SAN ANTONIO – Expect a rise in the oil and gas industry by the end of this year is what experts from Invesco shared during the Fifth Annual Eagle Ford Consortium in San Antonio.
Darrin Turner, Managing Directors with Invesco who performs quantitative and fundamental research on real asset securities addressed the consortium about the future of the shale play. His primary portfolio responsibilities include midstream energy, utilities, renewables and transportation infrastructure on a global basis.
“We have been waiting for the consumption of oil to catch up to the supply and we believe we are just about to hit that in the coming month,” Turner said. “We will have a much faster recovery coming by the end of 2016 even with the supply and demand. We believe we will be under the supply in 2017 which will lead to more drilling.”
The prime time of the Eagle Ford Shale climbed quickly in 2015 but OPEC drove the market to a virtual standstill in this shale play. OPEC began to drill at 1.5 million barrels a day to drop prices down.
“OPEC thought they could stop drilling in the U.S. by doing so. They succeed in Columbia, Venezuela and Nigeria,” Turner said. “What we are seeing now is Saudi Arabia and Iran fighting it out for the market share leaving the U.S. to begin drilling again.”
Columbia’s drilling is down 100 percent, Ecuador and Mexico have seen a huge decline in rig counts. In the U.S. the Permian Basin and Marcellus shales have been the only drilling in the country that has continued even with the fall in crude oil prices due to the low cost of frac drilling.
“We see the Eagle Ford Shale coming about as the natural gas comes about. With the retirement of fossil fuel it will generate a different market worldwide,” Turner said. “China is coal based and natural gas will replace it. The U.S. will surpass Russia by 2017 in natural gas and based on that countries instability, the U.S. will be in prime position to deliver.”
Natural gas exploration has already begun and the United States and is expected to triple in LNG exporting to Mexico and beyond in the next 10 years according to Invesco. The Port of Corpus Christi will be a huge part of the exporting of this gas.
“The dredging of the port will allow us to do more,” Chief Commercial Officer Jarl Pederson with the Port of Corpus Christi said. “With Cheniere coming along, the exportation of natural gas to South America and European countries will be huge for South Texas.”
Presently the price of natural gas is 2.40 MMBtu.
“We expect natural gas to reach 3.00 and 4.00-5.00 within the next five years,” Turner said. “Natural gas will be a high commodity in countries that are coal dependent right now as we move to a cleaner fuel.”
The resurgence of the oil and gas industry could occur as early as October according to Invesco, but the effects of its slowdown have taken a toll in the Eagle Ford Shale as far as unemployment rates.
“While the unemployment rates have taken a hit across the shale, we have seen many of these folks learn to diversify their line of work because of what they have learned from the oil and gas industry,” Texas Workforce Commissioner Julian Alvarez III said. “While shale play in the Eagle Ford has slowed down, many workers have moved on to either new fields or to another shale play.”
According to Alvarez 60 percent of 30 year olds have a skill certificate on some sort because of the shale play.
“This means these folks have skills that can be used to cross train while the oil and gas industry comes back. We have drivers that can easily go to work as a Wal-Mart or H-E-B delivery or even UPS,” Alvarez said. “This is what we are seeing in the Amarillo and Dallas area where the rates have not been really affected.”
Unemployment rates from April 2016 saw McAllen at a 7.2, Beaumont 6.1 and Corpus Christi 5.3. While Eagle Ford Shale counties like Bee had a 7.3, Dewitt 6.6, Atascosa 5.3, Live Oak 5.1 and Karnes 4.9.
“The Corpus Christi area has the best chance for people looking for jobs from the Eagle Ford Shale to find a place of employment with all the natural gas industry and port activity going on there,” Alvarez said. “We are seeing the Eagle Ford Shale folks either moving to the Corpus Christi area or commuting for these jobs.”
While rig counts may be down dramatically from three years ago, Turner said that will be a thing of the past come fall as supply and demand levels begin to change worldwide.
“While the price of oil and gas had a huge impact in South Texas, the goal of the Eagle Ford Consortium is here to assure ourselves of sustainable communities within the shale,” Consortium Chairman Leodoro Martinez Jr. said. “Now more than ever, we must be cognizant of the economic, workforce and business development that has been effected in our communities. Now is the time to seriously engage in a sober analysis of where our communities have been and where they are going.”