It finally happens in 2020: After 67 years as a net importer, the U.S. achieves net energy exporter status, according to the U.S. Energy Information Administration’s (EIA’s)[i]Annual Energy Outlook 2019[ii]. The U.S. became a natural gas net exporter in 2017 and coal net exporter decades ago. In 2020, domestic crude oil production growth will push the U.S. over the hump as a net exporter. The main source of growth will be the Permian Basin, located[iii]in western Texas and southeastern New Mexico, according to the Annual Energy Outlook 2019.
Texas Oil & Gas Production Reach Record Levels
In 1973, the Organization of Petroleum Exporting Countries (OPEC) used its worldwide oil dominance to punish nations it believed supported Israel in the Yom Kippur War[iv]. OPEC embargoed oil exports to those nations.
The United States was one of those embargoed nations. Anticipating supply interruptions, Texas oil producers ramped up in years leading up to the embargo. In 1973, Texas oilfields produced 1.25 billion barrels of crude.[v]In years after the crisis, Texas production dropped by two-thirds. But since 2012 when production equaled 0.72 billion barrels, production has increased and, in 2018, Texas oil production broke a 46-year record[vi]by producing 1.54 billion barrels.[vii]
Texas has 1/3rd of the nation’s proved crude oil reserves and an equal share of her production. No other state produces more crude oil, and that includes all federal offshore production.[viii]Texas crude oil production in 2018 was 348% greater[ix]than the second most productive state, North Dakota.
Like its crude oil production, Texas’s natural gas production peaked around the embargo years. The state’s proved natural gas reserves account for 1/4th of the nation’s reserves, and the state’s relative production is the same. But production in Texas is up, and in 2018 wells produced 8.8 trillion cubic feet,[x]compared to about 7.1 trillion cubic feet in 2012.[xi]Texas is the nation’s leader in natural gas production, and its production in 2018 was 44% greater [xii]than the second most productive state, Pennsylvania.
Texas is expected to continue its national oil & gas production leadership in 2019. In a report[xiii]last year on Texas oil & gas reserves in the Eagle Ford Shale region,[xiv]Dr. Jim Reilly, USGS Director, said, “Texas is so well-known for its history of oil and gas production that it’s almost synonymous with petroleum….Texas continues to remain in the forefront of our Nation’s energy supply chain with remarkable increases in production and reserves….” Texas assumes important national and global roles as Iran[xv]and Venezuela[xvi]supplies fall in 2019 because of U.S. sanctions and internal hardships. Market participants have doubts[xvii]about the ability of Russian and OPEC production increases to make up for expected declines; Texas oil production is the most likely source of increased supply.
Beyond 2019, production projections indicate the U.S. will continue the status it earned in 2018 as the largest producer of crude oil.[xviii]
- University of Utah economics professor Mingi Li[xix]ranks the U.S. as the largest oil producer in the world through 2050.
- The EIA projects continued domestic production growth largely attributable to efficiencies created by horizontal drilling.
- BP’s 2019 Energy Outlook[xx]forecasts U.S. world production leadership through 2040.
Expectations for U.S. oil & gas production growth leadership rest on Texan resources and on its advanced, more efficient drilling methods.
[iii]This link publishes a map of the Delaware Basin and Permian Basin: United States Geological Survey. (No date). 2018 Delaware Basin assessment unit map. Retrieved from https://www.usgs.gov/media/images/2018-delaware-basin-assessment-unit-map.
[iv]Wikipedia (2019 January 25). Yom Kippur War. Retrieved from https://en.wikipedia.org/wiki/Yom_Kippur_War.
[v]The Railroad Commission of Texas offers an authoritative source about energy in that state: Railroad Commission of Texas (2018 February 28). Crude oil production and well counts (since 1935). Retrieved from https://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/historical-production-data/crude-oil-production-and-well-counts-since-1935/.
[vi]Railroad Commission of Texas. (2019 February 4). Texas monthly oil and gas production. Retrieved from https://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production/.
[vii]The Texas Independent Producers and Royalty Owners Association is and oil & gas trade association devoted to advocacy and news. Retrieved from http://www.tipro.org/newsroom/tipro-news/tipro-releases-state-of-energy-report-1.
[viii]EIA’s Annual Outlook 2019
[ix]Texas Independent Producers and Royalty Owners Association. (2019 February 11). TIPRO releases “State of Energy Report. Retrieved from http://www.tipro.org/newsroom/tipro-news/tipro-releases-state-of-energy-report-1.
[xi]Railroad Commission of Texas (2018 February 28). Crude oil production and well counts (since 1935). Retrieved from https://www.rrc.state.tx.us/oil-gas/research-and-statistics/production-data/historical-production-data/crude-oil-production-and-well-counts-since-1935/.
[xiii] United States Geological Survey. (2018 June 22). USGS estimates oil and gas in Texas’ Eagle Ford Group. Retrieved from https://www.usgs.gov/news/usgs-estimates-oil-and-gas-texas-eagle-ford-group.
[xiv]Railroad Commission of Texas. (2019 February 12). Eagle Ford shale information. Retrieved from https://www.rrc.state.tx.us/oil-gas/major-oil-and-gas-formations/eagle-ford-shale-information/.
[xv]Wald, E.R. (2016 June 23). Is Iran oil about to drop? Forbes. Retrieved from https://www.forbes.com/sites/ellenrwald/2016/06/23/is-iran-oil-about-to-drop/#43cb09316c0d.
[xvi]Stapczynski, S. (2019 February 2). Venezuela oil output to drop by 18% on U.S. sanctions: Woodmac. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2019-02-02/venezuela-oil-output-to-drop-by-18-on-u-s-sanctions-woodmac.
[xvii]Oil and Gas Journal. (2018 October 11). EIA lifts U.S. crude oil production forecast for 2019. Retrieved from https://www.ogj.com/articles/2018/10/eia-lifts-us-crude-oil-production-forecast-for-2019.html.
[xviii]Dunn, C. and Hess, T. (2018 September 12). The United States is now the largest global crude oil producer. U.S. Energy Information Administration. Retrieved from https://www.eia.gov/todayinenergy/detail.php?id=37053.
[xix]Li, M. (2018 July 26). World oil 2018 – 2050: World energy annual report (part 2). Peak Oil Barrel. Retrieved from https://peakoilbarrel.com/world-oil-2018-2050-world-energy-annual-report-part-2/.
[xx]BP. (2019). BP energy outlook 2019 edition. Retrieved from https://www.bp.com/en/global/corporate/energy-economics/energy-outlook.html.