Page 7 - NorthAmOil Week 35

NorthAmOil COMMENTARY NorthAmOil
more pressing for independents to nd new, for- eign customers, and the study’s authors contend that consolidation will help them achieve this.
At the same time, though, a lack of coastal export infrastructure and the time required for new facilities to be built will make it more di - cult to seek new customers in the shorter term.
“While re neries have increased processing to keep up with production, supply of crude oil will soon outstrip demand and the producers will need to nd new customers,” said Univer- sity of Houston chief energy o cer and co-au- thor of the research Ramanan Krishnamoorti. “Even though there is more than $90bn in con- struction projects for terminals, LNG, re ning and petrochemical facilities along the Texas and Louisiana coast right now, and another $200bn planned for the next decade, construction can’t keep pace with the supply of oil coming out of the Permian.”
Growing strong?
The white paper takes the view that tight oil output from the Permian will continue to grow, with the region producing an incremental 1mn barrels per day (bpd) each year. Others, however, have warned of a Permian slowdown, evidenced by the fact that rig counts in the basin have fallen from a recent high of 493 in November 2018 to 429 at the end of August. Meanwhile, high-grad- ing of acreage during the oil price downturn sug- gests that productivity rates will su er as drillers move out of sweet spots that have already been tapped to more marginal areas.
Pioneer Natural Resources’ CEO Scott Shef- eld has been among those saying he is scaling back his expectations for the Permian. “I am lowering my expectations of the Permian, reach- ing 1mn barrels of oil per day growth annually as it did in 2018,” She eld said last month on Pioneer’s earnings call. “I’m still convinced the Permian will reach 8mn barrels a day at a much slower pace, with the Midland Basin as the only growing basin in the US past 2025.” He added that in the more proli c Delaware sub-basin top- tier acreage was quickly being exhausted.
Nevertheless, the Permian is anticipated to keep growing, buoyed in part by techno- logical advances that have improved drillers’ e ciency to the point that they can produce more while scaling back. e US Energy Infor- mation Administration (EIA) still expects the Permian to be the fastest-growing shale region in the US, adding 75,000 bpd in September compared to August. And as output continues to rise – even at a slower pace than previously projected – so do the region’s needs for new gas takeaway capacity, as well as new Gulf Coast export infrastructure.
A number of projects are planned or under way, but they will take time to be built. In the meantime, oil takeaway capacity is no longer a challenge, with more currently being con- structed on top of the Cactus II and EPIC pipe- lines that entered service last month. But other infrastructure shortages continue to pose con- siderable obstacles that are likely to constrain the region’s short-term growth potential.™
High-grading of acreage during the oil price downturn suggests that productivity rates will suffer as drillers move out of sweet spots.
New Gulf Coast
export infrastructure is needed to handle rising volumes of Permian crude.
Week 35 03•September•2019 w w w . N E W S B A S E . c o m
P7