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Permian pipeline constraint stalls growth

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World Pipelines,

The world’s most important oil growth region – the Permian Basin – will experience a setback with 345 completions likely to be deferred by the end of 2019 due to pipeline takeaway capacity constraints, according to a new US Drilling & Completion report from Westwood Global Energy Group (Westwood).

Westwood’s quarterly report provides an outlook for key US unconventional basins and contains historical and forecast views (2014 - 2022). The report predicts that all the supply chain logistics and capital, which were allocated towards 345 expected completions, will now have to find either new buyers or be stored in a warehouse for a considerable period resulting in additional inventory and maintenance costs.

Westwood expects 2.5 million t of sand and 5 billion gal. of water will be directly impacted by the deferred completions. Demand for 1.6 million hp for pressure pumping will evaporate in the second half of 2018 and US$1.4 billion of CAPEX for completion operations will also be delayed or reallocated on other basins such as Eagle Ford, DJ Niobrara, Bakken and MidCon.

“But, every cloud has a silver lining”, commented Todd Bush, Vice President, Commercial at Westwood Global Energy Group. He explained, “Midstream industry, on the other hand, is experiencing a second heyday thanks to unconventional plays. Crude and NGLs need to be moved, often from areas with little or no infrastructure, so you can expect operators to be more creative to find and fund new projects to lessen the current constraint. We estimate US$3.1billion in 2018 of CAPEX and US$3.6 billion in 2019 will be spent on pipeline construction which equates to a 21% increase from 2017. This also confirms the urgency and the level of activity in the basin needed to alleviate pressure.”

The special report by Westwood quantifies the magnitude of the recent bottleneck in the Permian across the entire drilling and completion supply chain as a result of deferred completions. This includes, for example, expected rig count, forecast for wells drilled and completed by basin, drilled uncompleted wells (DUCs), hydraulic horsepower for the pressure pumping industry, along with frac sand, water and crew impacts by basin.

Westwood’s US Drilling & Completion 3Q18 report is compiled using Energent and Westwood’s proprietary data. The report is available for online.

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US pipeline news Crude oil pipeline news