“It is San Antonio’s time.”
Within moments of each other, those words were uttered by Mario Hernandez and Judge Nelson Wolff at the Texas CEO Magazine Speaker Series Event in San Antonio. Hernandez is President of the San Antonio Economic Development Foundation and Wolff is a former Mayor of San Antonio and now Bexar County Judge.
While many industries contribute to economic growth in San Antonio, there is none bigger than the energy exploration tied to Eagle Ford shale. According to the Milken Institute in 2011, one out of every five jobs in the United States was created in Texas. Their best performing cities report listed San Antonio as the number one metro in the U.S. for economic performance.
According to Hernandez the employment growth has exceeded expectations. In a 2011 study completed by the University of Texas-San Antonio, Eagle Ford generated 6,800 full time jobs and paid $311 million in salaries and benefits in 2011. Adding in all the ancillary jobs tied to area workers, the numbers increase to 12,600 jobs and $512 million in salaries. Those statistics cover one year of operation.
Railroad Commissioner David Porter wrote in a recent opinion piece the development of Eagle Ford shale “has the potential to be the single most significant economic development in our state’s history.”
As Fort Worth has served as an anchor city for resources tied to the Barnett shale play in North Texas, now it’s San Antonio’s turn in South Texas.
Listening to experts on infrastructure, energy and development, San Antonio business leaders heard firsthand how to get in on the deal flow from Eagle Ford shale.
Judge Nelson Wolff shared statistics on the jobs being created and the dollars invested in South Texas. The numbers are significant on the oil and gas field services side:
- Baker Hughes – investing $30 million, creating 385 jobs
- Weatherford – investing $17.5 million, creating 120 jobs
- Halliburton – investing $79 – $90 million, creating 1,400 jobs
- Clearwater International – investing $19 million, creating 50 jobs
- Schlumberger – investing $30 million, creating 200 jobs (agreement in process)
For up-stream producers like Chesapeake Energy, the long-term investment will likely be over $1 billion. “When you invest this kind of money, you’re here for the long term,” said Adam Haynes, Chesapeake Senior Director. And, noted Haynes, Chesapeake is far from alone in its investment in South Texas. It is joined by Anadarko Petroleum, Petrohawk Energy, Apache, Pioneer, ConocoPhillips, ExxonMobile, Murphy Oil, Cabot, Marathon and others.
The Challenges & The Opportunities
For smaller producers like TerraFina Energy, CEO Marsha Hendler believes the infrastructure for oil and gas production is one of her biggest challenges in the Heart of Texas Field located in Bell, Burnet, Coryell and Lampasas counties. “Along with taking several years to find a mid-stream company willing to invest in a pipeline to the Heart of Texas field, we had to use equipment from Oklahoma and a fracking crew from the Texas Panhandle to handle the job.”
Infrastructure issues go beyond servicing the production of oil and gas wells. As Bart Koontz, CEO of Koontz McCombs, said, people have to have a place to sleep and South Texas is a rural part of the state that wasn’t ready for the influx of workers tied to Eagle Ford.
As real estate developers and contractors, Koontz McCombs is building what Koontz described as “one and two bedroom casita cottages” in a new housing development called Sendero Ranch in Pearsall, the county seat of Frio County, about an hour’s drive from San Antonio. “We’ve had to handle every element of development because almost nothing is there – water, wastewater, power lines – everything.”
Big producers like Chesapeake face a challenge finding skilled workers. Haynes said, “What we need is that high school student athlete who got good grades and shows mature, responsible behavior.” Once those workers are hired, Chesapeake will fully train them, pay about $60,000 per year to start and provide full benefits – all with a high school education.
For those who don’t want to work in an oil field, Haynes says employees with soft skills are needed, too, such as bookkeepers, accountants, and IT professionals. “Petrophysicists and petrochemical engineers are positions we also need to fill,” said Haynes.
Hernandez observed both the San Antonio community colleges and universities have done an excellent job of providing employees for oil & gas refining and marketing companies like San Antonio-based Valero & Tesoro and are ready to help develop the workforce necessary for Eagle Ford.
How can people invest in the production?
“Since you have publicly traded companies in the sector, buy stock,” suggested Chesapeake’s Adam Haynes. But be careful. Hendler has seen promoters soliciting investments for drilling projects over the phone and for projects that didn’t really exist. “Would you buy gold over the phone?” Hendler asked.
A great deal of business is done through relationships and without them, starting from zero can bring no results. For companies looking to expand into the boom, cash flow, equipment purchases, and connections are critical to success. “Often, it’s still who you know,” observed Hendler. According to Hendler the greatest challenge for a small independent energy group is access to investment capital.
As Bart Koontz observed, “Even though you have a good idea, you have to factor in the additional time from delays and extra costs on every project.” Koontz said his business partner, Red McCombs, has forecast 25 years for the Eagle Ford play.
Judge Wolff and others on the panel have all experienced the crumbling road surfaces in key state and county highways. “Solutions are going to require cooperation from the state level to the smallest counties,” said Wolff. And for now, there is no clear funding source to deal with the problem. “Economic development cannot happen to its fullest without good road roads and a full infrastructure,” noted Wolff.
The Texas Department of Transportation has assembled a task force to study the roads situation and look for funding options. By June, the task force plans to convene a meeting of local governments, law enforcement, oil and gas regulators and industry leaders to develop recommendations for state lawmakers. There is currently no state law to give counties the authority to mandate additional road repair fees on companies having drilling permits.
For comparison purposes, the exploration of Barnett shale in North Texas began in 1999. It currently has 14,000 producing wells, generating 1.8 billion cubic feet of natural gas. Eagle Ford Shale had nearly 221 billion cubic feet of natural gas drilled in 2011, compared with predictions of 122 billion cubic feet. The tentative forecast calls for activity to possibly peak with a total of 25,000 wells drilled versus 14,000 in the Barnett Shale play.
To attendees, Haynes offered this suggestion to be a part of Eagle Ford, “Just get on I-35 and drive south of San Antonio and take a look.”
Publisher’s Note: To read the full economic impact study conducted by UTSA and released in May, 2012 click here:
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