Recent drilling permit numbers from the Railroad Commission of Texas (RRC) show a continuing downward trend in oil production in the state.
However, the state's natural gas production remains strong -- though some industry players say even its potential is waning.
According to Ramona Nye, spokeswoman for the RRC, the downward trend in oil production is likely to continue for 2007 and beyond. The commission has several regulatory divisions that oversee the Texas oil and gas industry.
Bob Oliver, president of San Antonio-based Metano Energy, says big oil in Texas has all but come to an end.
According to information from the RRC, oil production in Texas peaked in 1972 at 1.3 billion barrels. Since then, the industry has continued to slip.
In January 2001, the annual total for crude oil production in Texas was 381.2 million barrels, compared to 344.4 million barrels in 2006, according to RRC figures.
The reason for the oil decline, Oliver explains, is that oil is found at shallower depths in the earth. Over time, those reserves have been drilled densely and depleted.
Although oil production may be declining in Texas, Nye says natural gas production remains strong, especially in the Dallas-Fort Worth area.
"There is a natural gas boom going on up there," Nye says.
In fact, in 2001 the RRC reported natural gas production at 5.8 billion mcf (thousand cubic feet) in Texas. That figure climbed to 6.2 billion mcf for 2006.
On the other hand, natural gas, Oliver says, is giving oil companies big opportunities.
"We are definitely a natural gas company," he says. "We target prospects for natural gas. That is mainly because there are no prospects ... for oil anymore."
Metano Energy was founded in March 2003 and leases about 80,000 acres of land in South Texas. The company's gross gas production is about 310 million cubic feet equivalent (MCFE) a month. MCFE is a measure that converts oil and gas production into a BTU ratio.
Oliver says about 90 percent of the oil companies have shifted focus to natural gas despite the fact that oil is in such great demand.
"There is plenty of incentive to drill oil wells, just as much as to drill gas wells," he says. "If there were oil prospects out there, we would be drilling them. There just aren't any."
Future demand
The demand for natural gas also is healthy, Oliver adds. In fact, Oliver says the industry is having the same struggles to meet demand with natural gas as it has had with oil.
"We aren't having much luck increasing the gas production higher than its original peak back in (the 1970s)," Oliver says. "Part of that reason is we are getting to the point we are drilling our gas reserves."
Oliver explains that companies are drilling smaller targets.
"We are not finding big fields," he says. "We are finding small fields that deplete out in a short period of time."
There has been discussion in the industry, Oliver says, to allow companies to drill on federal lands and to make more off-shore areas available for drilling. Unfortunately, due to the high cost of drilling offshore, most small companies cannot afford to pursue that as an option.
"It's very expensive," he says. "The big companies that can afford to do that are aggressively pursuing that."
But will those prospects help make the U.S. energy independent?
"Those days are gone," Oliver says. "There is definitely oil and gas potential in those (offshore and federal) areas. If those are opened up, it will slow down imports, but it will not make us energy independent."
Still after oil
Although a number of exploration companies have switched their focus to natural gas, others continue to be successful in oil production.
For TXCO Resources Inc., previously called The Exploration Co., oil still continues to be about 80 percent of the company's focus. "We switched from being primarily gas to being primarily oil about two years ago," says James Sigmon, president and CEO of TXCO. Sigmon says his company believes they have a large reserve of oil within its acreage in the Maverick Basin near Eagle Pass.
TXCO is an independent oil and gas company with operations in the Maverick Basin, the Gulf Coastal region, the Marfa Basin in Texas and the Midcontinental region of western Oklahoma.
"We believe we have a lot of reserves to be developed on the oil side," Sigmon says. "It serves us very well. We think it's a good time to be in the oil business."
