Energy experts say world events and other significant indicators point to a multiyear boom for Texas’s oil and gas industry. But others say several substantial challenges must be solved before that can happen.
Questions over an uptick in the Texas energy industry began to surface soon after Russia invaded Ukraine in February, and oil prices quickly jumped to an average of $114 per barrel. But the answers are complicated by uncertainty and other factors facing the U.S. over the past two years.
For the most part, large oil companies have avoided ramping up production despite increased interest by companies and nations wanting to see a more diverse and secure supply of gas and oil. But the world’s largest oil-field service company, Houston-based Schlumberger, sees a new trend emerging.
Schlumberger CEO Olivier Le Peuch noted a surge in profits recently and says the industry is entering an “exceptional” period of increased production, both in new areas as well as existing sites. In April, Exxon reported a first-quarter oil and gas profit of $9.3 billion, its largest in seven years.
Another indicator is an increase in permits to drill new wells in Texas. In March, the state’s oil regulator granted 1,176 drilling permits, up from the 798 issued in March 2021.
Most new permits were sought by privately held energy companies and not the publicly traded oil giants. But it will not be easy getting those wells drilled. Severe shortages in qualified workers remain as the oil industry has increasingly turned to automation since 2014 while letting workers go due to lower energy prices.
Houston-based Halliburton also says its fracking operations are booked solid through the end of 2022. Additionally, oil companies face shortages in electronics, engines and spare parts that virtually every sector of the economy face due to reduced production and supply chain issues. For many companies, the uncertainties they face make them unable or unwilling to ramp up drilling efforts.
Demand usually dictates supply
Despite the challenges, some analysts believe an energy boom is bound to happen. Bob McNally, a former energy adviser to President George W. Bush, told Texas Monthly Magazine that the uptick in oil and gas production began before Russia invaded Ukraine. He says booms always follow busts, and conditions exist once again for the pendulum to swing back toward increased production.