We’ve seen a number of companies around the country from various industries celebrating the recent tax cuts by handing out raises and bonuses or expanding operations. But they’ll all have to pick up the pace if they want to catch up with the nation’s oil and gas industry. Earlier this month we talked about the fact that business has been picking up at such a pace that the major producers are having trouble finding enough workers. They seem to be finding them somewhere, however… at least so far. In another significant milestone, the United States oil and gas rig count increased by a dozen in a single week. That’s the largest increase we’ve seen since March of last year. (Reuters)
U.S. energy companies added 12 oil rigs this week, the biggest weekly increase since March, as crude prices hovered near their highest levels since 2014, prompting drillers to return to the well pad.
Drillers boosted the rig count to 759 in the week to Jan. 26, the highest level since September, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. The U.S. rig count, an early indicator of future output, is much higher than a year ago when only 566 rigs were active after energy companies started to boost spending in mid 2016 as crude started recovering from a two-year price crash.
Most of those rigs are located in the Permian Basin in west Texas and eastern New Mexico. This still doesn’t put us back in record high territory, but domestic production is clearly picking up steam, creating more jobs and expanding U.S. market reach globally. One big driver is the price of crude. It bottomed out a couple of years ago as the market became saturated, with prices so low that a lot of rigs were idled because it simply wasn’t profitable to drill at that point. Now the U.S. Crude average has made it back into the range of slightly above $60 per barrel and global demand is keeping up. The current forecast is for that to increase so our rig count might be over 1,0000 by the end of the year.
Texas isn’t the only place seeing this sort of action and expansion. In Louisiana, despite massive protests from environmentalists, work began this month on the Bayou Bridge pipeline, which will cut across the southern part of the state. They’ve been held up in the permit process for years, running into one obstacle after another during the Obama administration, but now the red tape has been cut away. It’s owned by Energy Transfer Partners and the number of jobs they are bringing to the region is nothing short of amazing.
Energy Transfer has said the line will be an economic powerhouse for Louisiana that will create 2,500 construction jobs and that investors have already paid property owners $106 million for property to build Bayou Bridge.
The $750 million project will link an existing section of the Bayou Bridge line that cuts through Texas and far southwestern Louisiana to the Mississippi River. The announcement of construction comes as the U.S. Energy Information Agency recently forecast that the nation could, this year, break its all-time annual oil production record that was set in 1970 at 10.3 million barrels per day.
Other states are hustling to keep up. Pennsylvania was already doing well with all of the natural gas exploration taking place there, but the number of permits they needed to process was overwhelming the system. Rather than letting red tape bog them down, the Governor of the Keystone State just requested the funds to hire 35 new environmental regulators to inspect, process and approve permits. To cover the increased cost without sticking it to the taxpayers, they’re increasing the cost of permits from $5,000 to $12,500. The oil and gas industry doesn’t seem to mind, however, given the total revenue they can expect from a single well.
So what’s the point of all this and why does the rig count matter? Next time you’re watching some of the Democratic guests on MSNBC and CNN telling you how terrible the world is these days and how we’re all doomed, ask them what they think about this news. If this is the armageddon we were promised, it really wasn’t all that scary after all.