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ESAI: Permian growth overwhelms pipeline capacity

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Oilfield Technology,

According to ESAI Energy’s North America Watch, production of crude oil from the Permian Basin will continue to outpace pipeline capacity in the region, keeping pressure on WTI Midland prices relative to WTI Houston.

This constraint should be alleviated by the fourth quarter as new pipeline projects come online.

ESAI Energy estimates production from the Permian Basin will grow over 420 000 bpd in 2017 and the acceleration in drilling activity will increase the basin’s backlog of drilled but uncompleted wells (DUCs). Midstream companies are responding to the bottlenecks in getting the crude to market by expanding takeaway capacity. By the end of 2017, four new pipeline projects are expected to add over 800 000 bpd of capacity. Elisabeth Murphy, analyst at ESAI Energy, explains, “the price discount at Midland will ease as more crude makes its way to the Gulf. Permian production will continue to increase in 2018, but with more pipelines in the works, we do not anticipate the current constraint to last”.

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