The West Texas Cline Shale play will increase the economic output of the surrounding counties by $20.5 billion by 2022, the author of a study of the economic impact of oil and gas development in the region said Monday.
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The study conducted by the University of Texas at San Antonio Institute for Economic Development examined the effect of oil and gas operations in 10 counties in the eastern part of the Permian Basin, which is somewhat east of the center of oil and gas activity in the basin, institute Research Director Thomas Tunstall said.
"One of the things we find is there are three significant shale formations in the Permian Basin, the Wolfberry/Spraberry, the Cline and the Wolf Camp. Most of the activity right now is targeted on the Spraberry formation, west of our study area, although we expect to see a lot of that activity move eastward over to the Cline Shale over time," he said.
Tunstall said most of the development in the region is driven by oil drilling, because of crude's price premium. But he added that gas also is produced in significant volumes. "We examined both, particularly in the producing counties west of the study area," he said.
According to the US Energy Information Administration's drilling productivity report for June, projected gas output from the Permian Basin will rise to 5.62 Bcf/d in July from 5.48 Bcf/d recorded in May. Oil production is expected to remain flat at 1,522,484 b/d over the same period.
The UTSA study found that by 2022, oil and gas development will responsible for creating 30,000 jobs in the study area, which has a larger population density than the now more-active area to the west.
"The counties to the east are the ones that have the large population centers like San Angelo and Abilene ... and that's where we expect the workforce to be drawn from," Tunstall said.
The report is similar to an earlier economic development study the Institute for Economic Development did for the Eagle Ford Shale region of South Texas.
Tunstall said that after the publication of that report, West Texas community leaders asked the institute for a study focusing on their region, which is beginning to see the same rapid growth of oil and gas development that the Eagle Ford region experienced a few years ago.
"The folks in West Texas have been paying attention to what's going on in South Texas," Tunstall said.
"As in the South Texas Eagle Ford, we're urging community leaders to be thinking about ways to use this windfall to diversify their economies and to put in the types of infrastructure that will attract other industries, new residents.
"Certainly we'd like to see this become a catalyst for sustainable development," he said.
"One of the challenges that rural communities in West Texas have is that in the past few decades, for the most part, they have been steadily losing population. Hopefully these recent developments will present an opportunity to put in an infrastructure."
According to the study, in 2012 the oil and gas industry in the core 10-county study area had an impact close to $14.5 billion and supported nearly 21,450 full-time jobs.
The industry paid $1 billion in wages and salaries, generated almost $472 million in state revenues -- including $187 million in severance taxes -- added about $6.2 billion in gross regional product and contributed nearly $447 million in local governments' revenues.
Future economic impacts of the industry could vary widely, largely based on the price of oil. Under the report's low oil price scenario, the study estimates economic growth of $7.6 billion by 2022 for the region, while the high oil price scenario predicts growth as high as $34.3 billion.
Tunstall said a number of factors, including access to water to sustain oil and gas operations and the large geographic scope of the region also could impact future economic development.
"Water is certainly going to be an issue throughout Texas [and] even to [a] greater extent in West Texas," he said. "With regard to water supplies, in some cases communities are looking at the possibilities of additional reservoirs and water desalination is going to play an increasingly significant role ... ."