Texas is on its way to being 'Saudi Texas'

Here's an aerial view of a Marathon Oil drilling rig in the Eagle Ford. (Photo Courtesy Marathon Oil) Here's an aerial view of a Marathon Oil drilling rig in the Eagle Ford. (Photo Courtesy Marathon Oil) Image 1 of / 5 Caption Close Texas is on its way to being 'Saudi Texas' 1 / 5 Back to Gallery

The Lone Star State is earning a new moniker: Saudi Texas.

Oil production in Texas is soaring, so much so that production jumped to an average 2.139 million barrels a day in November — the best showing in more than 25 years.

Analysts are chalking up Texas' booming production to shale plays, especially South Texas' Eagle Ford Shale where production was minuscule just five years ago, along with a revival of West Texas' Permian Basin.

Analysts are tossing around the words “phenomenal,” “amazing” and “unprecedented” when discussing the numbers.

Since production began in the Eagle Ford Shale, the state's oil output has doubled and Texas' share of domestic oil output “has reached new all-time record high levels,” said Mark J. Perry, a professor of economics and finance at the University of Michigan-Flint and a scholar at the American Enterprise Institute in Washington, D.C.

Texas' oil production has jumped by 71 percent in the last two years, Perry said, based on data from the Energy Information Administration, the Energy Department's statistics arm.

“It's a huge, unbelievable increase,” said Perry, who has used the term “Saudi Texas” in his blog, called Carpe Diem. “It's amazing how fast it has happened. It's just phenomenal.”

To put Texas' oil production in perspective, Perry compared it to North Dakota, the nation's No. 2 oil-producing state. In November, Texas produced almost three times as much oil as North Dakota, home to the productive Bakken Shale.

Texas logged a 654,000-barrel-a-day increase in oil production in a 15-month period ending in November. “That's like adding another Bakken formation to the U.S. oil supply,” Perry said.

And the Permian Basin, once thought to be nearly played out, has reclaimed its status as a strong contributor to the state's production, experts said.

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Analysts credit the oil boom in Texas and across the country to improvements in horizontal drilling and hydraulic fracturing. Improvements in efficiency are helping, too.

The oil boom “has significant implications — both in terms of the economic base for jobs and employment and for the revenue base of state government,” said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist University's Cox School of Business in Dallas.

Texas is benefiting from the high salaries paid to workers in oil- and gas-related industries, whose annual pay averaged $112,000 in 2011, more than twice the average of $47,000 for all Texas workers, according to Bureau of Labor Statistics data.

Oil and gas workers represent just 4 percent of all workers in the state, but “when you have a salary that's approaching three times the average, that shows you the impact on the state's economy,” Bullock said.

Also, oil-field-related jobs have a relatively high multiplier effect, creating four jobs for every petroleum-related one. That doesn't even count service jobs, such as restaurant employment, created to handle oil-field workers, he said.

Severance taxes — Texas' tax on oil and gas production — “are back up as a significant source of revenue,” Bullock said, as well as local property taxes.

Oil and gas deposits in the state's rainy day fund were almost $1.9 billion in fiscal 2013 — representing almost one-fourth of the fund's $8 billion. They're estimated to be $1.7 billion in fiscal 2014 and $1.8 billion 2015.

(While oil and gas contributions to the fund have fluctuated, this year's contribution dwarfs 2011's deposit of $451 million. Eagle Ford production was just starting to make an impact that year.)

Whether the state can get a firm grip on the “Saudi Texas” handle is a matter of dispute. Experts differ on the expected longevity of Texas' black gold boom.

Texas comptroller Susan Combs noted last month that the “continued lack of vitality” in major world economies “will ultimately affect Texas ... regardless of how salutary the current oil and natural gas related activity is to our state.”

SMU's Bullock, though, is optimistic that oil prices will remain relatively high and that will continue to encourage drilling.

“Prices will go up and down for oil, but as long as the world economy maintains some modicum of growth in China and India and other developing countries, oil prices aren't going to dip too far.”

The Dallas-based petroleum consulting firm, Turner, Mason & Co., noted in a report last week that the “shale oil revolution is accelerating.” More crude oil is being tapped than was projected just a year ago, the firm said.

Senior consultant John Mayes at Turner, Mason said the general expectation is that shale plays such as the Eagle Ford won't be as productive for as long as reservoirs like the Permian Basin have been.

Yet the Eagle Ford's production is expected to last “a couple of decades more,” he said. “And remember that the way technology evolves, the life of the field could extend longer than originally anticipated.”

vvaughan@express-news.net