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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Skeptic Geologist Warns: Permian’s Best Years Are Behind Us

Permian

Geologist Arthur Berman, who has been skeptical about the shale boom, warned on Thursday that the Permian’s best years are gone and that the most productive U.S. shale play has just seven years of proven oil reserves left.

“The best years are behind us,” Bloomberg quoted Berman as saying at the Texas Energy Council’s annual gathering in Dallas.

The Eagle Ford is not looking good, either, according to Berman, who is now working as an industry consultant, and whose pessimistic outlook is based on analyses of data about reserves and production from more than a dozen prominent U.S. shale companies.

“The growth is done,” he said at the gathering.

Those who think that the U.S. shale production could add significant crude oil supply to the global market are in for a disappointment, according to Berman.

“The reserves are respectable but they ain’t great and ain’t going to save the world,” Bloomberg quoted Berman as saying.

Yet, Berman has not sold the EOG Resources stock that he has inherited from his father “because they’re a pretty good company.”

The short-term drilling productivity outlook by the EIA estimates that the Permian’s oil production hit 3.110 million bpd in April, and will rise by 73,000 bpd to 3.183 million bpd in May.

Earlier this week, the EIA raised its forecast for total U.S. production this year and next. In the latest Short-Term Energy Outlook (STEO), the EIA said that it expects U.S. crude oil production to average 10.7 million bpd in 2018, up from 9.4 million bpd in 2017, and to average 11.9 million bpd in 2019, which is 400,000 bpd higher than forecast in the April STEO. In the current outlook, the EIA forecasts U.S. crude oil production will end 2019 at more than 12 million bpd. Related: Oil Markets Tremble On Iran, Israel Flare-Up

Yet, production is starting to outpace takeaway capacity in the Permian, creating bottlenecks that could slow down the growth pace.

Drillers may soon start to test the Permian region’s geological limits, Wood Mackenzie has warned. And if E&P companies can’t overcome the geological constraints with tech breakthroughs, WoodMac has warned that Permian production could peak in 2021, putting more than 1.5 million bpd of future production in question, and potentially significantly influencing oil prices.

The takeaway bottlenecks have hit WTI crude oil priced in Midland, Texas, which declined sharply compared with Brent in April, the EIA said in the May STEO.

“As production grows beyond the capacity of existing pipeline infrastructure, producers must use more expensive forms of transportation, including rail and trucks. As a result, WTI Midland price spreads widened to the largest discount to Brent since 2014. The WTI Midland differential to Brent settled at -$17.69/b on May 3, which represents a widening of $9.76/b since April 2,” the EIA said.

By Tsvetana Paraskova for Oilprice.com

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  • maria on May 13 2018 said:
    I'm confused, how does this jive with the flow of reports finding massive new reserves? Are those not recoverable? Are they untrue?
  • Bill Simpson on May 13 2018 said:
    Judging by what I see on TV, and read in various publications, some of the world's largest oil companies don't seem to agree. Horizontal drilling lets them go after thin, deep layers heretofore uneconomic to drill. That could add up to a lot of total oil.
  • Dan on May 14 2018 said:
    Permian peaks as pressure dies and Saudi's IPO information on reserves give a clue to 9 years. Time to invest in natural gas conversion kits for autos 6 years. Tesla electric cars had another crash today? I'm feeling the love for natural gas cars in my future.
  • Lance Steele on May 18 2018 said:
    I grew up in Odessa, TX in the 1960s and 70s and they said the Permian Basin was almost depleted way back then.

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