The best thing about 2017 is that it is not 2016, according to Ohio oil and gas producers.
Commodity prices remain low but are up from last year, and there are encouraging signs in the marketplace. This was the sentiment as industry leaders gathered for the Ohio Oil and Gas Association’s winter conference on Thursday.
“There is a more optimistic mood now because we just came through a real trough and hopefully we’re going to see some moderate, continued increases,” said Mark Jordan, president of Knox Energy, an oil and gas producer based in Pataskala.
Also, this is a crowd that likes what President Donald Trump has to say about eliminating regulations.
“This new administration has given a little pep to everyone’s step,” said Shawn Bennett, the association’s executive vice president.
The oil and gas industry has been a key driver of the state’s economy, with an energy boom at the beginning of this decade followed by a bust that began in late 2014.
The continuation of that bust was in evidence in Ohio last year, when:
• The state approved 300 permits for new oil and gas wells, a huge drop from the high of 680 in 2014.
• Ohio oil production plummeted in response to low prices, with about 4 million barrels produced in the third quarter of 2016, down from about 6 million in the prior-year quarter.
However, natural gas production increased despite low prices, as many recently drilled wells have been in areas with plentiful gas and as energy companies see gas prices as more favorable than oil prices.
The data come from the Ohio Department of Natural Resources and refer to permits and output from horizontal wells in the Utica and Marcellus shale formations.
There are two big underlying problems facing the Ohio oil and gas industry this year. First is pricing.
The country’s benchmark oil price bottomed out last year at less than $30 a barrel, the result of a worldwide supply glut. Current prices are in the $50 range.
Natural gas prices bottomed out last year with a benchmark price of less than $2 per 1,000 cubic feet of gas. Prices are now in the $2.50 to $3 range.
The second big problem for Ohio producers is a lack of pipelines and other infrastructure to transport gas to out-of-state markets.
Oil and gas companies expect to see improvements in pricing and in the availability of pipelines. Several pipeline projects are under construction or in some phase of planning.
And that should lead to the availability of money for investment in drilling and production, said James Aslanides, owner of MFC Drilling, Inc. in Coshocton and the recently named president of the Ohio Oil and Gas Association.
He and others in the industry are closely watching the investment decisions of large energy and financial firms that are considering sinking money projects in Ohio and other energy-producing states.
“Capital is a real wild card in our industry,” he said. “However, it does seem positive this year. We have to wait and see.”
The association has said that Gov. John Kasich’s proposal to increase the so-called “severance” tax on oil and gas would discourage investment. Kasich has renewed his attempt to pass an increase in the tax, but legislative leaders have indicated they do not support the idea.
A year ago, during tough times, those in the industry put on brave face at the annual conference. Now, in an improved situation, members were more willing to acknowledge the concerns they felt then.
“It’s great to see excitement in here,” Bennett said. “Last year was very solemn. People were worried, very worried.”
From The Columbus Dispatch | March 10, 2017
