American Oil and Gas Reporter - February 2020 - 77

open in the region through 2021.
"Supporting the build-out of critical
infrastructure to transport oil and natural
gas is essential for the future of the industry, but expanding pipeline capacity
coupled with a reduction in capital expenditures and production growth will
drive increased competition among carriers, potentially leading to midstream
rate cuts," Longanecker speculates.
Other general concerns affecting businesses in the Permian, offers TIPRO
Chairman Eugene Garcia, president of
Hurd Enterprises LLC, relate to shifting
commodity prices, the United States'
trade war with China, and with a capital
scarcity that has forced more operators
to adopt a cash-flow-yield model and to
scale back spending on drilling projects.
Garcia says the reduction in available
capital weakened industry employment
during the second half of last year and
further cuts are expected in the first
quarter of 2020. And, he says, despite
progress with negotiations, TIPRO also
remains concerned about the U.S.-China
trade war, which has led to retaliatory
tariffs against American-made products,
including energy produced in Texas.
Several other factors may impact U.S.

oil and natural gas production and commodity prices this year, TIPRO goes on,
including conflicts in the Middle East. It
points to the attack on Abqaiq and Khurais
in Saudi Arabia last September, which
temporarily reduced Saudi Aramco production by 5.7 MMbbl/d, and this year's
escalation in U.S.-Iran tensions, which
temporarily boosted the geopolitical risk
premium on oil prices.
However, asserts Texas state Representative Tom Craddick, R-Midland,
chairman of the House Committee on
Land and Resource Management, "Unlike oil surges during previous tense
periods in the Middle East, prices may
not inflate as much as they might have
otherwise because of the growth of Permian Basin oil output. The region has
helped to mitigate the impact of lowered
output overseas."
Positive Signs
TIPRO also notes several positive
trends and momentum on key policy issues, including production cuts by the
Organization of Petroleum Exporting
Countries, progress on U.S.-China trade
negotiations, and finalizing the new
United States-Mexico-Canada Agreement
on trade.

"USMCA will provide significant
benefit to U.S. oil and natural gas producers," Garcia affirms. "Energy integration between Mexico, the United
States and Canada has been a success
story that has led to creating many new
opportunities to improve trade relations
across North America. USMCA will
help maintain and protect the ability to
sell U.S. natural gas, oil and other
refined products tariff-free to Texas'
two largest international trading partners:
Mexico and Canada."
"Notwithstanding market challenges,
the United States will continue to lead
the world in oil and natural gas production, thanks to our prolific shale formations, continued innovation, improvements and efficiencies in exploration
and production methods, and the remarkable men and women that comprise
this industry," Longanecker concludes.
"Continuing regulatory improvements
at the federal level and an expedited
resolution to trade disputes also will
support U.S. energy production, strengthen national security, and drive further
economic growth for Texas."
A Decade of the Permian Basin
may be accessed at http://bit.ly/A_Decade_Of_The_Permian.
❒

Learn more at
dnow.com/morecapacity

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American Oil and Gas Reporter - February 2020

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