American Oil and Gas Reporter - December 2016 - 87

ConventionCoverage: Permian Basin Petroleum Association
tinue to involve using additional portions
of the state's Rainy Day Fund supplied
from taxes on oil and gas, lawmakers
predicted.
Constant Change
Given changes in the legislature's
makeup, Texas Lieutenant Governor Dan
Patrick called on PBPA to stay involved
in shaping policy. "We have smart people
who work hard, but don't assume the
legislature knows anything about anything," he advised during the convention's
luncheon.
Patrick touted the importance of energy
and issues advisory boards-now consisting
of 80 participants-to drive sound policy
as lawmakers come and go. Of the 20
Republicans who occupied the Senate in
2007, 17 are gone, Patrick observed, and
of the 20 current Republican Senators,
only 13 have participated in at least one
session. Meanwhile, turnover in the Texas
House of Representatives during the same
period is 50 percent, he said.
Budget issues will be paramount this
upcoming session, he forecast. Although
a number of challenges abound, the state's
growth potential requires especially astute
leadership, he insisted. Projections estimate
Texas could add 15 million residents by
2040, Patrick pointed out. "We don't
have time to kick the can down the road,"
he said. "We need serious people from
both parties, but especially the Republican
Party."
Infrastructure Limitations
Speaking on a panel exploring issues
impacting Permian Basin operators, Midland County Commissioner Robert R.
Donnelly, president of Eastland Oil Co.,
reviewed PBPA's work to help secure
additional transportation funding for the
region.
A 2011 energy task force at the Texas
Department of Transportation produced
no additional funding for Permian Basin
roads and highways, Donnelly recalled,
and subsequent appropriations were spread
too thin. Therefore, Donnelly said he became part of an effort to push for better
funding. Now the Permian Basin region
will receive $676 million over 10 years
for highway and road improvements.
"The question is whether funding will
keep up with deteriorating roads," Donnelly considered.
According to panelist James Meier,
vice president for gas and power infrastructure at Pioneer Natural Resources,

operators active in the Delaware and Midland basins are unsure whether they will
have sufficient electricity infrastructure
to accommodate more exploration, production, processing and transportation.
PBPA has been working with utilities
and the Texas transmission grid manager,
the Electric Reliability Council of Texas
(ERCOT), to determine growth load and
identify solutions, Meier said. PBPA is
asking members to supply necessary information so transmission expansion projects, which can take from three to five
years to complete, can keep pace with
demand, he said.
ERCOT must validate load forecasts
and recommend transmission projects before the Public Utility Commission of
Texas can approve those projects, Meier
indicated, but a lack of comprehensive
data has prevented the agency from making
accurate growth and load determinations.
Midstream companies continue to expand oil and gas gathering, processing
and transportation infrastructure throughout the Permian Basin, reported Andy

Deck, senior vice president of the Permian
Basin for EnLink Midstream.
He indicated that one industry-commissioned study showed that midstream
requirements called for investing approximately $522 billion over 20 years. Of
the $6.0 billion it has spent nationally
during the past two years, EnLink has invested about $1.5 billion of that in the
Permian, he said.
Kathleen Jackson, a member of the
Texas Water Development Board, detailed
the agency's collaboration with the industry
to facilitate data sharing for the Brackish
Resources Aquifer Characterization System Program.
"Together, we will provide better information for businesses and communities
seeking to make decisions concerning
economic growth, better science for lawmakers, and better data for industry to
provide energy for future generations of
Texans," she said.
A final report on brackish aquifers
was due to the legislature by Dec. 1,
Jackson indicated.
❒

Service Rates Need To Recover
As Industry Readies For Future
MIDLAND-Entrepreneurial operators
looking to build on past successes and
continue to exploit a trove of reserves in
stacked pays insist the Permian Basin remains one of the country's surest producing
regions, but service companies hit by the
downturn hope to soon recover some of
the revenue they have lost by cutting
rates and costs to help operators stay in
the game.
Panels of service company executives
and operators explained their plans,
strategies and anticipated synergies to
the Permian Basin Petroleum Association
during the organization's annual meeting
in Midland. With lower commodity prices
dampening demand for service crews,
any activity rebound necessarily will require an increase in service company
pricing, reasoned David Christmas, region
vice president, Permian, for Schlumberger.
Prevailing service prices are unsustainable, Christmas insisted, and higher
rates are essential to allow service companies to add crews and equipment to
meet anticipated demand. Those additions
can cost between $2 million and $5

million a crew, Christmas observed. "Access to this capital will require a cash adjustment, so service company pricing has
to change to retain sustainable businesses
for all parties involved. Change is needed
to bring additional capacity back to market," he said. "Our industry needs to
rebuild a sustainable business."
In addition to increasing technological
innovation to continually enhance hydraulic fracturing and other service offerings, Schlumberger continues to work
alongside operators to look for ways to
create value, Christmas said. "Think about
the innovation and collaboration where
we can take costs out of operations,"
Christmas suggested during an afternoon
panel discussion. "Most operators in the
Permian Basin call for two cement pumping trucks at the well site. If you look at
the numbers, that pumping equipment is
put in gear less than 5 percent of the
time."
If the lack of a backup truck creates
problems with cementing a well, Schlumberger will work with the customer to
correct and address the well issue, he
maintained.
DECEMBER 2016 87

American Oil and Gas Reporter - December 2016

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