Wednesday, April 11, 2018

US Shale Crude Oil Midstream -- The Red Queen Re-Surfaces -- April 11, 2018

During the early years of the Bakken boom, folks talked about the "Red Queen." The argument was that North Dakota had to keep drilling more and more wells just "to keep up." We haven't heard much about the Red Queen. There appears to be an inverse relationship between "Red Queen" hysteria and the number of DUCs.


Now, the "Red Queen" has apparently gotten off one treadmill and gotten on another. The new treadmill is the "midstream" or "pipeline" treadmill. Anyone following the blog and/or following RBN Energy is well aware of this issue.

Now, we have a short article from Bloomberg via Rigzone that tries to quantify how much this build-out is going to cost: $170 billion over the next seven years. Data points:
  • gas output will expand by 24 billion cubic feet, or 32 percent, through 2025 from last year
  • to support that growth, the country’s gas industry needs to spend $170 billion over the next seven years on pipelines, compressor stations, export terminals and other related infrastructure [see source at link]
  • the Permian Basin, know for its oil-rich layers of rock, is facing the threat of having to slow down the output of crude because drillers lack capacity to handle all the the gas that’s flowing as a mere byproduct [the very problem the Bakken had]
  • for companies building multibillion-dollar plants to chill gas into liquid and ship it abroad, the abundance of cheap gas from the Permian in West Texas is an advantage
  • developments there “will happen” because it’s an environment supportive to energy infrastructure
  • that may not happen fast enough for Appalachia [again, according to the expert at the link]

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