Just one year ago, even expert oil and gas industry analysts couldn’t have predicted the level of good fortune the industry has seen in recent months. What major developments helped to spur on the domestic industry this past year? As we break in the New Year and close the books on 2017, let’s revisit the major U.S. oil and gas industry events of the last 12 months.
OPEC/Non-OPEC Production Cuts
First of all, let’s state the obvious. Compliance with the January 1 OPEC/Non-OPEC production cuts agreement remained strong throughout 2017. This attempt at stabilizing the oil market essentially gave U.S. shale oil producers the green light to boost domestic production. In fact, in response to the agreement, the U.S. Energy Information Administration (“EIA”) increased its U.S. oil production estimate by 230,000 to 9.5 million bpd in 2018, the highest production level in 48 years.
Public Policy Environment
A change in the public policy arena has played no small role in boosting the oil and gas industry outlook over the past year. The Trump administration removed some significant Obama era regulations that stood in its way. Meanwhile, the EPA hasn’t chosen to implement any new hindrances, allowing for significant freedom in domestic exploration.
Rising Domestic Crude Prices
Largely because of the OPEC/Russia production cuts, domestic crude prices continued to rise throughout the year, something the industry hasn’t seen in quite some time. Texas light sweet prices rose approximately 37% in the past six months, from around $43/bbl to now near $60/bbl.
Increasing Rig Counts
U.S. oil and gas acted fast on the price increases and adjusted shale drilling accordingly, with rig counts hitting 631 by March of 2017, then producers scaling back when prices started dropping mid-year.
Crude Oil Export Growth
Fourth, Crude oil export continues to increase after the 40-year ban on U.S. crude exports was lifted in late 2015. Before the ban was lifted, the U.S. exported around 50,000 barrels of crude per day -mainly to Canada under a ban exemption. By November 2017, that figure had risen to nearly 1.8 million barrels per day.
LNG Export Growth
Speaking of exports, as the world moves away from coal-powered plants, global demand for natural gas hit new highs. In late 2016, for the first time in over 60 years, the U.S. became a net natural gas exporter, exporting an average 7.4 Bcf/d in November, 0.4 Bcf/d less than it imported. In response, U.S. LNG export facilities like Cheniere’s Sabine Pass and Dominion’s Cove Point are cropping up all over, and LNG export volumes continue to rise.
Across the board, 2017 has seen some major positive shifts for the U.S. oil and gas industry. I discuss more on the technical and financial factors that are impacting the modern oil and gas industry in my new book, Giant Shifts: Energy Trends Reshaping America’s Future (Sutton Hart 2017).