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Demand for gas drives increased drilling, jobs West Texas drilling activity up as surge in prices drives the search for natural gas Betsy Blaney Associated Press Writer
The surge in natural gas prices has been a boon for the Permian basin in West Texas, leading to an increase in rigs and jobs, industry officials say.
Two years ago, the Permian basin had 131 active drilling rigs. Today, it boasts 214 rigs — nearly half the statewide total of 497.
The increase in rigs allowed operators to complete 680 new wells in February, the highest number in more than 30 years, according to the Texas Railroad Commission.
Each new rig creates about 100 jobs, said Morris Burns, executive vice president of the Permian Basin Petroleum Association.
“That means that there’s another 10,000 jobs in the oil patch than there were two years ago,” Burns said March 30. “We’ve got a lot of people developing new prospects and drilling new wells.”
The new workers owe their jobs to the rising price of natural gas, in the view of Gary Flaharty, director of investor relations for Houston-based Baker Hughes, which has tracked the rig count since 1944.
“The price has been in excess of $4 for a thousand cubic feet for a long enough time that it’s worth drilling,” Flaharty said.
Natural gas prices began rising quickly in November and have remained high for several months. Analysts have expressed surprise, noting that inventories have seemed adequate, but demand has been rising. Texas largest U.S. producer, consumer of natural gas Texas is the country’s largest producer of natural gas, averaging 5.7 trillion cubic feet per year, nearly 30 percent of the U.S. total. In addition to those in the Permian Basin, other rigs are active in the Lubbock, Amarillo and El Paso areas.
It is also the largest consumer of natural gas in the nation, at 3.9 trillion cubic feet annually. Demand has been rising with the population but mostly because of a jump in the number of gas-fired power plants.
Since 1995, 56 such plants have been built in the state — an unprecedented binge — said Charles Matthews, a member of the Texas Railroad Commission.
The same trend has taken place nationwide. As a result, the amount of natural gas burned nationwide to generate power rose 56 percent from 1993 to 2002, outstripping the growth of coal and oil in power production, according to the Energy Department.
The volatility has led to turmoil in the natural gas industry, said Cloyce Talbott, chief executive of Snyder-based drilling company Patterson-UTI Energy Inc., which owns the nation’s second-largest fleet of land-based rigs.
Talbott said the country long assumed that natural gas was plentiful and cheap, leading to the building of so many gas-fired power plants that demand now outstrips supply. Companies finding smaller pockets of gas, producing them more quickly “We’re finding smaller pockets of natural gas, producing them at a higher rate quickly, and the decline rates are going up,” Talbott said. The decline rate is a measurement of how quickly a gas reservoir is being drained.
“It’s really a hell of a mess,” Talbott said. “It’s good for people like us, but it’s not good for the people of this country.”
Alex Mills, president of the Texas Alliance of Energy Producers, disagreed. He said natural gas used to be a byproduct of oil drilling but is now a separate industry.
“The exploration effort for natural gas has really just begun,” Mills said. “And that’s the exciting part of the natural gas business. As long as you’ve got a good steady demand for natural gas, people are going to look for it.”
Nationwide, 1,150 rigs were working the week ending March 26, up from 962 a year ago, according to Baker Hughes, far below the 1981 peak but an improvement from the low of 488 rigs in 1999.
Of the active rigs, 982 were exploring for gas, 165 were looking for oil and three were listed as miscellaneous.
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