Despite thousands of layoffs and continuous price calamity, Texas is on route to produce a record amount of oil that hasn’t been reached in over 40 years, the Houston Chronicle reports.
At a bi-annual state assessment of oil and gas, economist for the Texas Alliance of Energy Producers Karr Ingham noted that budget cuts and reduction in drilling activity haven’t deterred record production. Statewide oil output is expected to reach 1.28 billion barrels this year, exceeding the state’s record of 1.26 billion barrels set in 1972.
According to a shocked Ingham, Texas output is up 17 percent from the same time last year, even with crude prices 45 to 50 percent lower.
Since oil prices started falling last year, oil and gas rigs have fallen 60 percent in Texas, according to Baker Hughes and reported by Fuel Fix. Ingham said drilling permits had fallen and that completions decreased by 33 percent.
“I don’t see any way at all now that we don’t continue to grow production in Texas for the balance of the year,” he stated. “We certainly have for the first part of the year. It almost can’t drop fast enough to keep this from happening.”
However, prices have (obviously) made an impact on what projects could have been completed if crude were still in the $70 to $90 per barrel range. According to a recent Wood Mackenzie report, globally, delays due to low market incentives equal to $200 billion of investment.
So far, Wood Mackenzie has counted another $83 billion in delays for the North American shale industry in an excluded study from the global data.
There’s not enough global demand to soak up the millions of barrels of excess crude added to the market each day, and as production stubbornly refuses to budge, there seems to be no end in sight to the imbalance keeping a lid on prices, Ingham said.
Upstream oil and gas companies have slashed over 20,000 jobs in the state, and more layoffs are probably on the way, Ingham stated. He expects Texas to lose up to 50,000 upstream jobs from the peak employment of 305,000 set in December.
However, Ingham did have a good means to compare the current bust with the cyclical nature of previous ones in the state. The industry is still in the budding days of the downturn, especially compared to prior cycles. A previous downturn in 2008-09 lasted 13 months and reversed as a surge in oil production helped prop up prices, Ingham noted.