The importance of our indie oil producers

Independent Oil Production

Independent oil and natural gas producers in the US play a vitally important role in the industry. They neither get the press coverage, the plaudits, or the level of criticism that the big guys like ExxonMobil and Chevron, but without them the industry just couldn't happen.

The little guys are the ones responsible for getting America's commodities out of the ground, whereas the majors are the ones who own the refineries and the gas stations.

As the nature of America's oil and gas industry has changed the role of independent oil and gas producers has become increasingly important, especially for production in both the Lower-48 states and in the near offshore areas. Today, independents are responsible for developing around 90 percent of the nation's wells.

According to the Department of Energy independent producers are responsible for supplying around 70 percent of American oil production and over 80 percent of overall American natural gas.

While major oil companies have switched their focus to exploration of American shores and foreign countries in an effort to respond to shareholder demands, independents have become more involved with domestic oil and gas activities.

Incremental demand challenges

The thousands of countries operating in over 30 states and off the coast only receive revenue from upstream operations and few employ more than 20 people. These independents are non-integrated and takes all revenue from production at the well head. The tax definition published by the IRS, states that a firm is an Independent "if its refining capacity does not average more than 75,000 barrels per day or if its retail sales are less than $5 million for the year."

The number of independents has fallen in recent years and those that remain face the problem of an ageing and depleting workforce, and this loss of experienced personnel puts serious pressure on an industry already struggling to meet incremental demand challenges.

The shift away from traditional sources of energy is in motion, and whereas it will be some time before the oil and gas industry is genuinely challenged by the emerging renewables sector, the transition will eventually be fatal to the already dwindling number of independents.

So far it has gone largely unnoticed by the general public, but the demise of the independents sector is a good indication of the direction America's oil and gas industry is heading.

Related Articles:

BP chief: Renewables cannot meet our needs | Global oil demand forecast rises...again | Will political change make carbon tax invevitable?

Daniel Jones

Daniel is a Politics and Philosophy graduate from Cardiff University where he also worked as a section editor on the award winning student newspaper. After university he joined an IT support company where he was a B2B online writer. He loves anything to do with sport and joined GDS in July 2009.

Like this article? Get the RSS feed: