Wednesday, July 27, 2011
Houston Chronicle
by Tom Fowler
Employment in Texas' oil and gas industry rebounded to its pre-recession highs while oil production solidified its return to the top of the fossil fuel ladder for the first time in more than a decade, according to an index of state energy activity.
The Lone Star State employed 224,200 workers in exploration and production in June, according to the Texas Petro Index -- more than the 223,200 at the height of the last energy boom in October 2008 and nearly 15 percent more than in June 2010, said Karr Ingham, the Midland economist who created and maintains the index.
Oil production also beat out natural gas as the dominant Texas fossil fuel product by value during the first six months of 2011, reversing a trend that started in 1997 when natural gas began to dominate the state's energy production.
"In the past 12 months, the industry has added more than 28,600 jobs, which is nearly 13 percent of all jobs added to the Texas economy," Ingham said.
Oversized impact
The oil and gas industry only accounts for about 2 percent of the state's entire workforce payroll, Ingham says, but it tends to have an oversized impact on the entire state economy because it is so capital-intensive. By some estimates, as much as two-thirds of Texas' job creation in the past year could be tied directly and indirectly to the oil and gas exploration business.
"That's really an accomplishment, considering the TPI in June indicates the industry still has not recovered to the level of economic health that created the last jobs milestone," Ingham said.
Unemployment was 8.2 percent in Texas in June. Nationally, the unemployment rate is 9.2 percent.
The Texas Petro Index is a composite based on economic indicators such as commodity prices, production volumes, employment and drilling data. The index starts with 1995 as the base year, with a score of 100.
The Texas Petro Index grew in June for the 18th consecutive month to 243.5, from a low in December 2009 of 186.6. It has not yet returned to its peak, 286.0, recorded in September and October 2008, and isn't expected to reach that point again for many months, Ingham said.
That's because other elements of the index, such as natural gas prices, the number of drilling rigs active and the number of wells completed, continue to lag behind the historic highs.
Crude prices, however, have risen significantly, helping push the value of Texas-produced oil to nearly $3.16 billion in June, 29.5 percent more than in June 2010.
Natural gas production was worth $2.46 billion in June, up slightly from June 2010, but the value of Texas' natural gas production for the first six months of 2011 was down more than 17 percent from the prior year, to $14.4 billion.
A return to its roots
The current energy industry growth spurt is different than the boom from 2002 to 2008, Ingham said.
Back then the growth largely was due to the expansion of drilling and production in natural gas shales, thanks to industry perfecting a combination of horizontal drilling and hydraulic fracturing.
"In the current expansion, the industry has returned to its crude oil roots," Ingham said, but it's hardly a repeat of the oil booms in the early 1980s and 1990s.
"In the current expansion, the industry has returned to its crude oil roots," Ingham said, but it's hardly a repeat of the oil booms in the early 1980s and 1990s.
Instead, the same technological improvements that fueled the recent expansion of natural gas production is allowing producers to tap previously unavailable oil reservoirs in plays including the Eagle Ford in South Texas and the Wolfberry in West Texas.
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