Entering 2018, even as it is seeing the benefits of relaxed regulation under a new administration, the US exploration and production industry nonetheless is facing significant challenges, the leader of the Independent Petroleum Association of America said in an interview Thursday.
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Industry participants expect to save about $300 million a year as a result of the Trump administration's rollback of about 10 regulations promulgated under the Obama administration, IPAA CEO Barry Russell said.
Russell said that under Obama, federal agencies, such as the Environmental Protection Agency and the Bureau of Land Management, began to assume more control over oil and gas operations through the imposition of tough environmental regulations.
Under Trump, "we're kind of rebalancing the state and federal relationship back to the way it was traditionally," Russell said.
He said that under Obama, the industry saw "a tsunami of proposed regulations," which added unnecessary costs to the production of oil and gas without providing any substantial environmental benefits. The result was a massive expansion of the federal regulatory bureaucracy. "It was like a big federal DMW," he said.
Even with the change of administrations, going forward the industry still is being confronted by a flurry of lawsuits, filed by environmental groups challenging the rollback of the Obama-era regulations. Russell said IPAA would continue to represent the independent producers in that litigation.
IPAA OPPOSED REMOVING FLORIDA FROM OFFSHORE PLAN
US Exploration and Production Milestones by Year
|Natural gas consumption||2016||27,491 Bcf*|
|Natural gas exports||2016||2,335 Bcf|
|Natural gas production||2015||28,753 Bcf*|
|Total industry employment||2014||2.2 million|
|Producing gas wells||2014||503,290|
|Oil wellhead price||2013||95.99/b|
|Gas wellhead price||2008||$7.97/MMBtu|
|Oil and Gas Revenues||2008||$12.6 billion|
|Gas wells drilled||2006||32,838|
|Petroleum imports||2005||13.7million bbls|
|Petroleum demand||2005||20.8 million bbls|
|Producing oil wells||1985||646,626|
|Active rotary rigs||1981||3,970|
|Total wells drilled||1981||92,090|
|Oil wells drilled||1981||43,887|
|Dry holes drilled||1981||27,953|
|Exploratory wells drilled||1981||17,573|
|Crude oil production||1970||9.6 million bbls|
*Based on preliminary estimated data
Source: Independent Petroleum Association of America
Despite giving overall high marks to the Trump administration's performance regarding the oil and gas industry, Russell did take exception to one recent administration action. "We're a little disappointed," he said, by Tuesday's announcement by Interior Secretary Ryan Zinke that the administration's proposed five-year Outer Continental Shelf leasing plan would not include the federal waters off the coast of Florida.
"We wanted to see it go through more of a process," which would have allowed the independent upstream industry to weigh in on the question of drilling off of Florida's coasts, Russell said.
On the technology front, recent improvements in drilling and completion technologies have vastly improved the productivity of oil and gas wells, thereby enabling producers to continue to operate profitably, even in a relatively low oil and gas price environment, Russell said.
"Now the industry has the ability to drill eight miles horizontally," he said. Improved technology has also allowed producers to reduce the time needed to drill and complete a well, leading to greater operational efficiencies.
Meanwhile, the IPAA is working to confront other challenges facing the upstream industry, such as addressing the need for increased takeaway pipeline infrastructure; the high rate of turnover among experienced oil and gas workers and the thorny problems revolving around royalty rates for oil and gas production.
The needed build-out of energy transportation infrastructure is being thwarted by some Northeastern states, which are putting up unnecessary roadblocks in the path of needed pipeline projects, Russell said. "It's a shame people in New England are paying more than the rest of the country for gas because New York is not letting pipelines get through," he said.
US POISED TO BECOME DOMINANT ENERGY EXPORTER
The production renaissance that the upstream oil and gas industry is undergoing "is also important on a world level," he said, adding that IPAA has been at the forefront of efforts to promote the opening of export markets for US-sourced oil and gas.
With the global market for petroleum-related products, such as petrochemicals and LNG, expected to increase substantially in coming years, the US must take advantage of its opportunity to become a dominant energy exporter, he said.
"It's important for the geopolitical balance," he said, adding that a substantial increase in US energy exports would serve to weaken the international influence of countries such as Russia and Iran, whose global interests are at odds with those of the US. "That's a very positive development," he said.