WoodMac: Permian Will Need Extra Oil Pipelines To Cope With Surging Output

Extra Oil Pipelines

U.S. shale play will need extra oil pipelines pipeline capacity up to 500,000 bpd by the end of 2030 to ship soaring crude output to markets, Wood Mackenzie said in new research this week.

Midstream operators are set to add 4 million bpd of Permian-to-Gulf Coast pipeline capacity by the end of 2022.

By the mid-2030s, Permian-to-Gulf Coast pipeline utilisation will surpass 92% in the absence of further investment, necessitating pipeline expansions or greenfield capacity,” said John Coleman, principal analyst, North America crude markets at WoodMac.

The Permian Basin, located in West Texas and Southeastern New Mexico, has emerged as one of the most prolific oil and gas regions in the United States. With its vast reserves and favorable geology, production in the Permian has skyrocketed in recent years, surpassing pipeline capacity. This has led to a significant challenge in transporting the produced oil from the region to the market, causing a strain on the Midland oil prices compared to other U.S. benchmarks.

A Blessing And A Curse

The rapid growth of production in the Permian Basin has been both a blessing and a curse. On one hand, it has brought about a surge in job opportunities and economic prosperity in the region. However, the existing pipeline infrastructure has struggled to keep up with this exponential growth, leading to a bottleneck in takeaway capacity. As a result, the surplus of oil has driven down prices in the Midland area, which has had a negative impact on the profitability of producers operating in the region.

This issue of production outpacing pipeline capacity has highlighted the need for significant investments in new infrastructure to alleviate the strain on the Permian Basin. Several pipeline projects are currently underway to address this challenge and increase the region’s takeaway capacity. Once completed, these pipelines will enable more efficient transportation of the produced oil to refineries and export terminals, ultimately reducing the price differential between Midland and other U.S. benchmarks.

In conclusion, the Permian Basin’s rapid production growth has outpaced the existing pipeline capacity, resulting in a significant impact on the Midland oil prices. However, with ongoing efforts to expand the region’s takeaway infrastructure, it is expected that the price differentials will eventually narrow, benefiting both producers and consumers alike. The Permian Basin continues to be a key player in the U.S. energy sector, and as investments in infrastructure continue, its potential for further growth and development remains promising.

Read the full article here
Source: oilprice.com


If you have further questions related to the topic, feel free to reach out to us here.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *