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Editorial Dept

Editorial Dept

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Global Energy Advisory – 22nd June 2018

The hottest shale oil play in the United States may be nearing its limit in production because of a growing shortage of pipeline capacity. Drillers are already being forced to leave wells unfracked because they have no way of transporting the oil from the wellhead to refineries and in three to four months they might have to start actually shutting down wells because the existing pipelines will be filled to capacity, unable to take in any more crude.

The pipeline bottleneck problem in the Permian started garnering media attention only recently as production in the play boomed, reaching an estimated 3.277 million bpd this month, according to the latest EIA figures. There are plans for new pipelines that will add over a million bpd of capacity but these are yet to be built and until they are the problem will remain.

Pioneer Natural Resources chairman this week said some drillers will be forced to shutter production and others will have to move their rigs elsewhere. A lucky few with a certain pipeline capacity will get to stay and continue pumping as usual, but they are not without their problems.

A recent IHS Markit report says that Big Oil companies in the Permian will need to cough up as much as $30 billion between now and 2020 to meet their production targets for the play. This, the market research firm said, will mean more acreage purchases, mergers and acquisitions as well as higher production costs as the greater demand for oilfield services will boost…




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