Permian Basin oil and gas executives have joined in the debate over whether to lift the nation’s 40-year ban on exporting domestic crude.
Jared Blong, chief executive officer and president of Octane Energy LLC, testified late last month on the subject before the House Small Business Subcommittee on Agriculture, Energy and Trade.
The Midlander explained that the opportunity arose from efforts to revitalize the Permian Basin chapter of the International Association of Drilling Contractors, which he served as chairman.
“It was a unique opportunity to sing the Permian Basin’s song,” he said after returning from the nation’s capital.
Testifying before the subcommittee, he described the impact lifting the ban would have on his company, which provides oilfield services support to exploration companies. He told the committee that Octane Energy, founded last year, expects sales of $3.5 million this fiscal year and currently provides project management on eight oil and gas rigs for seven operators. The company employs 12, six of them military veterans, with a goal of doubling in size over the next 12 months.
“What was interesting was the perspective of Congress on energy, which is largely colored by larger independents and integrated majors like Exxon and Chevron,” Blong said. “They don’t drive the boat out here any more.”
Instead, he said, smaller operators like Henry Resources to large independents like Concho Resources and Pioneer Natural Resources, even start-ups like Unitex Oil & Gas, are leading activity in the Permian Basin.
“Our operating companies are entrepreneurial, and that creates opportunities for entrepreneurial service companies like ours,” he said.
In his testimony, Blong said current policy is artificially suppressing the rig count “and thereby suppressing U.S. jobs, manufacturing investment, tax revenue as well as oil and gas production.” He cited a recent IHS CERA study that said domestic oil output would fall by 3 million barrels per day if the ban is not lifted because the price of domestic crude will continue to be sold at a discount, reducing investment in new production by $750 billion.
Lifting the ban, he told the subcommittee, would facilitate Octane’s direct investment in the manufacturing of an American-made rig fleet, which would create secondary and tertiary sustained job growth, contribute to growth in the investment sector and all the way through the energy sector into transportation and manufacturing. “Construction of an Octane Rig will create jobs in New York for the production of shale shakers, Ohio for the manufacture of mud pumps, and various locations in Texas for drill pipe, automation and iron, just to name a few,” he testified.
His testimony, he said, was eye-opening for committee members. “They didn’t realize that small energy companies are operating at a disadvantage courtesy of the government, when you tell them their policies are augmenting the profits of the majors and holding back job creation,” he said.
Blong said he felt he made a strong case that lifting the export ban would encourage creation of good-paying jobs, especially for military veterans. “I don’t care which side of the aisle you’re on, that resonates,” he said. “Those are their constituents, that’s their job.”
A higher rig count, he told committee members, means he could not only hire more people but create higher-quality jobs. For Octane’s consulting practice, he could conceivably add four new well site leaders at $220,000 per year per team member. Once Octane establishes its drilling company, each rig could employ up to 25 employees per rig at $76,000 per employee per year.
“Lifting the ban on oil exports would ensure the sustainability of these well-paying jobs in our company and other companies in the industry,” he testified. “The same goes for catering companies that feed rig hands, for steel manufacturers that make drill pipe, for technology companies that make wireline downhole sensors, and for countless other businesses that take part in energy exploration and production.”
He also addressed concerns that lifting the export ban would increase domestic gasoline prices. He cited studies that found lifting export bans would actually lower gasoline prices for consumers. He quoted an IHS study that found increasing global gasoline supplies would lower global oil prices and, as a result, U.S. gasoline prices because they are based on global oil prices rather than domestic oil prices. IHS estimated U.S. motorists would save $265 billion from 2016 to 2030 if the ban is lifted.
How, Blong asked, can the U.S. promote free markets around the globe when the restrictions on crude exports sends the wrong message to the nation’s trading partners? The restrictions, he said, slow job growth, restrict supplies and negatively impact the global refined product balance. The ban, he explained, creates an inefficient distribution of crude oil among refineries not only in the Western Hemisphere but elsewhere around the world.
“We have to fight for a free marketplace in all its facets,” he said, “not just pick and choose.”
Blong said he felt his comments were well-received and he is confident that, at some point in the near future, Congress will move forward with legislation to lift the export ban.
Source:
Midland Reporter Telegram
