The wild ride continues for the oil & gas industry

Editor’s note: Andy Miller is the senior director of government and community relations for Southwestern Energy Company. He is serves as president of the Arkansas Independent Producers and Royalty Owners and as the Southeast Region chairman of America’s Natural Gas Alliance. Opinions, commentary and other essays posted in this space are wholly the view of the author(s). They may not represent the opinion of the owners of Talk Business & Politics.

There is no way to sugarcoat it – the oil and natural gas industry is in the middle of a difficult time. American ingenuity and technology have created an over-supply of hydrocarbons, resulting in very low commodity prices.

Frankly speaking, we have more of the stuff than could have been dreamed possible just 10 short years ago. It has completely changed our country’s and the entire world’s energy picture. That’s the good news – we are finally in a place where we have a measure of energy security and are not completely held hostage by those who hate us. 

It is a difficult time for producers, however. It is testing leadership and causing much anxiety and restructuring in the energy industry. We are victims of our own success. 

However, as with all commodities, the cure for low prices is low prices. It’s the law of supply and demand. Drilling rigs are being laid down all over the U.S. There will be fewer hydrocarbons produced and eventually commodity prices will stabilize. More good news is that we now know that those resources are in the ground and are recoverable. They will eventually be produced. Arkansas has been blessed by an abundant supply of natural resources and those resources will continue to benefit us well into the future.

STATE ON THE FOREFRONT
Arkansans can be proud that we have been on the forefront of the energy revolution. The Fayetteville Shale was the second unconventional play (behind the Barnett Shale in Texas) and is where much of this technology was proven. The combination of horizontal drilling and hydraulic fracturing has revolutionized the energy industry worldwide. A few notable facts:
• Today, Arkansas produces 3% of the nation’s natural gas. We are the fourth leading shale natural gas producing state and the 17th leading oil producing state in the nation. Arkansas is truly – and very solidly – an energy state and will continue to be for decades.

• An IHS Global Insight study found unconventional oil and gas activity increased disposable income by an average of $1,200 per U.S. household in 2012 as savings from lower energy costs were passed along to consumers in the form of lower energy bills, as well as lower costs for all other goods and services. That figure is expected to grow to just over $2,000 in 2015 and reach $3,500 in 2025. (You’re welcome retail community!)

• U.S. manufacturing is experiencing a comeback. Jobs are being created because low and reliable energy costs offset the lower wages paid abroad.

• Another technology allows us to liquefy natural gas – an incredibly important aspect that will make the U.S. a NET EXPORTER of natural gas by 2017. With these exports, we can help our allies throughout Europe finally lower their energy costs – and in a way that will benefit everyone, with the exception of Russia. Yes, Vladimir Putin will finally lose his stranglehold on countries throughout the eastern world when there is actual competition for natural gas supplies that have been severely over-priced for decades.

• And maybe, just maybe, pending legislation in Washington will finally allow U.S. producers to export oil for the first time since the 1970s. This is vital legislation for the American oil producing market, and your Arkansas congressional delegation is completely in favor of this legislation.

THE NEW REALITY
The truth is that our modern society is only possible through the use of energy. Welcome to our new reality – one of domestic energy security and over-abundance. It is certainly a much better problem to have than scarcity, which has been our nation’s energy challenge since the 1970s.

American technology, ingenuity and entrepreneurship have once again changed the world – and for the better I might add.