Permian Basin oil output to jump 60 pct by 2016-Bentek

Thu Aug 16, 2012 2:20am IST

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* Output to reach 1.82 million bpd by end 2016 -Bentek

* Pipeline capacity to fall short by early 2013

* About 1 million bpd new pipeline capacity proposed

By Selam Gebrekidan

NEW YORK, Aug 15 (Reuters) - Crude oil production in the Permian basin -- a carbonate and sandstone prospect in Texas and New Mexico -- will rise by some 60 percent to reach at least 1.82 million barrels per day by the end of 2016, energy consultancy Bentek said on Wednesday.

Output will surpass existing pipeline capacity by early next year, Bentek added, while noting some 1 million bpd of new takeaway capacity is slated to come online by the end of 2014.

The Permian's oil output has grown consistently since May 2011, some of which is from shale oil prospects, and the basin will host more oil drillers in the next five years, the Colorado-based consultancy said.

The basin is among the largest and most active oil producing reserves in the United States and oil companies are revisiting old fields, armed with new technology such as horizontal drilling and hydraulic fracturing.

Bentek does not breakout shale oil or tight oil production for the Permian Basin. However, the Avalon, Cline, Leonard and Penn formations are considered shale plays or unconventional fields which, unlike sandstone, are not porous but can be exploited with the new drilling technology.

The basin is home to the Spraberry, Wolfcamp, Bone Spring, Avalon and Devonian formations, among others, that range in depth from a few hundred feet to five miles below the surface, according to the Texas Railroad Commision.

The number of rigs drilling in the Permian basin has grown five-fold since mid-2009 to 500 rigs in may 2012, the U.S. Energy Information Administration (EIA) said in July.

Bentek estimates current Permian oil production is at 1.29 million bpd. Railroad Commission data shows the basin produced more than 767,000 bpd in 2011.

OLD PLAY, NEW DEVELOPMENT

Oil majors like California giants Occidental Petroleum and Chevron Energy operate in the Permian, along with newer players like Chesapeake Energy, which hopes to sell its lucrative assets there as it pushes to fill a funding gap.

Occidental is the largest oil producer in the Permian, accounting for 15 percent of all output, according to the company's filings with regulators.

The company uses an enhanced recovery technology that injects carbon-dioxide into oil reservoirs for 64 percent of its Permian Basin production.

Chesapeake entered into a sale agreement with affiliates of E nerVest L td for its assets in the Midland Basin, which includes the Wolfcamp, Wolfberry Spraberry and Penn shale formations. It is negotiating deals for more assets and hopes to complete a sale during this quarter, it said in its second-quarter earnings report.

PIPE IT OUT

A few new pipelines are coming online and will help get more Permian crude to market.

Last week, Plains All American said it brought a 15-mile (24-km), 50,000 bpd pipeline online and will start more lines with a total 100,000 bpd capacity by the end of 2012.

Sunoco Logistics' "Permian Express" pipeline is also expected to add 90,000 bpd capacity by April 2013 and eventually ramp up to 150,000 bpd.

Occidental is looking to build a 278,000 bpd "BridgeTex" pipeline after it partnered with Magellan Midstream Partners to ship Permian crude oil to the Gulf coast.

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