Monday, May 19, 2014

Excellent Update On The Permian; Monday, May 19, 2014

Active rigs:

Active Rigs191189209176111

RBN Energy: excellent update on the Permian. The Permian is having the same problem as the Bakken does/did -- with takeaway capacity:
One of the most exploited oil plays in history, the Permian Basin in West Texas and New Mexico has recently become ground zero for some of the most exciting new “unconventional” oil and gas development in North America. Horizontal drilling and vastly improved completion techniques have vaulted the Permian once again to the fastest-growing oil and gas production region of the U.S.  In today’s Permian-focused blog, we review key conclusions from RBN Energy’s latest “Drill Down” Report and Production Economics Model.
On Friday, May 18, the price for West Texas Intermediate (WTI) crude oil in Midland, TX was $94.70/bbl, or about $7.30 below the price of WTI in Cushing, OK.   It was not that long ago (last year through mid-September in fact), when that discount was only about 18 cents/barrel.  But since September 2013 the discount has ballooned out with Midland selling for $11/bbl under Cushing in March 2014.
The problem is pipeline takeaway capacity, or lack thereof.  We reviewed some of the reasons for the pipeline congestion problems in recent blogs in our Come Gather ‘Round Pipelines (in the Permian) series, including Part 1 – Price Differentials and Takeaway Capacity, Part 2 - Gathering Systems, and Part 3 – Plains Expansions.  The bottom line is that crude oil production in the Permian is growing rapidly and today there is not enough pipeline takeaway capacity to efficiently handle the volume.  Although that takeaway situation will likely correct itself in a few weeks when new pipelines come online, the underlying cause – rapid growth in Permian production – will not be going away.  In fact, that trend is picking up steam all across the Permian basin.
From SeekingAlpha: it turns out that earlier reports that Libya was ready to begin exporting oil again -- never mind.
  • Brent crude rises above $110/bbl on renewed concerns over Libya's oil output following some of the worst violence in Tripoli since Gaddafi's ouster in 2011
  • Gunmen stormed Libya's parliament yesterday and demanded its suspension, claiming loyalty to a renegade army general
  • An end to a month-long blockade of major oil ports in eastern Libya last month raised the prospect of higher crude exports, but just-opened oil fields have been closed again as clashes erupt
  • Also helping push crude prices are potential Norwegian strikes and the shutdown of BP's Foinaven field for maintenance
New link: a reader sent me a reminder about archived articles at IPAA:
IPAA (Independent Petroleum Association of America) has archived meetings and sometimes some interesting stuff gets said at those shows. I think you would like the Pioneer presentation at the April OGIS meeting.

Easy to find: google IPAA. Tab at top for "Meetings and Events." Click on April OGIS.

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