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Shepperd: Export capacity critical to oil industry's future growth

Permian Basin

Pump jacks work in a Permian Basin field near Lovington, New Mexico.

When I drive through the oil and gas fields of West Texas, I am filled with both pride and anxiety.

I’m proud that an unprecedented drilling boom is funding roads, schools and other essential services across the state, as well as providing a livelihood to thousands of Texans who either work in the industry or benefit by their proximity to it. But I can’t help but worry about the forces outside our control that might bring these operations to a standstill. A looming infrastructure bottleneck is one potential pitfall.

U.S. oil production recently rose to more than 10 million barrels per day for the first time since the 1970s. This milestone was achieved largely thanks to the Permian Basin, where more than 4 million barrels per day are currently produced. Energy industry analyst IHS Markit anticipates that this figure will exceed 5 million barrels per day by 2023, when the Permian will be producing more oil than every OPEC country except Saudi Arabia.

This transformation is the result of the hardworking producers in Texas and across the country, as well as Congress’ foresight in 2015 to lift the ban on crude oil exports. As most U.S. refineries are designed to process heavy, high sulfur crude oil, and those that process the light crude oil produced in the Permian are operating at capacity, much of the oil produced in West Texas is destined for export markets.

According to a report from Wayfinder Analytics, the U.S. is projected to export more than 6 million barrels per day of crude by 2023. Exporting our energy resources has benefited Texans greatly, and continued success will depend on building the infrastructure critical to maintaining not only today’s export capacity but tomorrow’s as well. Remember, in only a few short years the Permian will be overtaking Kuwait, Nigeria and Venezuela in crude oil production. That success should not be taken for granted.

Today, Very Large Crude Carriers and other supertankers — the most efficient and competitive for exporting crude oil — require deeper water depths and wider berths than those found at most U.S. ports in order to safely load. The per-barrel cost for transporting crude oil on these vessels is much lower than the smaller alternatives that can dock at our ports. The larger the ships, the more profit flows back to producers in Texas. This is why most oil-exporting countries have built networks of offshore terminals to accommodate Very Large Crude Carriers. Several more have been proposed along the Texas Gulf Coast.

As president of the Permian Basin Petroleum Association, I know that hundreds of our member companies are working tirelessly to support the energy economy in our region. And they are concerned that the infrastructure we need to export this quantity of crude oil is not keeping pace with production in West Texas, resulting in a bottleneck. Railroad Commissioner Ryan Sitton summed up these concerns at our 56th annual meeting in October, asking the audience: “What will we do when production rises above domestic demand and export capacity is not up to speed?”

Without the ability to export crude, under such circumstances market forces would necessitate a decrease in production. That would mean a loss of jobs, a loss of tax revenues and reduced support for roads, health care and schools across Texas. With the ability to export domestic crude internationally, such an outcome is avoidable, as long as the infrastructure exists allowing that production to reach the international market.

Beginning with the first offshore oil export facility in Texas proposed by Texas Gulf Terminals under review by federal and state regulators, Texas would be wise to partner with the private sector to build new projects in deep water that can handle the “stunning” (in the words of IHS Markit) Permian production expected to come online in the near future. Aligning U.S. export infrastructure with that of other advanced oil producers will increase avenues and options for future crude exports, increasing our country’s share of global energy markets and generating economic growth in our state.

The oil export bottleneck is real, and unless we take actions today to avoid it, the economic impact will not be confined to the Permian Basin. Revenues earned by those in the Permian Basin and taxes collected by local, state and federal governments from operations here not only support road projects, schools, and health care funding in areas across the state, these revenues also support economic prosperity across the state. If production in our region is restrained by obstacles that could otherwise be overcome, that restraint will be felt by us all.

Wishing away our infrastructure deficiencies will only impede the new era of American energy dominance. Instead, Texas should lead the country in embracing opportunities that enhance and bolster our energy dominance.

— Ben Shepperd is president of the Permian Basin Petroleum Association.

Today's Bible verse

“Because you are his sons, God sent the Spirit of his Son into our hearts, the Spirit who calls out, ‘Abba, Father.’ ”

Galatians 4:6

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