Texas’ energy industry is in a strong position, despite mixed market indicators, according to the Federal Reserve Bank of Dallas’ monthly energy sector report.
Production and drilling permit applications started to level off in June and July, but exports and employment have continued to increase overall, according to the report.
Regarding employment, Texas is outperforming the nation overall, as support activities from March to June grew 33.2 percent, or 11,100 jobs, and the number of jobs in oil and gas extraction grew 4.9 percent, or 940 new jobs.
However, despite those employment gains, crude production and the installation and permitting of new drilling rigs have remained flat, though they are significantly greater than those seen during the roughly two-year downturn in commodity prices.
One challenge driving this is pipeline constraints affecting the two major Texas geological targets, the Eagle Ford Shale and the Permian Basin, according to the report. Pipeline constraints also suppressed prices on Permian Basin crude, while a Canadian production outage boosted prices for West Texas Intermediate crude sold through Cushing, Oklahoma.
Additional Canadian market factors resulted in a reduction in exports to that country causing a dip in Texas’ total natural gas exports. This is due to Canada’s own cross-country pipeline. However, with the Nueva Era and Topolobampo pipelines coming online, access to Mexican natural gas consumers is expected to improve. The Nueva Era pipeline is owned by San Antonio-based Howard Energy Partners.
According to the report, Texas liquefied natural gas exports are expected to increase 24 percent by the end of the year and 136 percent by next year due to new capacity coming online. LNG exports have been rising since 2016.
Improved offshore infrastructure has boosted crude exports, as more very large crude carrier, or VLCC, tankers are operating along the Gulf Coast. Additional improvements are expected to be made as well, with Enterprise Products Partners LP announcing construction of an offshore loading terminal and the Port of Corpus Christi investing to improve VLCC loading with a project at Harbor Island
Overall, exports of petroleum products reached 5.2 million barrels per day in June, an increase of 180,000 barrels per day year over year during the second quarter, according to the report.