Oil and gas in Texas generated 116,000 new jobs and $61 billion in economic activity in only one of several large oil and gas areas of Texas during 2012. The Eagle Ford Shale area of South Texas is estimated to have 30 million barrels of oil and unconventional gas reserves. Possibly more exciting for Texas is only a few of the oil and gas shale formations in the state that have been recently discovered have been tapped.
What does Texas oil and gas mean for the state and the country?
On a national scale, natural gas prices have fallen to a several decade low. Texas isn’t the only contributor to lower natural gas prices; North Dakota and Pennsylvania have also been a contributor to the largest surplus of natural gas the country has seen. In about mid-2012 the number of electricity power generators powered by natural gas exceeded the number using coal as a fuel. As a consumer, my own usage is telling. I use natural gas in my 3,400 square foot home for heating, cooking and water heating. Last month (April) my total natural gas bill was $24.31 of which $1.97 was for the cost of the actual natural gas I consumed. The remaining costs were for maintaining service, surcharges for the low price of gas, and taxes.
Many consumers and businesses are saving countless dollars because of the low price of natural gas. Expect the price of natural gas to stay low as technology assisted natural gas and unconventional gas reserves are brought online across the world during the next few years. Environmentalists should applaud the use of natural gas instead of coal as its impact on the environment is substantially less. For Texas oil & gas the news is good. Wages for truck drivers in the oil field are some of the highest in the country. The average oil & gas exploration worker earns an average of $150,000 a year in Texas compared to about $125,000 in other parts of the country. Real wealth is being created by oil and gas in Texas.
On Friday, May 16, 2013 the U.S. Energy Department approved a plan to export 1.4 billion cubic feet a day of liquefied natural gas, or LNG, from the Freeport LNG facility in Texas, the second such approval granted in the U.S. A few years ago, the U.S. was an importer of LNG; now we are becoming an exporter. This means that the U.S. will be narrowing its trade deficit with some European and Far-Eastern countries. Because of Texas oil and gas, the U.S. is importing far less oil today than it did 10 years ago. Some economists and experts believe we can be oil independent in the next 10 years. Relying less on Middle Eastern oil is a true benefit to the U.S. as it makes OPEC less important in the global economy. It is reasonable that states like Texas that are willing to develop their petroleum resources will continue to thrive and prosper.
New areas of Texas oil and gas are just being developed
The Texas Cline Shale area of Texas is a yet-to-be-developed oil and gas field. This oil and gas area is expected to have as much as 30 billion barrels of oil and gas. This would make it three times larger than the existing Eagle Ford Shale area in South Texas and many times larger than the North Dakota Bakken region.
How are small businesses benefiting from Texas oil and gas?
Thousands of small businesses are now growing in Texas because of the oil and gas activity. Fast food, catering, and lodging, trucking, logistics, and other service sector businesses are indirectly generating revenue as a result of the oil and gas boom in Texas. Small oil and gas consulting companies, and even drilling companies with 3 to 6 rigs, are generating revenues that are supporting much larger than average payrolls. Hundreds of new startup businesses a day are forming to take advantage of servicing the 1st-, 2nd-, and 3rd-tier companies that are developing Texas oil and gas.
Oil and gas as a game changer
Much of the technology necessary to safely extract oil and gas that was previously considered non-recoverable has been developed in Texas. Because of new processes and technology, the world’s previously un-recoverable oil and gas is now being put to use. China has some of the biggest reserves and is a very large user of oil and gas. Ironically if China and other third-world countries exploit their own natural gas reserves they could do more to clean up the world’s environment than any other short-term technique. In the meantime, Texas, Pennsylvania, North Dakota, and several other states will help our country reduce its oil and gas imports, thus balancing the trade deficit. Meanwhile companies will continue to invent new technology that will make the processes more efficient, cleaner, and less expensive.
Sam Thacker is a partner in Austin, Texas-based Business Finance Solutions and is actively involved in financing 2nd- and third-tier oil and gas service and material suppliers.
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