EPA is continuing its attempts to stay or postpone various Obama-era requirements on the oil and gas industry. It has proposed 90-day and two-year stays of the most recent and encompassing regulations imposed during the last years of the Obama administration. Some of these attempts are ensnared in court proceedings. However, the oil and gas industry itself is not idly standing by waiting for relief. Instead, oil and gas production is steadily climbing to record levels.
The U.S. Energy Information Agency (EIA) estimates that crude oil production will increase to an average of 10.3 million barrels per day in 2018, an increase of about 1 million barrels per day from 2017. The 2018 level will be the highest annual average on record, surpassing the previous record of 9.6 million barrels per day set in 1970. But it will not stop there. For 2019, crude oil production is forecast to rise to an average of 10.8 million barrels per day.
The Permian Basin area in West Texas is the epicenter of this activity. This area will produce 3.6 million barrels per day by the end of 2019, accounting for about 33 percent of the total U.S. crude oil production.
By way of contrast, crude oil production from all of the countries in OPEC averaged 32.5 million barrels per day in 2017, a decrease of 0.2 million barrels per day from 2016. OPEC agreed in November 2016 to reduce production to that level. An agreement in November 2017 extended the production cuts through the end of 2018 in an effort to reduce global oil inventories.
EIA expects India and China to be the largest contributors to growth in petroleum consumption in both 2018 and 2019. China’s consumption is expected to increase by 1 million barrels per day by the end of 2019, and India’s consumption is expected to increase by 0.5 million barrels per day in that period. Due to the amount being produced and the end of the ban on U.S. oil exports, crude oil produced in the U.S. is expected to compete with oil from the Middle East for consumers in Asia.
Natural gas production also increased in 2017 by about 1 percent. The largest growth was in the Appalachia region, primarily in the Marcellus and Utica shales. Interestingly, EIA expects the U.S. to become a net exporter of natural gas on an annual basis for the first time since 1957. The U.S. is exporting more natural gas to Mexico and more liquefied natural gas (LNG) to at least 20 countries, while importing less natural gas by pipeline from Canada.
What is driving these ever-increasing amounts of U.S. oil and gas production? Mainly, it seems to be improvements in drilling speed and efficiency. Some wells take only a week to complete as opposed to a month or more, thus substantially reducing costs. Additionally, “smart technology” is used, such as sensors on drill bits and even artificial intelligence.
The new oil and gas production boom has a ripple effect on the economy. Jobs are created to meet the demand for drilling, decreasing unemployment in shale-rich areas; new equipment is being purchased, assisting the manufacturing sector; pipelines are put into place to handle the demand; and state and local tax revenues increase.
In all, the U.S. oil and gas production industry is in a boom cycle yet again, fueling economic growth and prosperity for many. Opponents of fossil fuels will no doubt be disheartened by this news. However, they can argue that oil and gas production does not seem to need EPA’s regulatory reform or rollbacks in order to maximize efficiency and increase production.
John B. King is a partner with Breazeale, Sachse & Wilson LLP in Baton Rouge, Louisiana. His practice relates mainly to environmental regulatory permitting and compliance. Prior to joining the firm in 2003, he served as chief attorney for enforcement for the Louisiana Department of Environmental Quality.
For more information, visit www.Bswenviroblog.com, or contact John B. King at jbk@bswllp.com or (225) 381-8014.
