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The Long Story Short - Is the Permian the largest oil basin in the world?

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.

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My FAVORITES

Movers and SHAKERS

The Long Story Short - Is the Permian the largest oil basin in the world?

Permian oil production is soaring and gaining importance on a global scale.

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