Texas 2014 Oil Output to Surpass Some OPEC Members

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By John Daly for OilPrice.com

Texas oil production is surging, and estimates for 2014 predict that output of more than 2.7 million barrels per day will push the Lone Star State’s production above OPEC members Nigeria (2.524 bpd), Venezuela (2.489 bpd) and Algeria (1,875 million bpd.).

The news comes as University of Texas at San Antonio Institute for Economic Development Research Director Thomas Tunstall, an expert on the Eagle Ford shale deposit, told the annual meeting of the South Texas Energy and Economic Roundtable that next year output from the Eagle Ford shale deposits and the Klein shale fields in the Permian Basin in west Texas would surpass 1 million barrels apiece per day, up from their current rate of 650,000 bpd, which will help Texas alone to produce more oil than several nations who are current OPEC members.

Tunstall added that 25,000 wells are being drilled into the Eagle Ford shale in southern Texas over the course of its field life using fracking to liberate tight oil, a technique developed in the United States, but as the technology is fully developed in Mexico, Canada, China and elsewhere, all of which are known to have extensive tight oil reserves, pressure on OPEC will intensify.

Tunstall’s optimism is supported by statistics from the U.S. government’s Energy Information Administration, which reported that in September Texas pumped 2.7 million barrels of crude per day, an extraordinary 30 percent increase over September 2012 figures, the highest average oil production in Texas since monthly record-keeping began in January 1981.

According to the Federal Reserve Bank of Dallas, “oil and gas companies in Texas and nearby states are expecting continued growth next year.” Mark Perry of the conservative Washington DC American Enterprise Institute noted, “1.35 million bpd increase in oil output in only 29 months in one U.S. state is remarkable, and would have never been possible without the revolutionary drilling techniques that just recently started accessing vast oceans of Texas shale oil in the Eagle Ford Shale and Permian Basin oil fields.”

But if all that is good news for the Texan economy, concerns are growing that increased fracking injection well activity is producing regional surges in seismic activity, including around Eagle Ford. Researchers at the University of Texas found that underground injection of carbon dioxide to boost oil production "may have contributed to triggering" a series of earthquakes north of Snyder several years ago. Texas already has had some of the best-documented seismic activity around injection wells, causing some researchers to link injection to earthquakes in the Haynesville Shale in East Texas and the Barnett Shale in the Dallas area, and in 2009 Chesapeake Energy Corp. shut down two wells linked to quakes near the Dallas-Fort Worth Airport.

What is leading to rising anxiety in small towns like Azle and Springtown northwest of Fort Worth, bracketed by numerous fracking sites, is last month’s swarm of 20 earthquakes, the biggest a magnitude 3.6.

On 11 December the Dallas City Council passed new restrictions barring hydraulic fracturing within 1,500 feet of a home, school, church, and other protected areas, effectively barring the practice within the city. Dallas had previously outlawed fracking within 300 feet of protected areas.

The ordinance was approved by a 9-6 vote, with Mayor Mike Rawlings voting in favor.

Not surprisingly, the natural gas industry was quick to react. Trinity East representative Dallas Cothrum, which had hoped to exploit the city’s location on the edge of the massive Barnett Shale region lamented, “You just can’t drill under these conditions. It’d require more than 250-acres of property and in an urban area it’s just not possible.” Dallas City Council Lee Kleinman, who opposed the new restrictions said, “We might as well save a lot of paper and write a one-line ordinance that says there will be no gas drilling in the city of Dallas. That would be a much easier ordinance to have.”

As Texan oil and natural gas production continue to surge due to fracking, so do local concerns over the technique’s possible consequences, including increased seismic activity. With the U.S. Geological Survey and researchers from Texan universities all studying the phenomena, more data will inevitably be forthcoming, but whether a “smoking gun” will be found linking fracking and earthquakes remains to be seen. What is beyond debate is the increased rate of seismic activity.

One oil major has decided that increased seismic activity risks are acceptable; ConocoPhillips (COP) “is planning to make $16.7 billion in capital expenditures to boost drilling in U.S. shale plays, including the Eagle Ford.”

So, while Texas has an obviously sunny hydrocarbon future, it appears to have significant potential environmental costs, many of which are presently poorly understood. The IEA reports that in 2010 Texas led the nation in wind-powered generation capacity and became the first state to reach 10,000 megawatts of wind capacity. Accordingly, while embracing the revenue stream from oil and natural gas produced by fracking, increasing state usage of renewables will at least spare the state from increased seismic activity and polluted subterranean water sources.

Read the original article at OilPrice.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities , Technology , US Markets

Referenced Stocks: COP

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