Permian Basin accounts for more than half of the current U.S. oil rig count

“According to Oilprice.com, the U.S. Rig Count for last week stood at 337 oil rigs and 93 gas rigs. Of that count, the Permian Basin reports 224 rigs – or well more than half.” (Mayor Dale Janway)

As the U.S. and global economy recover, production in the Permian Basin is finally returning to pre-pandemic production levels as the American oil industry gets back on track.By May, production levels in the basin are expected to reach 4.466 million bpd, the highest level in the last 12 months. The Energy Information Administration (EIA) also highlighted the increase in rig counts in the region.

Several companies are attempting to ramp up production and speed up drilling and exploration projects that were halted following the severe weather conditions experienced in Texas in February, to ensure they meet targets as demand levels improve.

Prior to the disruptions in February, projects in the basin were getting back on track with wells being drilled at 57 percent their pre-pandemic speed, at a rate of around 250 a month. However, producers are aiming to balance production levels with low investment rates to please stakeholders who are expecting dividend pay-outs.

Analysts stated of Permian production levels, “Permian oil production maintenance currently requires about 300 unconventional well completions per month, so the basin is set for production growth already in the second quarter”.

There is more optimism around U.S. oil as a Rystad Energy report found that fracking in North America has almost recovered to pre-pandemic levels, achieving a 12-month high in March 2021.

All major U.S. basins are expected to maintain or increase production in the second quarter of 2021, with the exception of the Bakken and Anadarko regions, as operators struggle with a base decline.

The oil industry in the region is also responding to calls to curb carbon emissions. In the Permian Basin, gas flaring intensity decreased to 1 percent, reaching levels only previously seen in the Eagle Ford regions. Gas flaring also decreased in the Bakken Basin this March.

According to data from The Texas Independent Producers and Royalty Owners Association, methane emissions intensity fell by 77 percent in the Permian between 2011 and 2019, with public companies producing significantly less gas from flaring in the region than their private counterparts. In fact, public oil producers working in the basin have reduced gas flaring from 70 percent at the beginning of 2018 to 45 percent in the second part of 2020.

Despite positive trends in the region, experts warn around half of the oil pipelines in the Permian basin could be empty by the end of 2021. As demand stagnated throughout 2020, in response to the pandemic, instead of growing as anticipated, pipelines that were constructed throughout 2018 and 2019 might remain unused. At the time of construction, around 13 million bpd of U.S. crude were being produced and the existing infrastructure was overwhelmed.

Oil and gas companies are now looking into alternative ways to use the empty pipelines by moving other products, to ensure the space is being used. In Q4 2021, the total use of the largest oil pipelines in the Permian could fall to 57 percent if demand continues at its current rate.

As oil firms ramp up production, and demand looks stable, production and well construction rates in the Permian Basin appear positive. In addition, greater diversification of oil pipelines use could help operators raise cash until oil demand increases in 2022.

By Felicity Bradstock for Oilprice.com

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