Posted on 08/17/2014 8:05:45 PM PDT by ckilmer
Oil Production In Permian Causes Pipeline Bottleneck In Texas
Catherine Ngai
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Tuesday, August 12, 2014
NEW YORK, Aug 12 (Reuters) - Oil production from the burgeoning Permian Basin of West Texas is outpacing pipelines' ability to transport oil to the Gulf Coast, causing coastal refiners to pay an additional premium to acquire oil.
On Monday, that bottleneck caused oil for delivery at Midland, Texas <WTC-WTM> to trade at nearly $20 a barrel less than Gulf Coast benchmark Light Louisiana Sweet <WTC-LLS>, the deepest discount in 17 months. It was little changed on Tuesday.
The deep discount is a consequence of the U.S. shale revolution, which has unleashed a revival in U.S. production, unlocking billions of barrels of reserves of crude oil, boosting the economy and potentially outstripping domestic demand.
In shale formations in the Permian Basin of Texas and New Mexico, the rate of growth for oil production is set to increase for the sixth consecutive month in September, according to data from the EIA's drilling productivity report. The formation's growth rate is outpacing Texas' Eagle Ford, where growth slowed between February and August, and North Dakota's Bakken fields, where growth has been relatively stable in recent months.
As Permian production has taken off, infrastructure to move the crude has lagged.
With rising production, widening differentials may mean shippers need to be more creative to get oil to the coast, says Amrita Sen, chief oil analyst at Energy Aspects.
"On the whole, there's not enough takeaway capacity. What we will see is the differentials widening out as other forms of transportation like rail and trucking will become more economical," she said. "But we expect Gulf Coast grades to ease in the fourth quarter because of maintenance season. All that should ease some of the pressure."
Permian On The Rise
The Permian Basin is set to produce about 1.72 million barrels per day in September, 38,000 bpd more than August, according to the Energy Information Administration's drilling productivity report.
"The bottom line is that the incremental growth is slightly more than the market expected," Barclays Plc Analyst Michael Cohen said.
Meanwhile, Eagle Ford is set to produce about 1.51 million bpd, an increase of 31,000 bpd from the prior month, and the Bakken play is set to produce about 1.14 million bpd, an increase of 20,000 bpd, EIA data showed.
Pipelines
A number of pipelines may reduce the glut of crude in the Permian, although they are not coming online quickly enough to offer immediate relief.
Magellan Midstream Partners LP's 300,000 bpd BridgeTex crude oil pipeline, which will move oil from Colorado City, Texas, to the Houston area, is set to start up at the end of September. That should help narrow the spread, traders said, although more capacity is required.
Sunoco Logistics Partners LP's Permian Express II, moving crude from the Colorado City area to the Gulf Coast, may also alleviate the backlog. The pipeline will come into full-service in the second quarter of 2015.
- See more at: http://www.rigzone.com/news/oil_gas/a/134497/Oil_Production_In_Permian_Causes_Pipeline_Bottleneck_In_Texas/?all=HG2#sthash.e5jbxwBI.dpuf
The Permian Basin is set to produce about 1.72 million barrels per day in September, 38,000 bpd more than August, according to the Energy Information Administration’s drilling productivity report. -
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How much oil was the permian basin producing at the end of 2013? Consider this article.
“The Permian is now the top oil-producing area in the U.S., accounting for 18% of the nation’s total output in 2013. Based on data from the Energy Information Administration, the Permian recorded production of 1.35 million barrels per day last year. The region hit a low mark of 850,000 bbl/d in 2007.”
http://www.foxbusiness.com/industries/2014/08/07/permians-oil-surge-creates-need-for-pipelines/
A little math yields 1.72 million barrels@ day-1.35 million barrels @day=370,000 barrels@ day increase in the permian basin oil production as of the end of Sept 2014.
So how likely is it that Permian basin oil production increases will go over 500,000 by the end of 2015?
I understand that they are running out of fresh water with which to frack in the Permian Basin.
Ping.
They are in the midst of a historic drought.
I do not know what it takes to frack a well in the Permian, but it takes about 1 million gallons over here in the Barnett.
There is a railroad that runs from Monahans, Texas up to at least Hobbs, New Mexico. I suppose they could use that for the excess oil unless the railroad is at capacity.
I don’t know either but here on the Bakken we were running day and night for two days to keep the posiden tank full.
I guess it dep!ends on the number of zones theybfrac.
On the Jonah and the Mesa gas fields they would do sometimes 24 zones
Here in the Marcellus/Utica, we have plenty of fresh water, but are starting to recycle flowback as well as use tainted sources (gray water, acid mine water from the old coal mines) to supplement and reduce the amount of fresh water being used.
Innovation and opportunity to silence rabid, northeast environmentalists is something new to the industry...and they are adapting well!
I personally designed, staked out, and oversaw the construction of 2 crude by rail transload sites on the TNMR... one in Wink, TX and one in Lovington, NM. I would gladly build more... I miss the Texas-New Mexico Railroad... sometimes.
there is a tidal wave of oil building in west texas and new mexico.
what they’re building now will only serve for about 18 months at best.
they’re gonna need a bigger...
anyhow they’re going to need double capacity above what they’re currently building.
yeah that’s a problem. I have not heard anyone say its insurmountable.
They are in the midst of a historic drought.
I do not know what it takes to frack a well in the Permian, but it takes about 1 million gallons over here in the Barnett.
....
One thing I have that they’re doing is reusing water
That happened to me once.
ping
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