The Energy Capital

City of Odessa

“Only the Saudi Arabians have a bigger oil field,” says Guy D. Andrews, Odessa’s Director of Economic Development. “But our production is going up so much now that we will surpass Saudi Arabia in just a short period of time. We are in our 50th month of economic expansion; it is all related to the oil and gas industry. We have become the energy capital.”

There are roughly 155,000 oil producing wells currently operating in the surrounding oilfield, with 400 to 500 new wells being drilled each month. As a result, people from around the country are pouring into Odessa and neighboring Midland to take advantage of the boom. “The growth is off the charts,” Mr. Andrews reports. “We are the two fastest growing communities in the United States. We are expected to double our populations by 2020.”

The community’s oilfield is not only large; it is also gives investors more bang for their buck than many other oilfields. “The number one reason we are so successful here is we have stacked pay zones in our oil fields,” Mr. Andrews explains. “You can drill down and hit several different oil formations from a single platform, whereas in the other oil fields there are normally only one or two layers that you can have access to. Once they drill those they empty out and they are done.” Odessa’s oil, on the other hand, just keeps on coming. “We’ve been at it for 91 years out here drilling. And we still have as much oil left in the ground as we’ve taken out during those 91 years.”

Drilling an oil well is exorbitantly expensive, so stacked pay zones are crucial in reducing costs. “A conventional vertical well starts at about $2.5 million,” Mr. Andrews explains. “Horizontal [drilling] costs $7 million to $8 million, so we are constantly looking for increased efficiency.” In the last year alone, Mr. Andrews estimates a whopping $19.8 billion was spent on drilling.

Remarkably, there is so much oil left in Odessa’s existing wells that they could keep the community going for many years all by themselves. “That is the other part of what makes us sustainable as an oil field. If we quit drilling tomorrow, we still have to service all those wells.” The world’s leading service companies are active in Odessa – and are banking on remaining active there for decades. “The minimum estimate is that this will last at least 20 years,” Mr. Andrews shares. “The service companies are counting on 70 plus years.”

These companies are also flocking to the Odessa area because of its safe environment. “This oil field is protected,” Mr. Andrews points out. “When you drill in foreign oil fields, [such as those in] Iraq or Nigeria, you are subjected to dangers. This is probably one of the safest oil fields to drill in. You are protected in Texas not only by Homeland Security, but you’ve got Fort Bliss to the west and Fort Hood to the east. Being able to protect that investment is vital.”

With so much oil in the area, Odessa has become a center for related technology. “Most of the oil field technology is developed here,” says Mr. Andrews. “We’ve got more patents in Odessa than the Silicon Valley, and that is because people are constantly inventing ways to improve their efficiency. And we export all over the world, so wherever oil is being drilled in the world, you are seeing equipment that is manufactured in Odessa.”

Odessa is also home to energy projects and sectors that go beyond its massive oilfield. For starters, a local wind farm is making waves with an experimental battery backup system. “They are able to capture 32 megawatts of electricity and store it. The ability to store that gives them greater leverage in getting the power onto the grid. It could revolutionize the whole wind industry.” Odessa will also be home to the $3 billion Texas Clean Energy Project (TCEP), a “NowGen” Integrated Gasification Combined Cycle (IGCC) facility that will incorporate carbon capture and storage (CCS) technology in a ground breaking clean coal power plant. As well, Saulsbury Industries, Odessa’s largest private employer, is busy building gas powered electrical plants, among many other things. “In the past two years they have gone from a $250 million dollar revenue to a $750 million revenue this year,” Mr. Andrews says. That figure is predicted to reach $1 billion next year. The number of employees has also recently skyrocketed, from 800 to 2,300.

Of course, all of this energy related business leads to even more development throughout the community. “We’ve added 1,892 businesses since 2010 – and that figure doesn’t include about 1,000 branches of oil field companies that are located in here,” Mr. Andrews shares. Retail opportunities are huge, and multiple new shopping centers are going up all over town. Thirteen hotels are also currently in the planning stages or under construction in Odessa.

While largely positive, this rapid growth does present some challenges. With so many new residents moving in every month, the city is facing a real housing shortage. In response, new houses, apartments, and entire subdivisions are appearing all over town. “We are building houses as fast as we can.”

The new housing doesn’t come cheap, however. “It is expensive to develop housing because of the high labor costs,” Mr. Andrews points out. In fact, labor is expensive throughout town. “The average wage in Odessa for working at, say, McDonalds, is $15 an hour.” The high wages are commensurate with the high cost of living, with older apartments renting for an average of $980 a month, and new one bedroom apartments going for between $1,400 and $1,800 a month. In addition, goods generally cost more in Odessa because of its location. “We are out in the middle of nowhere,” Mr. Andrews admits. “We are halfway between Fort Worth and El Paso – we call ourselves centrally remote – so it costs more to get the goods here. Prices are typically higher in our grocery stores and, believe it or not, gasoline is always higher in the Permian basin.”

Yet with unemployment at just 2.9 percent, there are job opportunities in almost every industry, not just the energy sector. But the unskilled workers who would benefit from the plethora of service industry jobs are finding that the cost of living is a real barrier to entry. “There are a lot of people who would like to move here for those [service industry] jobs, but they can’t afford the housing,” Mr. Andrews explains. “It is just too expensive.” The city is actively working to overcome this challenge, and officials are currently exploring strategies that would make moving to Odessa more affordable.

The city is also working to improve transportation. With 40,000 new vehicles receiving permits in the past 49 months, traffic is a challenge. The community is also working to make air travel easier. The county airport is in the midst of an expansion to meet the increasing demand; new hangars are being built and the runways are being brought up to FAA standards. The Midland International airport is located conveniently close to Odessa, and it stays busy bringing people to and from the surrounding oilfield. “They have more private jets out here than any other place in the United States now,” says Mr. Andrews.

These private jets are sure to keep coming; there is still plenty of oil left to be discovered. “We continue to find more oil in the Permian basin. We are just now exploring the shale formation to the east of us which is estimated to have an additional 50 billion barrels of oil in it.”

To be sure, Odessa has earned its place as an energy capital. Business is booming, and so is the population. Opportunity is everywhere, and the city is working hard to overcome the challenges that rapid growth presents so that everyone can take full advantage of the boom. Fortunately, the challenges don’t seem to be slowing anyone down so far. “It is one of those things that you need to come out here and see,” Mr. Andrews says of Odessa’s skyrocketing economy and rapid growth. “People just can’t believe it.”

March 20, 2018, 9:42 AM EDT

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