Texas, the next Saudi Arabia? Study revises economic impact numbers upward
By Dave Mundy/manager@gonalescannon.com
Posted March 27, 2013 - 4:06pm
AUSTIN — The Eagle Ford Shale formation has become a game-changer, Texas Railroad Commissioner David Porter said Tuesday.
“Texas has always been the leader in energy policy,” Porter said Tuesday at at a meeting at the Capitol of the House Energy Caucus and Eagle Ford Shale Caucus, updating figures on the economic impact of the Eagle Ford Shale. “The United States is going to become the largest oil and gas producer in the world by 2020, because of Texas. We’ll be bigger than Saudi Arabia.”
Dr. Thomas Tunstall of the University of Texas-San Antonio presented an update to his study, originally presented in May of last year, indicating that the overall economic impact of the giant shale formation would be $89 billion a year by 2022 — nearly $28 billion more than originally forecast.
“If you look at the economic impact, it’s luscious,” said State Sen. Leticia van de Putte (D-San Antonio).
Tunstall’s update was presented to the Texas Legislative Eagle Ford Shale Caucus and Energy Caucus as well as capitol staff and the media. He said the Eagle Ford’s impact on the 20-county region included in the study — which includes Gonzales and DeWitt counties — shot from from $25 billion in 2011 to $61 billion last year, far out-stripping projections.
“If you’ll look at the figures, there were 26 (drilling) permits in 2008 and more than 4,000 last year,” he said. “Gas and condensate production has pretty well leveled off because the price for gas has remained relatively low, but oil production tripled from 2011 to 2012.”
So far, more than 5,400 Eagle Ford wells have been permitted by the Texas Railroad Commission, but the study expects more than 24,000 wells in the region by 2022.
He said the growth goes beyond just the oil industry.
“A few years ago the Gardendale rail head at Cotulla had been more or less shut down, the only way to find it was using a metal detector,” he said — then showed a slide of a full and busy rail yard today.
Tunstall also hinted that as technology catches up to exploration, the natural gas impact could grow exponentially.
“There is a big global market for LNG (liquefied natural gas), and they’re starting to build more big LNG tankers to carry it,” he said. “You could see the same kind of growth with gas that we’ve seen with oil.”
Tunstall’s figures indicate that oil production in Texas, primarily from the Eagle Ford and Permian Basin, not only puts the state as the leading oil-producing state in the union — it produces more oil than the next three states (California, Alaska and North Dakota) combined.
And the Eagle Ford and Permian Basin aren’t Texas’ only oil aces in the hole, Tunstall said.
“We haven’t even tapped the Cline Shale (east of Midland-Odessa),” he said.
He added that shale oil extraction technology has advanced rapidly in just the last couple of years.
“The costs to complete a well are going down in a steady fashion as oil companies get on the learning curve,” he said.
The key challenge for communities across the Eagle Ford, he said, is learning to handle and promote the growth. The study suggests communities work to improve infrastructure for long-term population growth and also to work hard on diversifying their economies so that a downturn in the industry will not leave them devastated.
“Communities need to market their trademark, their history, their architecture, what makes each town unique,” he said. “Crystal City markets itself as the ‘Spinach Capital of the World’ because they grow so much spinach there ... and now I hear they’re planning olive trees, so they’ll have Olive Oyl to go with Popeye.”
Tunstall’s study looks at the traditional 14 counties included as part of the Eagle Ford Shale as well as six surrounding counties, but he said his next study may move north and east into counties which are part of what is being called the ‘Eaglebine” formation — the shallower end of the Eagle Ford and the older Woodbine formation which begins in Fayette and Lavaca counties and runs north and east to Bastrop, Grimes, Lee, Burleson, Brazos and Houston counties.
Porter told conference attendees the Railroad Commission on Tuesday approved updated rules on well casing and the re-use of recycled water in the hydraulic fracturing process. He said he has been especially cognizant of the problems the state has had in the past with environmental and other concerns.
“When I was elected, I was determined not to repeat the mistakes (of the Barnett Shale development),” he said. “I wanted to make sure our regulations kept up with technology.”
A panel of industry repersentatives also gave attendees some insights into new and innovative ways to accomplish hydraulic fracturing, including gas fraccing and the use of recycled water and even effluent water purchased from cities around the region.
Porter praised the Texas Legislature and Gov. Rick Perry for providing the right climate for industrial growth — and the Eagle Ford Shale for providing it.
“While the rest of the country was experiencing record unemployment, the Eagle Ford was creating jobs. These are not just jobs, they are good, high-paying jobs,” he said — noting the average oilfield pay is in six digits. “In a lot of small towns, that’s a lot of money. “We are finding that companies are becoming more creative in the hiring process.”
Porter and Tunstall also noted that Texas’ colleges are also adapting to the demands of a workforce which includes some people who have dropped out of high school or college to go after the higher pay of the oilfields.
“Some of the community colleges are working on a plan to provide on-site (jobsite) classes,” Porter noted.
