A higher rig count, expected record production from the Delaware Basin, and another forecast for record full-Permian production from the EIA are just some of the latest news from the US stellar shale company. However, this production growth is much slower than it should have been, and is likely to remain very slow. what happened?
One of the reasons is the shareholders. As Bloomberg pointed In a recent report on the state of the Permian River, public shale drillers have shifted their focus after years of putting everything into production growth and are now prioritizing the return of cash to shareholders. A reversal seems unlikely at this point.
Another reason is higher production costs. Global oil prices have already been on the rise, but production costs have continued as the effects of the supply chain disruption of the past two years have continued.
In late April, Colin Eaton of The Wall Street Journal mentioned That the most prolific rock play in the United States was struggling to find enough steel, frac sand, frac pumps, and well workers.
Eaton noted that unlike the recent downturn in the oil market, the oilfield services industry is not standing in the wake of producers in recovery. On the contrary, oilfield services companies are struggling this time around two years after equipment fleets were halted due to a sharp contraction in production during the pandemic. They are also largely avoided by investors, which makes them reluctant to invest in new equipment.
The report quoted industry executives as saying that it now took much longer between drilling and commissioning a well due to delays in the delivery of basic equipment and materials. The costs of such equipment and materials are also higher.
“It’s hard to get some of the key products we need, whether it’s pipe or sand,” Travis Thompson, CEO of FireBird Energy, a Midland Basin drilling company, told Bloomberg. “If we want to increase the activity, say from three rigs to four or five rigs, we will certainly have to plan for that a lot more than you would have to go back for a year or two.”
“If someone goes in and puts a pile of money on the table and says, ‘Dig me up well next week,’ it won’t happen,” said Jimmy Small, president of private-equity-backed Element Petroleum 3. Eaton in the Wall Street Journal in April. “You can’t get things to do that.”
Bloomberg reported that the average forecast of five agencies for US oil production growth is about 900,000 barrels per day. Forecasters include Rystad Energy, Bloomberg NEF, Envirus, Standard & Poor’s Global and the Energy Information Administration.
The Permian will account for 80 percent of that growth, which will certainly help it cement its reputation as the star in the US shale patch. However, the rate of production growth is very modest when compared to the growth rate of oil production in 2018, as presented by Bloomberg. That year, the US added 1.9 million barrels per day.
However, Rystad Energy is on its own Forecasting The Norwegian consultancy said earlier this month that only the Delaware Basin in the Permian will add about 990,000 bpd to its total production this year, of which more than 400,000 bpd will be new production. According to the report, the economies of the Delaware Basin and higher oil prices will spur production growth, which will push the basin’s total to a record 5.7 million barrels per day later this year.
Another record was recently projected by the Energy Information Administration. The agency said it expects the Permian River to add 88,000 barrels per day in June, reaching a record 5.219 million barrels per day, which is a large part of the total monthly production increase across the shale patch, which the EIA expects to be 142,000 barrels. Daily.
By Irina Slough for Oilprice.com
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