Posted March 9, 2017
During an interview with CNBC earlier this week, API President and CEO Jack Gerard described the oil and natural gas industry’s current outlook as one of “thoughtful optimism” – based on readings from the big IHS CERAWeek energy conference in Houston. Gerard:
“Most of the people believe that we’re at a point of some stability, that the cost-cutting has taken place, they’re managing in such a way that we can be competitive globally even at lower prices. So I think a lot of people believe things are beginning to stabilize and hopefully move forward with more upside opportunity as demand begins to come back globally.”
See Gerard’s interview here:
Let’s look at some of the supporting evidence for Gerard’s assessment.
From Washington, the Trump administration has signaled support for domestic energy in executive orders urging expedited approval for needed infrastructure – specifically, the Keystone XL and Dakota Access pipelines.
Meanwhile, Congress has voted to repeal a pair of hindrances to energy development, the Bureau of Land Management’s Planning 2.0 rule and the Securities and Exchange Commission’s anti-competitive Section 1504 rule. Lawmakers continue to work on repealing BLM’s redundant and technically flawed venting and flaring rule that could result in up to 40 percent of federal wells that flare being permanently shut in, potentially costing the federal treasury millions of dollars.
All of these help advance the ball on safe and responsible domestic energy development, which 80 percent of U.S. voters said they support.
These important signals to the market are indeed being heard by the market. Earlier this week ExxonMobil announced it is expanding its manufacturing capacity along the Gulf Coast with $20 billion in investments in new refining and chemical facilities over a 10-year period. The company expects projects at 11 proposed and existing sites will create more than 45,000 jobs, many of them high-skilled, high-paying jobs with salaries averaging about $100,000 a year.
ExxonMobil Chairman and CEO Darren Woods:
“The United States is a leading producer of oil and natural gas, which is incentivizing U.S. manufacturing to invest and grow. We are using new, abundant domestic energy supplies to provide products to the world at a competitive advantage resulting from lower costs and abundant raw materials. In this way, an upstream technology breakthrough has led to a downstream manufacturing renaissance.”
This is an energy sector that’s robust, technologically advanced and innovative, one that is finding opportunities for new investments and energy development, spurring economic growth. In its latest short-term energy outlook, the U.S. Energy Information Administration estimates U.S. crude oil production will average 9.2 million barrels per day this year (up from the previous forecast of 8.9 million barrels/day) and 9.7 million barrels/day in 2018 (up from the previous forecast of 9.5 million barrels/day). EIA projects natural gas will average 73.7 billion cubic feet per day (Bcf/d) this year, rising by an average of 4.1 Bcf/d in 2018. EIA Acting Administrator Howard Gruenspecht:
“U.S. crude oil production is now expected to reach an all-time high in 2018, reflecting an increased forecast of domestic oil production growth. … Domestic oil output is expected increase to an average of 9.7 million barrels per day next year led by increased drilling in the Permian shale region of Texas and New Mexico and from rising production in the Gulf of Mexico, breaking the U.S. total annual production record set back in 1970.”
At CERAWeek, International Energy Agency Executive Director Fatih Birol said a second wave of U.S. shale energy growth is building, with more investment needed so that production can address rising global demand. Birol said new leadership in Washington is taking steps to foster increased energy development:
“[W]ith the new administration … addressing two issues – pipelines and de-bottlenecking, and the second, putting back policies for industry, making life easier for industry – we may well see the growth of shale gas in the United States may be much bigger than we all thought, and this may have serious implications for the U.S., for the manufacturing industry plus the feedstock industry …”
Put it all together and it’s critically important for U.S. policy to continue working to keep pace with America’s energy renaissance. We have the oil and natural gas reserves, the experience and the technologies to harness the country’s vast energy potential. With increased access to public reserves, a common-sense regulatory approach and a sound investment climate, America’s oil and gas companies are showing they will invest to develop the energy to fuel our economy and modern lives while strengthening our security. Gerard:
“Here in the United States with a free market, whenever there’s opportunity you’ll get somebody down here in Texas, Colorado, Pennsylvania with natural gas, and they’ll go back into the marketplace, put people to work, bring more of the rig counts going up. So it’s fascinating to watch how this is balancing out and we’re finding a new equilibrium around the globe. But a lot of that focus has moved to the United States, particularly with those shale plays, with a lot of people wondering what’s the next step. I believe our guys here in the U.S. are well-positioned … to take advantage of potential upside.”
Yes, thoughtful optimsim.
ABOUT THE AUTHOR
Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He's currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.