May 2011. The June 2012 gas storage estimate is 402,021,384 Mcf.
The RRC Oil and Gas Division set initial July 2012 natural gas production allowables for prorated fields in the state to meet market demand of 10,530,548 Mcf (thousand cubic feet). In setting the initial July 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 July 2012 is reported.
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
The EIA projects the West Texas Intermediate (WTI) crude oil spot price to average about $88 per barrel over the second half of 2012 and the U.S. refiner acquisition cost (RAC) of crude oil to average $93 per barrel, both about $7 per barrel lower than last month’s forecast. EIA expects WTI and RAC crude oil prices to remain roughly at these second half levels in 2013. Brent crude oil spot prices are expected to average $106 per barrel for 2012 and $98 per barrel in 2013. These price forecasts assume that world oil-consumption-weighted real gross domestic product (GDP) grows by 2.9 percent in both 2012 and 2013.
With crude oil prices falling, EIA has lowered the average regular gasoline retail price forecast for the third quarter of 2012 to $3.39 per gallon. EIA expects regular gasoline retail prices, which averaged $3.53 per gallon in 2011, to average $3.49 per gallon in 2012 and $3.28 per gallon in 2013.
EIA expects U.S. total crude oil production to average 6.3 million barrels per day 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 June 2012 at an estimated 3.1 trillion cubic feet (Tcf), about 23 percent above the same time last year. EIA expects the Henry Hub natural gas spot price, which averaged $4.00 per million British thermal units (MMBtu) in 2011, to average $2.58 per MMBtu in 2012 and $3.22 per MMBtu in 2013.
In April 2012, the United States exported 12.5 million short tons of coal, which is a monthly record based on EIA data dating back to 1973. Although EIA projects coal exports to total 112 million tons in 2012, 4.6 percent higher than 2011, EIA expects that coal exports will fall by 15.5 million short tons (14 percent) in 2013.
—compiled by Garner Roberts