The Permian Basin employed 87,000-plus people last year, mostly in upstream operations, nearly twice as many direct jobs as in 2009, according to new statistics.
The Texas Independent Producers and Royalty Owners Association (TIPRO) in its latest State of Energy Report outlined achievements in the 63-county Permian Basin, which extends across West Texas and into southeastern New Mexico. TIPRO analyzed employment, as well as demographics, businesses and production in the two states over the past decade.
“The region’s oil and natural gas industry continued to provide unmatched economic support in 2019, directly employing an estimated 87,603 individuals, an increase of approximately 3,200 net new jobs over the previous year,” TIPRO noted. “Since 2009, direct oil and natural gas employment in the region increased by 42,833 jobs. These jobs also pay extremely well, with an average annual wage of $98,000, which is 101% higher than average private sector wages in the region.”
Direct employment last year was strongest in Midland County, TX, with an estimated 33,328 people. West Texas energy industry employment also was strong in Ector (14,791) and Hockley (2,765), while New Mexico showed the most energy jobs in Lea (8,356) and Eddy (7,766).
The largest increase in employment over the past decade was in Midland County, which has seen jobs escalate by 20,802, followed by Ector (7,693), Eddy (4,985), Lea (2,407) and Hockley (1,513).
“Since 2009, oil production in the region has increased from less than 1 million b/d to more than 4 million b/d in 2019, with some forecasting oil production to nearly double by 2023,” TIPRO noted. Last year the Permian also surpassed Saudi Arabia’s Ghawar field to become the top producing oilfield in the world.
Permian oil production in 2019 increased year/year by 255 million bbl to a record 1.5 billion bbl. Natural gas output from the basin jumped by 1.1 Tcf year/year to a record 5.3 Tcf, according to the analysis.
With all of the growth there are some complications, noted TIPRO Chairman Eugene Garcia, who also is president of Hurd Enterprises LLC.
“Despite substantial gains in oil and gas output, several issues impacted domestic energy production levels in 2019, including takeaway capacity limitations in West Texas, an escalating trade war with China, and capital constraints, which forced more operators to adopt a cash flow yield model and scale back spending on drilling projects,” Garcia said.
The reduction in available capital led to a decline in industry employment during the second half of 2019 with further cuts expected through March. Permian operators Apache Corp. and Occidental Petroleum Corp. recently notified the Texas Employment Commission about planned layoffs, which could number more than 500 total. Among other things, Apache plans to shutter an office in San Antonio, TX.
Other operators also have expressed less optimism about prospects this year for growth.
“In addition to capital constraints, TIPRO also remains concerned over the U.S.-China trade war despite recent progress with negotiations, which has led to retaliatory tariffs placed against American-made products, including energy produced in Texas.”
Additional pipeline capacity was added in the Permian in 2019, including Kinder Morgan Inc.’s 2 Bcf/d Gulf Coast Express, which moves gas to the Texas coast. Five oil pipelines also are set to ramp in the region through 2021.
“Supporting the buildout of critical infrastructure to transport oil and natural gas is essential for the future of the industry, but expanding pipeline capacity coupled with a reduction in capital expenditures and production growth will drive increased competition among carriers, potentially leading to midstream rate cuts,” said TIPRO President Ed Longanecker.
Other factors could impact domestic production and commodity prices this year, including continued conflicts in the Middle East.
Following the attack on Saudi Arabia’s Abqaiq and Khurais fields last September, which temporarily reduced production by 5.7 million b/d, “the recent escalation in Iran may have further implications for the world oil markets. U.S.-Iran tensions boosted the geopolitical risk premium on oil prices in the short term, but opinions differ on how long the market can hold onto that premium,” according to TIPRO.
“Unlike oil surges during previous tense periods in the Middle East, prices may not inflate as much as it may have because of the growth of Permian Basin oil output in the last decade,” said state Rep. Tom Craddick, chair of the Committee on Land and Resource Management. “Thanks to production growth in the Permian Basin, the region has helped to mitigate the impact of lowered output overseas.”
TIPRO also outlined positive trends on key policy issues, including production cuts by the Organization of the Petroleum Exporting Countries, progress on U.S.-China trade negotiations, and finalizing the United States-Mexico-Canada Agreement (USMCA), which would, if completed, replace the North American Free Trade Agreement.
“USMCA will provide significant benefit to U.S. oil and natural gas producers,” said Garcia. “Energy integration between Mexico, the United States and Canada has been a success story that has led to the creation of many new opportunities to improve trade relations across North America. USMCA will help maintain and protect the ability to sell U.S. natural gas, oil and other refined products tariff-free to Texas’ two largest international trading partners, Mexico and Canada.”
Added Longanecker, “Notwithstanding market challenges, the U.S. will continue to lead the world in oil and natural gas production thanks to our prolific shale formations, continued innovation, improvements and efficiencies in exploration and production methods, and the remarkable men and women that comprise this industry.
“Continuing regulatory improvements at the federal level and an expedited resolution to trade disputes will also support U.S. energy production, strengthen national security and drive further economic growth for Texas.”
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 2577-9877 | ISSN © 1532-1266 | ISSN © 2158-8023 |