By Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association (TIPRO)
As the U.S. oil and gas industry endures the most challenging market conditions in its history, other threats loom on the horizon. Consequently, the future of the industry will undoubtedly require bold leadership and a concerted effort to support continued domestic development.
New analysis from the Texas Independent Producers & Royalty Owners Association (TIPRO) shows the oil and gas industry represented 321,455 direct jobs in the state of Texas during the first six months of 2020, a decrease of nearly 40,000 jobs compared to the previous year. Over 2 million indirect jobs were also tied to the Texas oil and natural gas industry during the same time period.
Operators started the year with conservative plans for production growth in order to achieve free cash flow and had already cut a notable amount of capital expenditures (CAPEX) even before the outbreak of the novel coronavirus (COVID-19) pandemic and this year's economic downturn. Crude prices going into the negative territory in April for the first time in history and trading below $30 per barrel for nearly three months sent major shockwaves across the oil and gas industry. This unprecedented price crash resulted in nearly $50 billion in CAPEX cuts, forced large scale shut-ins across the country, drove the national rig count to its lowest level in the last six years (with the July average being 285 active rigs deployed) and caused numerous E&P bankruptcies.
As the nation's largest producer, the Texas oil and gas industry has borne the brunt of COVID-19 demand deconstruction and ongoing capital constraints. According to TIPRO, Texas oil production decreased in the first half of 2020 by 46 million barrels compared to the third and fourth quarters of 2019, while natural gas production fell by 162 million cubic feet of gas during the same time period. Overall, U.S. oil production is expected to continue to fall moving into the second half of the year. U.S. exit to exit oil production (December 2019 – December 2020) is projected to drop by an estimated 2 million barrels of oil per day, approximately 40 percent of which will ultimately come from the state of Texas. Several prominent Texas operators have also recently forecasted little to no growth in output for 2021 compared to this year.
Despite facing a wide array of challenges, the oil and natural gas sector remains one of the most innovative, resilient and impactful sectors in the state, and will eventually emerge from this downturn as market conditions improve. The recovery of our industry and the livelihoods of millions will be in jeopardy though if anti-oil and natural gas policies are allowed to advance, including extreme proposals stemming from the Green New Deal, the Keep It In The Ground movement, and a ban against any new oil and gas permits on public lands and waters, a likely precursor for an attempt to halt all U.S. exploration and production activities.
There is a stark contrast between energy-minded elected officials that value the contributions of domestic oil and natural gas and a more extreme contingent bent on stopping the production of hydrocarbons in the United States, which would only make us more dependent on foreign sources of oil. At risk is one of our country’s key strengths for protecting national security and a true cornerstone of our nation’s economy, including over 19 million direct and in-direct American jobs that will not magically be absorbed by another industry of equivalent size and economic impact.
Supporting an all-of-the-above approach to our future energy needs versus the elimination of all domestic oil and gas are two vastly different scenarios. We as Texans should not take anything for granted given the dramatically divergent views on energy policy and what future election cycles could mean for the Texas oil and gas industry. It’s incumbent upon on us all to help educate policymakers, friends and family about the positive impact of domestic oil and gas development, as well as the quantifiable results our industry has achieved in reducing energy emissions, and continued efforts to advance environmental stewardship throughout the oil and gas value chain.
We encourage all Texas citizens to support reliable, affordable energy, the economic prosperity provided by the Texas oil and natural gas sector and those leaders that understand its critical importance. Join in efforts to inform stakeholders on the importance of oil and natural gas, and help our industry advocate for sound, science-based energy policies at all levels of government. Our future depends on it.