Austin Emerges as New Hub for Oil and Gas Industry
- Tuesday, Jul 16, 2013
Houston. Dallas and Fort Worth. Midland. These fine locales have long been the Texas meccas for the international oil and gas industry.
But in the last few years, there’s been a quiet, yet fast-growing oil and gas sector emerging in Austin — one that’s driven by multiple factors, such as the entrepreneurial graduates of the Cockrell School of Engineering who have chosen Austin for its tech scene, the research being conducted within the Department of Petroleum and Geosystems Engineering, the access to fresh engineering talent out of The University of Texas at Austin and the city’s quality of life.
As of 2012, there are nearly 300 companies employing more than 2,900 engineers and staff in upstream functions in the Austin area, performing activities related to everything from investments, exploration and production to geophysical surveying and drilling-technology development, according to the Greater Austin Chamber of Commerce. While the oil and gas sector won’t compete with Austin’s software or semiconductor areas in terms of headcount, the combined economic impact on the region has become more significant than it’s been in decades.
Many veterans of the industry know that this hasn’t always been the case. Before the emergence of companies like Brigham Exploration, Texas American Resources, Jones Energy, Three Rivers Operating Company and plenty others, Austin had hosted operators but was primarily known as the home of the Texas Railroad Commission. And while most companies working Texas oilfields had some sort of presence in Austin — be in legal or lobbying firms — the city was never known as a place companies preferred to locate their headquarters. It was just too far away from the field.
Setting up Oil and Gas Idea Shops
The sale of Brigham Exploration to Statoil Gulf Services LLC in late 2011 was a remarkable transaction, not only because of its amount, at $4.4 billion, but also because Brigham Exploration was based in Austin.
Composed of a team of outstanding UT Austin alumni, Brigham Exploration was originally founded in 1997 in the Dallas-Fort Worth area, said Gene Shepherd (BSPE ’81; MBA ’86), the company’s chief financial officer.
“At the time, it was an out-of-the-box thought process that led to Brigham’s relocation. We were mostly an idea shop trying out new technology, not deep into production and operations, so we didn’t need to be in the middle of downtown Dallas,” Shepherd said. “Bud Brigham loved Austin, and given that we were an idea shop, we knew we could move to Austin and it wouldn’t set us back.”
After the Brigham Exploration sale to Statoil, Brigham, Shepherd and others created Anthem Ventures, LLC. Based in Austin, Anthem Ventures focuses on investment opportunities in emerging resource plays* as well as oil service and infrastructure. The group also recently launched Brigham Resources, which will build on the achievements of Brigham Exploration.
Another homegrown company in town is Three Rivers Operating Company LLC. Formed in 2009 by a group of seasoned Austin-based oil and gas executives, Three Rivers began pursuing mature assets in the Permian Basin just as the price of oil was coming off of historic lows. Three Rivers employed leading-edge technology to gain an advantage at just the right time, said engineer Wes Gibbons (BSPE ’09). The combination of technology and the opportunity to get in on the ground floor led Gibbons to leave a consulting job in Houston to relocate to Austin.
“I knew that they were growth-focused and small. That was what I was looking for,” Gibbons said. He began at Three Rivers with an array of responsibilities, including operations, regulatory filings and tubing and casing procurement, and he is now entering reservoir engineering and business development. “In Houston, I was in the industry but I wasn’t using my degree like I wanted to. Here in Austin, I have the freedom to use my degree in a lot of different ways.”
Austin’s challenge in the industry is that there are fewer job opportunities than in the established oil and gas hubs. Even though Three Rivers completed its sale to Concho Resources for $1 billion in the spring of 2012, Gibbons is confident that the workforce issue in Austin is changing rapidly.
“There are a lot of opportunities here, especially for petroleum engineers who are looking for more than just a technical career,” he said.
Additionally, as Brigham’s Shepherd said, “the quality of life is very high in Austin.” It’s a great environment for raising a family, is a healthy city and a creative and technology center with many things to do, Shepherd said.
Access to World-Class Research
From Brigham Exploration’s point of view, Shepherd said one major advantage to Austin is the research conducted here at The University of Texas at Austin.
“There’s a lot of benefit to being here because of the opportunity to work with the university,” he said. “It’s huge.”
Bradley Sparks, chief financial officer at Laredo Oil, said his company relocated to Austin from Tucson, Ariz., in 2010 for the same reason — the promise of working with UT Austin’s petroleum and geosystems engineering department.
“What we do with gravity drainage is technically very complex, so it was important to have access to the best talent coming from a university like UT Austin,” Sparks said. “Plus, we get to be close to the best petroleum engineering program in the country and have already partnered with UT PGE faculty on some of our most challenging technology issues.”
In turn, UT PGE and the Jackson School of Geosciences have benefitted from the proximity of companies such as Laredo Oil, Brigham and Statoil. In 2013, Statoil partnered with UT PGE and the Jackson School on a five-year, $5 million graduate student fellowship program. The company granted 13 fellowships to students who are now conducting research at Statoil’s Austin and Houston offices.
“The growing presence of oil and gas companies in Austin has strengthened the research conducted in petroleum engineering,” said Tad Patzek, chair of the Cockrell School’s petroleum and geosystems engineering department. “With industry setting up shop in the 40 Acres’ backyard, we have developed strategic partnerships that provide our graduate students with the resources required to conduct game-changing research. It is also beneficial to our graduating students who have developed a passion for Austin, as the job options are increasing.”
Written by Heath Hignight. A version of this story originally appeared in the Fall 2012 issue of the Department of Petroleum and Geosystems Engineering print magazine, Energy One.