Posted on 07/10/2015 6:16:08 AM PDT by thackney
Market analysts have a keen interest in understanding how crude oil production in key states has been affected by recent changes in crude oil prices and drilling activity.
EIA develops state-level production estimates for selected states that are based in part on state-level data. However, data published by state agencies are often incomplete when first published because of a combination of late reporting and processing delays, mainly due to the filing of production reports that do not contain all required information. Because EIA's methodology for state-level production estimates aims to anticipate and account for expected revisions to data collected by the states, state-level production data published by EIA and state agencies can differ.
Production data for Texas, the largest crude-oil producing state, published by EIA in the Petroleum Supply Monthly (PSM) and by the Texas Railroad Commission (TRRC) in its monthly reports, reflect differences in the treatment of incomplete and lagged data. As shown in the left-hand panel of Figure 1, Texas production data in the PSM and TRRC reports published in June 2015 are virtually identical through 2013, but there is a gap between the reported data for more recent months that grows larger for months closer to the present. The middle panel of the graphic shows how data reported by the TRRC have evolved over time as processing and filing proceeds, with significant upward revisions in the data for recent months covered in each report as later reports are issued. The right-hand panel shows EIA's PSM estimates, which, given EIA's effort to account for expected revisions to state agency data in its initial estimates, generally do not show large revisions as later reports are issued.
There are several reasons why the TRRC's initial reports tend to be low. For one, some reports are placed in a pending file while waiting for other state reporting requirements to be satisfied. In addition, there are always delinquent reports from oil and natural gas operators and reports with discrepancies that take time to resolve. Each month, Texas posts its own calculation of how low its initial estimated production values are. In addition, EIA has for several years measured the change in reported volume from month 1 to month 24, showing an average increase of 30%. These issues are eventually resolved, and the production data are incorporated into TRRC's published reports, generally over the course of about two years.
It is also important to note that EIA's published estimates include lease condensate, while some tables that TRRC provides tabulate crude oil and lease condensate separately. Condensate accounts for about 15% of the total crude oil and condensate volumes produced in the state of Texas.
At the beginning of the monthly reporting process, EIA uses information from third-party data vendor Drillinginfo Inc. In the case of Texas, Drillinginfo combines the accepted and pending file data records. This combination reduces the time lag between initial reporting and reasonably complete data from two years to about five months. Within those five months, the difference in production volumes is generally attributed to late and incomplete data reporting.
EIA uses the state's preliminary data plus the pending file from TRRC (as aggregated by Drillinginfo) as the starting point to make production estimates. EIA also uses the first-purchaser volumes of crude oil from the EIA-182 survey, Domestic Crude Oil First Purchase Report, to make estimates of what will eventually be reported as complete production for the most recent months in an effort to account for data submitted late or incomplete to the TRRC.
Texas is not the only state whose data are incomplete in initial report months. A full explanation of EIA's approach for Texas and other states can be found in EIA's methodology report for the Petroleum Supply Monthly.
The need for EIA to calculate a true-up oil production volume for states, including Texas, will soon be replaced by a direct EIA survey of oil producers, just as it currently surveys natural gas producers in its EIA-914 survey. The survey garners about 95% of produced natural gas volumes in the Lower 48 states and is expected to achieve similar results for oil production.
EIA's monthly natural gas production survey now directly surveys producers in 15 states, 10 more than in previous years. In addition, EIA receives timely monthly production data from the state of Alaska.
The addition of 10 states—Arkansas, California, Colorado, Kansas, Montana, North Dakota, Ohio, Pennsylvania, Utah, and West Virginia—significantly enhances EIA's monthly state and regional coverage, which was previously limited to Alaska, Louisiana, New Mexico, Oklahoma, Texas, Wyoming, and the federal Gulf of Mexico. As suggested by the title of the new webpage, Monthly Crude Oil and Natural Gas Production, EIA will also report survey-based volumes for crude oil production from the states covered by the new EIA-914 survey. This oil production survey, which began earlier this year, is currently being evaluated internally and will begin publication later this summer.
Why did it take so long to add in the #2 producer?
The chart shows the EIA preliminary predictions getting worse in the last three years. I would expect that in a time of rapidly changing technology and prices.
Serious question, not snarky at all. Why is this divergence important?
It shows the EIA is far better than the state estimates for recent production rates and has far lower corrections over time as more data comes in.
Thanks.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.