The Eagle Ford shale play of South Texas is now said to be among world’s largest oil and gas developments with a reported $61 billion in total economic impact on the region in 2012.
The $61 billion in economic impact for Eagle Ford in 2012 represents an astounding 144 percent increase over a reported $25 billion for the area in 2011, according to a recent study conducted by the University of Texas’ Institute for Economic Development.
“The Eagle Ford now ranks as the largest single oil and gas development in the world based on capital expenditures,” the study declared.
The report estimates that of the total economic impact generated by the Eagle Ford in 2012, close to $19 billion can be attributed directly to capital expenditures.
Comparative statistics and analysis for North Dakota’s prolific Bakken petroleum system were available for 2011, but unavailable for 2012.
Bakken impact $30.4 billion
A recent study by North Dakota State University attributed $30.4 billion in total economic impact to the Bakken in 2011, actually about $5 billion more than Eagle Ford for the same year. Still, just to keep pace with Eagle Ford in 2012, the Bakken would have had to generate roughly twice as much economic activity than the previous year.
On the job front in 2011, the Bakken accounted for nearly 41,000 full-time jobs, or about 9 percent of the state’s workforce, compared to 47,097 full-time jobs for the Eagle Ford. In 2012, employment attributed to the Eagle Ford rocketed to more than 116,000 full-time workers.
Authors of the 2012 Eagle Ford economic impact study presented one scenario based on a 14-county core area and another on a broader 20-county region. Their analysis was subdivided into six industry categories: oil and gas, drilling oil and gas wells, support activities for oil and gas operations, oil and gas pipelines and related structures construction, oil refineries, and petrochemicals.
The 14-county region produced nearly $46.6 billion in total economic impact and supported 86,000 workers in 2012, while $61 billion supporting 116,508 jobs was produced under the 20-county scenario, which includes the 14 counties most actively producing, as well as six counties that are experiencing substantial indirect and “induced” activity, according to the study.
Upstream biggest contributor
The upstream sector spread around the most cash in 2012. Based on analysis of the 14-county core area only, drilling and completions accounted for $22.3 billion in revenues and more than $9.9 billion in gross regional product (value added) impact supported by 46,500 full-time jobs. Oil and gas extraction generated an additional $16.9 billion in revenues and value added activities close to $10.7 billion.
Midstream development companies last year continued to spend millions in developing and expanding pipeline infrastructure needed to move oil and gas produced in the Eagle Ford to refineries and processing plants.
Pipeline-related construction in four counties represented close to $800 million in expenditures in 2012, the study said, adding that these activities resulted in close to $2.4 billion in total revenue impact, more than $1.1 billion in value added product, and supported 16,927 full-time jobs.
“In Eagle Ford, there are multiple, small diameter gathering systems being constructed,” the study said, noting that Plains All American Pipeline LP is close to completing four, 6-10 inch gathering pipelines, totaling 90 miles with a capacity, to gather 115,000 barrels of crude oil daily.
Double Eagle Pipeline
The study also noted that Copano Energy and Magellan Midstream Partners have teamed up to construct the Double Eagle Pipeline, a major 140-mile long transmission line connecting existing pipelines in Karnes, Live Oak, McMullen and La Salle County to Magellan’s terminal in Corpus Christi. Additionally, DCP Midstream is in the middle of building the 20-inch, 720-mile Sand Hills Pipeline, which will move natural gas liquids from Midland County’s Permian Basin, through Eagle Ford, to Mount Belvieu, near Houston. The project is expected to be fully operational by mid-2013.
And in addition to new pipelines within Eagle Ford, older pipelines are being converted, reversed, expanded and leased to companies seeking new routes for their products.
“Drilling companies have shown no indication of halting their operations within the Eagle Ford shale,” The study said. “As producers continue to extract this oil and gas, midstream companies will be called upon for transporting and processing. Construction of the pipeline network for the Eagle Ford shale is expected to continue through 2014.”
Downstream activities
Meanwhile, 2012 downstream activities from two refineries in the area produced close to $4.7 billion in revenue impact, according to the study. Valero’s Three Rivers refinery is processing close to 100,000 barrels a day of oil from the Eagle Ford, and the Nixon refinery in Gonzales County is processing nearly 15,000 barrels a day. Due to refining operations, Eagle Ford activity generated $941 million in total gross regional product in 2012 and supported 1,894 full-time jobs.
The University of Texas study also attempted to paint an economic picture of the Eagle Ford oil patch in the year 2022. Projected impacts include oil and gas extraction, oil and drilling and completion, royalties, and lease payments. Projections are in 2012 U.S. dollars.
The 14-county economic impact estimate for 2022 is $61.1 billion and 89,803 jobs. Under the 20-county scenario, $89.4 billion supporting 127,919 jobs is projected.
“In 2022, the industry of extracting oil and natural gas will still be much more dominant than any other,” the study said, noting that this industry alone with generate $32 billion in the Eagle Ford. Moreover, the top three industries within the Eagle Ford in 2022 will be directly associated with the oil and gas sector “involving thousands of workers.”
Enormous growth curve
Like North Dakota, South Texas has undergone enormous growth over the past several years due to economic activity surrounding an unconventional shale play.
For example, Eagle Ford drilling permits jumped from 94 in 2009 to 1,010 in 2010, and from 2,826 in 2011 to 4,145 in 2012.
Daily oil production went from 358 barrels in 2008, to 844 barrels in 2009, to 11,986 barrels in 2010, and to 127,965 barrels in 2011, and to 352,127 barrels in 2012, a whopping 175 percent increase over 2011.
