Texas saw its crude oil and gas reserves fall the most last year as commodity prices dragged down reserve levels across the U.S. amid continued economic woes brought by the downturn.
The nation’s top oil-producing state saw its crude oil reserves fall by about 1 billion barrels (Bbbl) from 2014 to 2015, according to the data released this week by the U.S. Energy Information Administration (EIA). Reserve additions from the prolific Eagle Ford and the Permian’s Wolfcamp shale plays were not enough to compensate for losses in other areas.
Natural gas proved reserves also dropped by 20.6 trillion cubic feet (Tcf) in Texas.
Data from the EIA show overall crude oil proved reserves fell by nearly 12% to 4.7 Bbbl in the U.S. by the end of 2015, compared to the previous year. During that same timeframe, natural gas proved reserves sank by more than 16% to end the year at just more than 324 Tcf.
“Downward reserves revisions are likely in EIA’s next report for year-end 2016, but probably not to the same degree as in 2015,” the EIA said. “Lower prices have curtailed drilling and made the economics more challenging in 2016. Although technically recoverable resource estimates are not necessarily reduced by lower prices, the calculation of proved reserves is sensitive to price changes.”
North Dakota, Gulf of Mexico, California and Alaska saw oil reserves fall, while Pennsylvania, Oklahoma, West Virginia and Wyoming saw its gas reserves tumble.
The explanation for the declines, according to the EIA, are the “more challenging economic and operating conditions” the industry has faced since oil and gas prices began to tumble in 2014. The world’s abundance of oil and gas resources, including in the U.S. where E&Ps have gotten better at getting resources from the ground with the help of technology and improved drilling techniques, outpaced demand.
The inability to fetch as much money from oil and gas as in the past prompted companies to slow drilling and leave wells uncompleted as West Texas Intermediate crude spot prices plummeted 47% to about $50 from 2014 to 2015 with Henry Hub spot prices falling more than 40% to $2.62 per million Btu in 2015.
However, some states bucked the trend.
Development in the Wolfcamp Shale, coupled with that of the Bone Spring carbonate, Strawn sandstone and Avalon shale, for example, helped pushed up crude oil and condensate reserves in New Mexico by 31 MMbbl.
In addition, action in the Utica-Point Pleasant Shale play contributed to Ohio adding more than 5 Tcf of natural gas proved reserves, the EIA said. The added reserves were enough to push Ohio past Arkansas and the Gulf of Mexico to become the ninth-largest natural gas reserves holder for 2015.
Rising commodity prices plus commitments by some OPEC and non-OPEC producers to cut output could improve the outlook as some E&Ps step up drilling.
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Analysts said the most core projects will move forward, while shorter-cycle developments will see the most dramatic investment cuts.
Apache said it would cut 85 people in its Midland, Texas office, while oilfield firm FTS International said it would lay off 35 workers in Fort Worth, Texas and 85 workers in Hobbs, N.M.
Most of EOG Resources's activity this year will be in the Eagle Ford Shale and the Permian's Delaware Basin, a company executive said, adding it could reduce some plans if necessary.