Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

The Permian paradox: Texas shale players go green to drill more

Stock Markets Nov 08, 2019 07:54AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Wind turbines operate at sunrise in the Permian Basin oil and natural gas production area in Big Spring

By Arpan Varghese

HOUSTON/BENGALURU (Reuters) - As the thirst for electricity to power drilling rigs in West Texas drives the state's energy needs to new highs, oil and gas companies are increasingly relying on wind and solar power to ensure that the shale boom continues.

Oil and gas firms operating in the Permian shale basin in West Texas, the nation's biggest, have been largely behind growth in the area's energy demand, according to Electric Reliability Council of Texas (ERCOT), which oversees most of the state's electricity grid.

Securing ample, reliable energy supply is critical to sustaining the shale boom that has helped the United States eclipse Saudi Arabia and Russia as the world's biggest oil producer.

Wind and solar farms help oil and gas producers lock in a growing part of that supply in a way that can be easily tailored to their needs as they keep ramping up production, industry experts say.

"Gas generation gets cheap if you're building at a large scale. But if you're trying to build to match your refinery or E&P (exploration and production) operations, you'd want to build something relatively inexpensive at a smaller scale," says Manan Ahuja, manager at North America Power Analytics at S&P Global (NYSE:SPGI) Platts.

"You can add more panels or windmills at a later point if your exploration and production grows."

Graphic: Energy sources vs West Texas demand,

Building their own on-field wind or solar farms is one way to safeguard electricity supply, long-term supply deals with renewable energy firms is another.

One recent example is Occidental Petroleum Corp (N:OXY), a major player in the Permian, which announced early last month the launch of a solar-powered facility to power an oilfield operation there.

A unit of Occidental also signed a long-term power purchase agreement with a joint venture between Macquarie's Green Investment Group (GIG) and Core Solar LLC for 109 MW of solar energy, beginning in 2021.

"Use of solar energy is expected to reduce the cost and carbon intensity of Occidental's operations," the company said in a statement.

Oil major Exxon Mobil (N:XOM), which aims to boost its Permian output to more than 1 million oil-equivalent barrels per day by 2024, last year also signed a multi-year supply contract with Danish renewable firm Orsted (CO:ORSTED)

Under that deal, Orsted would make available about 500 megawatts (MW) split evenly between wind and power to fuel Exxon's Permian operations, with its Texas wind farm due to come online early next year, and the solar project due in 2021.

Typically, energy firms will mix natural gas and renewables.

Houston-based Apache Corp (N:APA), for example, uses solar, natural gas and diesel to power its operations in the Permian basin at locations where they're not connected to a power grid.

Together, wind and solar power this year have nearly overtaken coal as the state's second-biggest source of electricity behind natural gas, according to ERCOT. The council expects West Texas electricity demand to keep growing by around 10% per year over the next five years.

Graphic: Operating versus planned wind and solar power generation in Texas,

The phasing out of federal tax breaks for wind and solar projects due to begin next year offers additional incentive to ramp up renewable projects and the U.S. Energy Information Administration (EIA) expects nearly half of wind projects scheduled for this year to come online in December.

Oil major Royal Dutch Shell (L:RDSa), said it has started using solar energy to power parts of their Permian operations this year, and that while it welcomed the tax incentives they were unlikely to be a decisive factor behind the industry's push into renewable technologies.

"Whether more oil and gas companies decide to transition into renewables likely hinges more on overall corporate strategy than a single tax provision," Shell spokeswoman Anna Arata said.

Environment Texas, an advocacy group that has sued major oil companies over air pollution, lauds the use of renewables to reduce carbon emissions during oil and gas drilling, but Executive Director Luke Metzger says eliminating those fuels altogether remains its ultimate goal.

"It is certainly ironic that oil and gas companies would use renewable energy to pump out more fossil fuels."

The Permian paradox: Texas shale players go green to drill more

Related Articles

Former Deutsche Bank co-CEO Anshu Jain dies
Former Deutsche Bank co-CEO Anshu Jain dies By Reuters - Aug 13, 2022 2

(Reuters) -Anshu Jain, a top finance executive best known for helping German lender Deutsche Bank AG (NYSE:DB) take on the largest Wall Street firms, died overnight on Saturday...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email