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Permian oil production is soaring and gaining importance on a global scale.
(Note: related companies are at base of the story and all the sources listed in the "Balanced" section)
The United States has already surpassed Saudi Arabia as the largest producer of oil. Much of the increase has come in response to higher production in the Permian Basin, a region between western Texas and southeastern New Mexico. The Permian Basin now accounts for more than one-third of domestic oil production, and that percentage is growing. So much that some now believe Permian production will soon surpass Saudi Arabia’s Ghawar Oilfield and become the largest oil-producing field in the world.
Production estimates are huge. IHS Markit analysts believe Permian oil
production will double between 2018 and 2023, which means it will represent more
than half of the production in the United States. IHS Markit believes the Permian Basin will
comprise 60% of net world production growth.
This belief is backed by investment numbers. Exxon Mobil has indicated it plans to triple
its production in the Permian and Black Mountain Sand, a supplier of sand used
for fracking in the Permian Basin, indicates that demand for sand in the
Permian has doubled. Infrastructure investment
is also soaring. The Pipeline and Gas
Journal claims that the main production constraint is the pipeline system, not
well development, and new infrastructure is coming online mid-2019.
Uncertainty looms. Shale production is highly sensitive to small
changes in oil prices due to a sharper production decline curve. When oil prices dipped into the forties last
December, several Permian producers, such as Diamondback Energy, cut back their
capital expenditures. Oil prices have
rebounded but further declines are always possible. On a longer-term basis, the future role of
oil as part of the overall energy mix remains in question. Nick Cunningham, an analyst for OilPrice.com,
claims a push towards renewables could mean the current Permian investment boom
merely represents a temporary boom. Growth
in renewable energy would likely affect domestic fields like the Permian Basin
more than fields in OPEC countries.
The future for Permian oil production is bright. Unforeseen developments may influence the growth rate but are unlikely to change the fact that the Permian Basin is growing in importance globally. Low production costs and amble untapped reserves mean this importance could last for several decades. Energy companies that hold large acreage positions in the Permian stand to benefit from increased activity in the Basin.
Operators Race to Build Pipelines as Permian Nears Takeaway Capacity, Pipeline & Gas Journal, March 2018.
The Permian Basin Still Has an Awful Lot of Oil, Joe Nocera, Bloomberg Opinion, September 27, 2017
IHS Markit forecasts Permian basin oil production will double from 2018-23, OGJ editors, Oil & Gas Journal, June 13, 2018
2019 Oil and Gas Outlook According to Experts, Black Mountain Sand, November 1, 2018.
Energy giant plans to triple production in Permian Basin, Ron Davis, Albuquerque Business First, January 30, 2019What the Permian Oil Boom Looks Like, Justin Fox, Bloomberg Opinion, October 19, 2018