Permian’s Oil Surge Creates Need for Pipelines

Fox Business ^ | August 07, 2014 | Matthew Rocco

[thackney]

With crude gushing from the Permian Basin, companies are ramping up efforts to build pipelines and better capitalize on the production surge.

Drillers have been producing oil in the Permian for some eight decades. But in recent years, the Texas formation’s central region, which consists of the Delaware and Midland basins, became a hotbed for shale oil.

The Permian is now the top oil-producing area in the U.S., accounting for 18% of the nation’s total output in 2013. Based on data from the Energy Information Administration, the Permian recorded production of 1.35 million barrels per day last year. The region hit a low mark of 850,000 bbl/d in 2007.

Irene Haas, an analyst at Wunderlich Securities, said the Permian was previously the “domain of the big boys.” Now, smaller oil producers and logistics firms are also flourishing.

Up-and-comers like Concho Resources and Rosetta Resources joined the likes of Exxon Mobil, Chevron and Occidental Petroleum as production in the Permian soared. Shares of Matador Resources, which has a market value of $1.9 billion, have rallied 117% since debuting in February 2012.

Smaller companies are setting up shop on the Midland side of the Permian Basin, Haas explained, while the Delaware Basin has a higher barrier to entry.

“We’ll probably see a good 10 to 20 years of ramping up investment” in the Permian, Haas remarked. “I think we’re just beginning.”

Like other unconventional oil plays, pipeline infrastructure is still playing catch-up to drilling activity. Companies that produce oil in the Permian, North Dakota’s Bakken shale formation and elsewhere often use rail or truck to ship crude to refineries.

Midland, Texas-based Concho, one of the largest Permian producers, said Thursday oil and natural gas sales climbed 25% year-over-year in the second quarter. Combined oil and gas production checked in at..., up 18%.

[buckalfa]

Wondrous words about potential until the dreaded NIMBY monster rears it is ugly head. I understand that monster even has been none to exist in conservative regions of the country. /s

[thackney]

Most of the pipeline need starts and ends in Texas.

[Smellin Salt]

Oil is for sure king in the Permian, the Eagleford, North Dakota and elsewhere, but what is really needed, and is coming, IMO, are pipelines for the natural gas that is a by product and is currently being flared off because of it’s low market value and the fact that no real means of getting it top market currently exist.

If we could bottle it and sell it to say Europe, that would be a huge market.

[thackney]

It is not flared off due to low market value but rather a lack of gathering line infrastructure in the Bakken, but that is changing.

New ND Flaring Regs Make Statoil’s Nat Gas Container System Timely
http://www.freerepublic.com/focus/f-news/3175479/posts

North Dakota aims to double pipeline capacity; Enterprise helps
http://www.freerepublic.com/focus/f-news/3174086/posts

Snuffing flares, North Dakota willing to let oil production take a hit to curb flaring
http://www.freerepublic.com/tag/bakken/index

[American Constitutionalist]

Don't know if you have the answer for this but I'll ask anyway.
It's about the Marcellus formation, is it difficult for fracking for oil ?
Also ? is it true that just the natural gas alone in the Marcellus could produce enough natural gas for the whole world ? I find that hard to believe.... or at least there are some doubts in my mind.

[thackney]

The Marcellus contains little, mostly gas and some natural gas liquids.

For the whole world? It doesn’t produce enough for the US. Maybe I don’t understand your question...

[American Constitutionalist]

That's what I have heard some people say, perhaps they are embellishing it.
Heard them say that there is enough natural gas at Marcellus to fuel the natural gas demand for the whole world.

[thackney]

Maybe so many years of production from the Marcellus equals so many hours of consumption of the whole world.

[thackney]

A better source of information for the Marcellus:

http://www.ogj.com/unconventional-resources/marcellus-shale.html

The Marcellus shale play runs through northern Appalachia, primarily in Pennsylvania, West Virginia, New York, and Ohio. It is part of the Devonian black shale and the thickness of the gas-producing rock is as much as 900 feet. The formation runs an estimated 600 miles north to south, and is estimated to hold as much as 500 trillion cubic feet of natural gas, about 50 tcf of which is recoverable using current technology. It is one of the richest gas fields in North America.

Aug 5, 2014 Natural gas production from the Marcellus shale has surpassed 15 bcfd through July and now represents 40% of US shale gas production, making it the largest producing shale gas basin in the country, according to the US Energy Information Administration’s Drilling Productivity Report.

[thackney]

Also a good source of the production history of the Marcellus:

http://www.eia.gov/petroleum/drilling/pdf/marcellus.pdf