Low oil, gas prices dampen booming Texas power use

OREANDA-NEWS. May 20, 2016. Booming electric demand growth in Texas' busiest oil and natural gas producing regions has finally begun to slow amid the ongoing slump in commodity prices.

So far this year, electric demand in west Texas power zones that encompass the prolific Permian basin producing region fell by just under 0.7pc compared to the first four months of 2015.

That decline is just a bit less than the 1.1pc drop in overall power consumption across Texas' primary grid in 2016, but far below the 5.4pc growth in demand the Permian saw in 2015 over 2014, according to data from the Electric Reliability Council of Texas (ERCOT).

In south Texas, an area that covers most of the counties that comprise the Eagle Ford shale formation, power use remains resilient this year, climbing by 1pc from the same period in 2015. That's down from the 3.4pc growth in 2015 over 2014.

Beginning in 2008, power use began to soar in areas of Texas where companies like Occidental Petroleum, Pioneer Natural Resources, EOG Resources and others used horizontal drilling and hydraulic fracturing technology to tap into vast shale resources.

Overall power demand in ERCOT grew by 10pc from the beginning of the shale boom in 2008 through 2014 while electric use in the Permian soared by 35pc and in the Eagle Ford by 23pc in the same years.

Electric demand is mostly needed for above-ground oil and gas activity, such as processing to separate crude from gas and to prepare and compress gas for pipeline transportation. Initial drilling and fracturing tasks needed to unlock energy resources from rock formations thousands of feet below the surface largely use diesel-fueled equipment or portable generators.

ERCOT electric output reached a record 347mn MWh in 2015 even as energy prices were sliding toward the lowest levels in more than a decade.

Gas-fired power plants have fueled 47pc of Texas power generation this year, down slightly from a record 48pc last year.

Despite the current low-price environment, output from the Permian — the largest US oil-producing region and the second-largest US gas-producing area — continues to grow as many producers sell assets elsewhere to focus on the area and improve the efficiency of their operations.

Oil output in the Permian continues to exceed 2mn b/d this year despite a 47pc drop in the number of active rigs drilling. April production rose to 2.035mn b/d, up 6.5pc from April 2015, according to the Energy Information Administration (EIA) which includes output from New Mexico. April gas output was 7.07 Bcf/d (200mn m?/d), up 8.4pc from the year-earlier period.

In the Eagle Ford region which covers a swath of south Texas from San Antonio to the US-Mexico border, oil and gas production peaked in March 2015 when more than 270 rigs were working. The Eagle Ford rig count has dwindled by 84pc to 42 in April. Oil output that month was 1.33mn b/d, down by 21pc from the year-earlier period, the EIA said. Eagle Ford gas production was 6.59 Bcf/d, down by 11pc from April 2015.