Oil

Petroleum’s Impact on Mississippi’s Economy

Behind the electric power industry, petroleum production, refining, storage, and distribution is the second largest segment of Mississippi’s energy sector, and these two sectors make up the vast majority of Mississippi’s energy sector. Because of high average wages in the energy industry and the wealth produced through the value chain, the sector has a disproportionate impact on the state’s economy. While direct employment in energy may only be about 2% of total state employment, the sector accounts for about 9% of state GDP.

Oil production in MS has increased due to unconventional production methods. First, the naturally occurring presence of CO2 along with decades of private pipeline infrastructure investment has enabled the growth of the enhanced oil recovery (EOR) industry, which injects CO2 into previously produced oil fields to significantly increase the productive life of the resource. EOR makes up more than half of all oil production in MS today and will hopefully continue to rise. The reversed trend from decreasing production to increasing production, which started around 2004, is due to EOR development.

Also hopefully contributing to growth in Mississippi oil production will be the development of the Tuscaloosa Marine Shale (TMS) in southwest MS. Drilling permits are up and development costs have decreased, but the drop in oil prices has now added to the economic and technical challenges of the TMS. Growth in production is expected, but the rate in growth ahead, due to the marginal economics of this shale play compared to others, is unknown. Oil prices will dictate investment levels in 2015 and beyond.

Chevron Celebrates Completion of Premium Base Oil Project

Earlier this month, Chevron celebrated the completion of their Premium Base Oil Project. The company invested $1.4 billion in the local economy, created more than 2,000 construction jobs, and permanently created more than 30 jobs. Completion of this project positions Chevron as the world’s largest producer of premium base oil.

How the State Fuels Up

Energy, mostly in liquid fuel forms, propels the transportation economy.

As with electric power, every family and business depends on transportation fuels daily. Today, more than 5 billion gallons of fuel are used each year in the Mississippi economy. Gasoline  makes up 85% of this total, and diesel – both on-road and off-road – makes up 14%. Aviation and jet fuel account for the remaining 1%.

The supply system consists of a network of petroleum refineries, interstate pipelines, fuel terminals, distributors, and retail outlets. The map below shows the major transportation fuel distribution assets in the state.

Fuel Asset Map w CO2

Chevron Base Oil Plant Begins Production

Courtesy of Chevron.

Courtesy of Chevron.

The Pascagoula Refinery, Mississippi’s largest energy asset, announced today the beginning of commercial production of the base oil project, a $1.4 billion addition to the Refinery. The base oil plant will produce about 25,000 barrels per day of lubricant oils that will supply customers in Europe, Latin America, and eastern U.S. For more details, click here: http://blog.gulflive.com/mississippi-press-news/2014/07/chevron_refinery_begins_produc.html#incart_river

Enhanced Oil Recovery an Ideal Opportunity for Mississippi

Mississippi Energy Institute President Patrick Sullivan was featured in a WLBT report concerning yesterday’s Symposium on Enhanced Oil Recovery. Sullivan commented that EOR has been a multi-billion dollar business in Mississippi just in the last ten years while also employing hundreds of Mississippians with economic reach beyond in the thousands. See the full report in the following link and read more about the symposium below.

WLBT_03-06-2014_17.05.22

By JEFF AMY, Associated Press | March 6, 2014

JACKSON, Miss. (AP) — Gov, Phil Bryant and others are extolling Mississippi as a national leader in using carbon dioxide to extract more oil from old oil fields.

A conference hosted Thursday in Jackson by Rice University and Mississippi State University discussed expanding what’s called enhanced oil recovery. Proponents say it could be a way to increase oil production while at the same time storing carbon dioxide underground, mitigating global warming.

A majority of Mississippi oil production today comes from using carbon dioxide in older fields, driven by an underground carbon dioxide source called the Jackson Dome, which is piped to fields.

“It is amazing the success we are having with enhanced oil recovery in Mississippi,” Bryant said. “Our goal must be energy independence.”

Visitors from states including Michigan said they’d like to push up oil production using carbon dioxide, but don’t have available supplies like the Jackson Dome. But academics and industry officials hope they can increasingly use man-made carbon dioxide from sources such as power plants. Mississippi Power Co.’s Kemper County plant is meant to extract carbon dioxide and sell it to oil companies.

“We’ve got to take it out of the smokestacks and the processes where it’s produced,” said Charles McConnell, executive director of Rice’s Energy and Environment Initiative. “We’re not in a situation where we can look at this as a waste product.”

McConnell said that up to 40 percent of all American oil production could come from enhanced oil recovery. He argued that with increasing energy consumption in Asia, it’s necessary for the United States to seek any method to increase oil production.

“It unlocks reserves that couldn’t otherwise be realized,” McConnell said.

Jostein Mykletun, a Norwegian diplomat based in Houston, said he was following up on a visit last year by the Norwegian minister of petroleum to a Mississippi power plant. Norway has been developing methods to capture and store carbon dioxide, but has struggled.

“We haven’t been able to bring it up to scale,” Mykletun said.

He told attendees he’d talked to Bryant and hopes to build a partnership with Mississippi universities to study issues around carbon capture.

Mississippi doesn’t tax carbon dioxide pulled out the ground and has cut severance tax rates on oil production. But lawmakers have debated anew this year how the state should regulate and tax carbon dioxide. Some lawmakers wanted to force Denbury Resources Inc. to open its private pipeline to others who wanted to ship the gas, and to tax carbon dioxide that the Plano, Texas-based company is shipping out of state. Proponents of those moves argue that there are many small oil fields that could be brought back into production if more of the gas stays in Mississippi.

Denbury has fought off those moves, supported by many in the state’s existing oil industry.

“They were looking at the issue with a lack of understanding about the capital-intensive nature of the business and the sometimes razor-thin margins,” Patrick Sullivan of the Mississippi Energy Institute said of proposed legislation.

Keith Bowman, who works for Tellus Operating Group, another Mississippi producer, said cutting costs is key to developing smaller fields in Mississippi

“We need to develop the technology on a smaller footprint, which will require some kind of mobile and modular infrastructure that can be moved around,” he said.

Mississippi to Partner with Alabama in Oil Sands Resources Study

Governor Phil Bryant speaking with Governor Robert Bentley of Alabama. Photo Credits: Donna Harris, The Sun Herald

Governor Phil Bryant speaking with Governor Robert Bentley of Alabama. Photo Credits: Donna Harris, The Sun Herald


Governor Robert Bentley of Alabama and Governor Phil Bryant of Mississippi announced plans to partner up to further study the oil sands resources in the two states. The announcement came while both governors were addressing the Southern States Energy Board.

Northeastern MS and Northwestern AL share a formation, known as the Hartselle Sandstone, believed to contain large volumes of oil recoverable from oil sands. One study estimates 7.5 billion barrels of oil is in this reserve, but more detailed information is needed.

The Governors signed a memorandum of understanding commissioning an assessment of the oil sands formation to initiate a more thorough analysis of the resource. Oil sands is a sandy mixture found below the surface containing bitumen. After extracting the sand, the bitumen is transformed into refinery-ready crude oil.

The assessment is to be conducted as a joint effort between the Geological Survey of Alabama/State Oil and Gas Board, the Mississippi State Oil and Gas Board, the Mississippi Development Authority, the Mississippi Office of Geology and the Southern States Energy Board.

Hopefully, this resource can be profitably produced to create jobs and revenue for the local economies. With oil field jobs, on average, paying more than twice the average private sector wage, development of this formation could have a noticeable impact in these two states.

A Tale of Two States: One Energy Rich, the Other Decision Poor

In case you missed the Wall Street Journal’s recent editorial (5/4) comparing oil booming Texas to over-regulated California, we wanted to be sure to highlight this important story because it’s a not-so-micro microcosm of the energy opportunity facing our country.

California, once one of the top three energy producing states in the nation, has lost its top spot to North Dakota, who now joins energy titans Alaska and Texas.

The column points out how impactful an expanding energy industry can be to a state’s economy when it welcomes energy development.  Restricted by politics and policy, California is unable to take advantage of its offshore reserves and the Monteray Shale, both believed to be abundant resources. Meanwhile, Texas is capitalizing on its private leases within the Eagle Ford shale and doubling its oil production.

Stats show that more than 400,000 Texans work in the oil and natural gas industry – nearly 10 times as many as in California. The average salary is $100,000 in an industry that generates $80 billion a year in economic activity. The Journal goes on to say:

In short, Texas loves being an oil-producing state while California is embarrassed by it. And it’s no accident that Texas has been leading the nation in job creation since the recession ended. The energy boom is creating thousands of jobs related to drilling but also in downstream industries such as transportation, high-technology, construction and manufacturing. The Texas jobless rate is 6.4% while California’s is still the third highest at 9.4%.

In short, the editorial presents an excellent case study of the two states’ economies and poses the question of whether the nation will embrace America’s oil and natural gas wealth with comprehensive pro-development policies.

How Energy Makes Business Boom

Most of the American public probably hasn’t grasped the significance of unconventional oil and natural gas development. While remaining cautious about the potential volatility of commodity markets is wise, many see new energy development opportunities having a long-lasting impact on markets. NBC News recently provided a good overview of how the energy boom is beginning to ripple through the US economy. Without a boom in US energy production, which has far reaching impacts, we should wonder what shape the economy would be in today.

Goodrich Petroleum Announces Tuscaloosa Marine Shale Well Report

Goodrich Petroleum Corporation announced the completion of its Crosby 12H-1 (50% WI) well in Wilkinson County, Mississippi. Read more details about the well here.

EPA Updates Standards

The Environmental Protection Agency has finalized the first federal air and emissions standards associated with hydraulic fracturing (also known as fracking). The new standards would require companies to implement “green completion” techniques where gas is captured at the end of drilling, separated from the water and is routed through a pipeline for sale. The methane gas could then be sold by the oil and gas companies instead of emitted into the atmosphere. The standards do not go into effect until January 2015. giving oil and gas companies time to manufacture and implement these techniques. Read more here.

The EPA has also released new regulations on greenhouse gas emission standards for new coal power plants. These regulations would require new power plants to release no more than 1,000 pound of carbon dioxide per megawatt-hour. This limit is not achievable for coal plants without a carbon capture system.