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Energy Update - December 2017

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December 1, 2017

The number of active drilling rigs at work in Texas is stable around 450, slightly higher than last month's count, and significantly more than last year, according to oilfield services firm Baker Hughes. Nationally, there were 929 rigs at work, up from 913 at this time last month. Overall, US crude production is steady around 9.7 million barrels/day, according to the Energy Information Agency.

Oil prices have risen at an unexpectedly fast rate over the past two months, much to the delight of OPEC members who have faced budgetary problems as of late. The price of West Texas Crude increased to $58 and the price of Brent Crude also rose to around $63 – evidence, OPEC's Secretary General Mohammad Barkindo says, of “a new optimism in the oil market not seen for a very long time.” This increase in prices will likely lead to greater drilling activity in Texas over the coming months.

A new oil refinery which will have an initial capacity of 50,000 barrels per day (bpd) is in opening stages of development in Pecos County in the West Texas Permian Basin. The refinery, to be completed in 2019 by MMEX Resources, will be one of the very few refineries built in the US in the last 40 years. An estimated 500 total jobs will be created by this project --approximately  400 construction positions and 100 operations positions upon completion. In addition to the 476 West Texas acres the refinery will occupy, MMEX Resources plans to purchase 250 acres of buffer land around the site to install cutting-edge emissions technologies which are expected to lower the environmental impact. The project will be completed in two phases, the first being the construction of a crude distillation unit for producing diesel, naphtha and residuals. The second phase will involve the mentioned large-scale refinery, capable of producing 50,000 barrels per day at first, then possibly expanding to 100,000 bpd. MMEX Resources CEO Jack Hanks explains, “The existing facilities and pipeline networks are largely unequipped to handle this growth and are limiting where products can be transported. By building a state-of-the-art refinery along the region’s existing railway infrastructure, we hope to bring a local and export market for crude oil and refined products which will add substantial job and economic growth to West Texas.”

Wind energy reached a significant milestone in Texas as it surpassed coal to become the state's second largest energy source in terms of capacity. According to the Electric Reliability Council of Texas, a new 155-megawatt wind farm in West Texas, completed in November 2017, pushed the state's wind power capacity to over 20,000 megawatts, which surpassed the 19,800 megawatt capacity of coal-fired power plants. While wind energy still trails natural gas and coal in total power generated (wind generation accounts for only 15% of total power), estimates are that it could surpass coal as early as next year. New advanced methods of predicting wind surges more accurately and further in advance could provide a substantial boost to wind power production and move it closer to reaching its capacity.