Texas drilling permits on the rise

Rebound in crude oil prices leading to more exploration and production in the Lower 48.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   Jan. 11, 2017 at 8:10 AM

AUSTIN, Texas, Jan. 11 (UPI) -- The number of drilling permits issued in Texas, the No. 1 oil producer in the country, for December was up 38 percent from last year, state data show.

Nearly half of all the activity in exploration and production in the United States took place in Texas, a state that saw layoffs and economic downturns after the price of oil dropped below $30 per barrel in early 2016.

Oil prices recovered lost ground after members of the Organization of Petroleum Exporting Countries in November agreed to limit production in an effort to ease the supply-side pressures dragging on crude oil prices. The oil price recovery, however, has brought U.S. shale producers off the sidelines, adding to some re-emerging concerns about a potential glut of oil.

The Railroad Commission of Texas, the state energy regulator, said it issued 1,009 original drilling permits in December 2016, up from the 727 recorded in December of the previous year.

Last week, Karr Ingham, an economist with independent Texas Alliance of Energy Producers, said the reaction to the rally in oil prices that followed OPEC's decision was net positive for the United States. What OPEC cuts in output "will be produced elsewhere -- Texas and the United States most notably," he said.

The latest forecast from the U.S. Energy Information Administration forecasts production from the Lower 48 states at 6.8 million barrels per day for this year, up marginally from 2016. Most of that growth is expected to come from the Permian shale basin, centered in Texas and parts of New Mexico.

EIA had expected a general decline in Lower 48 production this year, but recalibrated its forecast to reflect the increase in crude oil prices in recent months.

"The current price outlook is expected to support onshore drilling and well completions, which are expected to be complemented by continued increases in rig and well productivity along with falling drilling and completion costs," the federal report read.

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