Texas Petroleum Industry Had Unusual Year

The petroleum industry in Texas had an unusual year in 2023: it produced more crude oil and natural gas in the state’s history, but declining exploration and production indicators could be sending a different message about the future.

The Texas Petro Index, a monthly measure of growth rates and cycles in the Texas upstream economy, fell for 11 consecutive months in 2023 from 178.3 in December 2022 to 154.4 in December 2023, a decline of 13.4%.

“Rising crude oil and natural gas production and still-growing industry employment were unable to offset lower prices, fewer rigs at work, and lower values of statewide production, pushing the TPI downward in 2023 after the January peak,” said Karr Ingham, Petroleum Economist for the Texas Alliance of Energy Producers, and the creator of the TPI analysis.  “But Texas oil and gas producers, with extraordinary efficiency and productivity gains on full display, still managed to grow production significantly, setting new records for statewide output along the way.”

Statewide crude oil production in Texas surpassed two billion barrels for the first time ever in 2023 and reached a record 5.62 million barrels per day in December 2023, Ingham said. Daily production, which peaked pre-COVID at 5.45 million barrels in March 2020, finally reached and exceeded that level fully three years later in March 2023. Texas annual crude oil production in 2023 outpaced the 2022 annual total by a stout 8.5%, and comprised 42.6% of U.S. annual production.

Texas natural gas production exceeded 12 trillion cubic feet (TCF) for the first time at an estimated 12.5 TCF in 2023, an increase of 7.4% over the 2022 annual total, Ingham said.

“Surprisingly, however, these milestones were accomplished with a significant and sustained decline in the statewide rig count and fewer drilling permits issued over the course of the year,” Ingham said.  “The Texas rig count climbed to its post-COVID high of 379 in January 2023, and then fell by 76 rigs to 303 in November, before adding four rigs in December. At year-end 2023, the rig count was down by nearly 18% compared to the December 2022 monthly average.”

At the same time, the number of drilling permits declined by 16.5% in 2023.

It is unusual that production would increase by such a substantial margin (8% for oil and 7% for natural gas) while the drilling permits and the rig count decline by 18% and 16%, respectively.

Additionally, all of this occurred with a workforce that is a third smaller than it was ten years ago.

“Texas is increasingly leading the way in terms of supply growth domestically and globally, helping to meet the ever-growing demand for abundant, affordable, and reliable energy at home and around the world,” said Ingham. “For this, oil and gas operators in Texas of all shapes and sizes are worthy of thanks, not scorn, and their accomplishments in powering our economy, improving our everyday lives, and enhancing America’s energy security should be widely celebrated.”

Alex Mills is the former President of the Texas Alliance of Energy Producers