Like the old “That’s good, no, that’s bad!” comedy routine, the oilfield of spring 2022 is riddled with contradictions.
Prices are high, but so is uncertainty.
Hiring is up, but manpower still vexes.
On-shore exploration is increasing, but off-shore development lags.
The Biden administration has been a little more helpful lately, but the U.S. Department of Energy is still trumpeting its “fossil fuels are passé” mantra.
Texas Oil & Gas Association President Todd Staples, Panhandle Producers & Royalty Owners Association President Judy Stark and Texas Alliance of Energy Producers President Jason Modglin say individual oil and gas companies and trade associations are working hard to enhance production and stability, but their influence is slight compared to President Biden’s and the federal government’s.
“We need a complete reset from the administration to establish a strategic energy plan for America with the president saying, ‘We’ll look for ways to facilitate the approval of pipelines rather than canceling them, including terminals for liquefied natural gas, and we will implement a plan for on-shore and off-shore leasing,’” said Staples, a former state representative and senator from Palestine and a former state agriculture commissioner.
He said the war in Ukraine “continues to create uncertainty in the market place and uncertainty leads to volatility.
“A decade ago, countries in Europe traded energy security for energy ideology and now they’re suffering the consequences,” Staples said. “The energy crisis in Europe should be more than a wakeup call for the strategic importance of a steady, affordable energy supply.
“Energy should be treated as a national security asset and not a liability.”
The TXOGA leader said manpower and supply chain issues are limiting growth and access to capital after years of seeing the future of oil and gas questioned. “The industry has been doing its best to respond to market signals,” he said.
“Since this time last year, the state and national rig counts are up from 205 to 326 and from 417 to 670.”
Asked the state of the mancamps for oilfield workers that got so much attention a few years ago, Staples said companies have been trying to offer permanent residencies, but a recent report indicated that 1,500 mancamp beds in the Permian Basin are full.
He said the political buzz in Austin is favorable to the industry, but the picture in Washington “is murky and unclear.
“We’re increasing exports to our European allies,” he said. “Now we need to back that up with orders that will last for the long term. The high prices are the result of poor policy decisions over the years that are now exaggerated by the Russian invasion of Ukraine. We need to unleash American energy if we’re going to have a steady supply here at home and for our allies across the globe.”
Quoting data from the Texas Workforce Commission, Staples said upstream employment like the geologists, drilling rigs and service crews of the Basin grew by 5,100 in February, which was the highest spike in over a decade and the second highest jump in 32 years.
“Since the low point in employment in September of 2020, the industry has added 24,900 Texas upstream jobs and job growth months have outnumbered decline months by 15 to 2,” he said. “With 181,900 upstream jobs, February 2022 jobs were up by 20,700, or 12.8 percent, from February of 2021.”
Independent Petroleum Association of America Chief Operating Officer Jeff Eshelman said from Washington Monday that the industry “is ready to do its part to address the energy challenges that the United States and our allies face.
“But the obstacles and signals from the federal government are standing in the way of progress,” Eshelman said. “It’s difficult to plan years-long, multi-million-dollar exploration and production when the Biden Administration sends mixed messages at every step of the way.”
Judy Stark, president of the Panhandle Producers & Royalty Owners Association, said from Amarillo that the biggest problem “is that you can’t just turn oil and gas off with a spigot.”
Stark said there are infrastructure issues with trying to avoid moving oil and gas by trucks, even in the Basin, and that while the Biden administration has made a few concessions lately, it needs more coherence and consistency to develop a productive long-term relationship.
“We’re still hearing backlash with what I call programmed responses,” she said. “I got an email from the Energy Department last week that it ‘is more evident now than ever that we need to divest ourselves from the fossil fuel industry.’”
Explaining that the administration has lifted some restrictions on drilling on federal lands and “is being a little more friendly on resetting permits,” Stark said finding adequate manpower remains problematic. “It’s not as severe as it was because excellent pay and benefits are making it worth the risk to come back into the industry,” she said.
“There are still some smaller to mid-size mancamps and there are some in the Midland-Odessa area. We don’t want to see repercussions from high prices per barrel on oil because those just that add pressure with high inflation.”
Texas Alliance of Energy Producers President Jason Modglin of Austin reported that despite the challenges, the Basin will keep enhancing its record production this summer in West Texas and Eastern New Mexico. “The industry is doing about as much as it can to balance the global markets, but we have seen incredible price fluctuations,” Modglin said.
He said the war in Ukraine is causing even more instability and the capacity of the industry’s midstream sector, moving oil and gas to the Gulf Coast, should be increased. “That creates big challenges when production naturally declines and we are not adding enough new production to satisfy the demand,” Modglin said.
He said the Biden administration “has walked back the proposed rule that would have hamstrung pipelines in the Northeast.
“They have also opened up the LNG trade in Europe from Texas and Louisiana,” Modglin said.
“We have a number of physical constraints that the state and federal governments could help with.”
Notwithstanding the bump in oilfield employment, he said, “We lost a significant amount of jobs in 2018 and ’19 and that’s limiting our ability to get crews out into the field.
“We don’t have quite the labor that we once did.”
