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Karr Ingham, an economist and owner of Ingham Economic Reporting, recently spoke at the Houston Petroleum Club about the Texas Petroleum Index and to warn them that despite booming production that turned 2013 into a record year for the Texas oil and gas sector, growth is likely to slow down soon.
Oil production in the lone star state grew more than 20% in 2013 as output reached more than 850 million barrels for the year, but for the last three months rig count fell, along with the number of people employed by the industry, and even the number of drilling permits owned. Ingham suggests that this could be a sign that the industry is bracing itself slightly for the lower oil prices expected later in 2014.
"I think we will see a solid year for exploration and production activity, and that the oil and gas economy will continue to be a great benefit to the state as a whole, but I don't think we are going to see rates of growth like this."
Texas's oil and gas sector benefited from massive increases in production from wells operating in the Eagle Ford Shale and Permian Basin, and combined with the high oil price, which rose from $94 in 2012 to $98 in 2013, the Texas Petro Index reached its highest level ever.
In 2013 the index hit 295, up from 277 in 2012, and surpassing the record of 287.6 from 2008, the year before the financial crisis after which the index fell to just 189.
Ingham explained that "it is the story of the old and the new. The old being the Permian Basin, which has turned around production in a behemoth of a region, and the new being the Eagle Ford."
In 2013 production from the Eagle Ford Shale formation contributed more than 25% of Texas' total oil output, and the Permian Basin experienced a revival in production levels, accounting for nearly 45%, compared to 32% in 2011. This helped oil and gas production in Texas to reach almost $110 billion for the year.
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Written by James Burgess at Oilprice.com.