Energy

By Robert Evatt

Usually when energy has a volatile year, prices lunge in one direction. But 2022 managed to pull off both skyrocketing and plunging prices, bringing Tulsa energy companies along for the ride.

Tom Seng, Mervin Bovaird professor of energy business and director of the School of Energy Economics, Policy and Commerce at the University of Tulsa, said despite the bizarre behavior of oil prices, Tulsa energy companies fared well last year.

“Oil prices of $70 per barrel is still profitable,” he said. “Sure, oil companies would like them to be higher, but they’re still making money.”

U.S. crude oil futures began 2022 at $75 per barrel, quickly surged to above $120, then started deflating in June to hit $75 again in

December. While much of the price increase could be chalked up to inflation and uncertainty, Seng said the reversal was due to a simple increase in supply and a decrease in demand.

He also thinks the June peak was due to the Biden administration selling from the strategic oil reserves, as well as customers cutting back on driving. “We haven’t had the demand level this summer as we had in summers past.”

Even with the price swing, the impact on Tulsa energy companies was minimal. Since many energy companies were still recovering from the previous price collapse, most local companies used the windfall from the price spike to strengthen their balance books and buy back shares of their own stock to keep shareholders happy.

As a result, most companies did not increase oil production, even when it might seem beneficial, Seng said.

“It’s surprising we’re not above the current level of oil production we have now,” he said.

Part of his surprise comes from low oil supplies across the globe, as many governments and organizations tapped into reserves. These reserves will need to be refilled eventually, which are likely to cause prices to rise again, ending the reprieve at the pump.

Natural gas prices experienced a similar rise and fall as oil, starting the year near $4.40 per million BTU, hitting a peak in August at $8.81, then swiftly collapsing down to the $5 range in December.

Even the lower price is still historically high, meaning local natural gas companies also enjoyed a profitable year, Seng said.

Natural gas helped drive the Williams Companies to a strong 2022, said Alan Armstrong, president and CEO at Williams.

“Williams is the most natural gas centric, largescale, midstream company around today and there’s a reason we’ve stuck with our natural gas focused strategy for as long as we have,” he said. “Not only is this strategy delivering in the current environment, but the signals coming from the market show that it is going to continue to deliver substantial growth for the long term, as well.”

Armstrong said the near future will likely see higher demand for liquid natural gas exports and a faster pace of coal to gas conversion.

Though oil and natural gas industry is still a big piece of Tulsa’s economy, it has waned over the years. The last big blow was WPX’s exit from Tulsa after it was purchased by Devon Energy. With that move, Tulsa no longer has any major production companies, Seng said.

The area still has an array of significant midstream organizations, including Williams, ONEOK and Magellan, as well as some downstream companies like ONE Gas. There were no major acquisitions or similar moves of note by Tulsa-area energy companies in 2022, likely due to the profitable environment, Seng said.

Which isn’t to say the local energy industry has stayed stagnant. Thanks to tax credits and other government incentives, oil and gas companies are investing in technologies such as carbon capture that will reduce their environmental impact.

The Williams Companies, still a major player in Tulsa’s energy industry, is also pursuing cleaner natural gas distribution, with carbon capture as well as renewable natural gas interconnects onto its system that can capture and use methane from landfills and livestock farms that would otherwise escape into the atmosphere.

But that’s just the start of Williams’ aspirations to achieve net zero carbon emissions by 2050. Its New Energy Ventures business development group plans to develop an array of new solutions for meeting growing energy demand while reducing emissions. One of these initiatives is establishing green hydrogen production in southwestern Wyoming.

Other local organizations are pursuing nonpetroleum renewable sources of energy. So many wind farms have been built in Oklahoma that the state now ranks third in the nation for wind power, behind Texas and Iowa. AEPPSO has purchased huge numbers of wind generation facilities, making the company the utility with the most wind generation ownership in the nation.

Even with the success of green energy in the state, Seng expects petroleum-based companies to have a strong start to 2023.

“We’ll likely see higher prices after first of the year, especially in spring when refineries gear up,” he said.