Permian Basin could double oil production by 2023

Already one of the world’s leading oilproducing regions, the Permian Basin could nearly double crude oil production by 2023, according to a new report from IHS Markit.

An increase from the current 3.2 million barrels per day to 5.4 million would push the Permian Basin past all countries except Saudi Arabia and Russia. The region started 2018 at about 2.8 millions of barrels per day, but production has increased in recent months in response to rising oil prices.

The region already produces more crude than many member nations of the oil cartel, OPEC (Organization of the Petroleum Exporting Countries).

“In the past 24 months, production from just this one region — the Permian — has grown far more than any other entire country in world,” Daniel Yergin, IHS Markit vice chairman, said in a written statement. “Add an additional 3 mbd by 2023 — more than the total present-day production of Kuwait — and you have a level of production that exceeds the current production of every OPEC nation except for Saudi Arabia.”

Russia and Saudi Arabia currently produce more than 10 million barrels of crude oil every day. IHS Markit describes the potential increase in Permian production as “stunning” and would account for 60 percent of the world’s production growth during that period. Although those are eye-popping numbers, the company said this wasn’t the best-case forecast.

These projections, however, are far larger than earlier forecasts by the U.S. Energy Information Administration. That agency’s reference case projections showed the Permian Basin peaking at a little more than 4 million barrels per day.

Natural gas production, which is mostly a byproduct in the Permian Basin, is also expected to more than double by 2023.

The exploration and production costs would be about $308 billion, but that wouldn’t be the “primary challenge,” according to the report. The most likely roadblock is logistics; the Permian Basin’s massive growth is pushing pipeline capacity — both oil and natural gas — to its limit. New pipelines and expansions are in the works, but relief isn’t expected until at least the middle of next year.

Midstream companies are scrambling to build more pipelines to transport oil and natural gas from the Permian Basin to refineries and export facilities along the Texas Gulf Coast. Irving-based Exxon Mobil and Houston-based Plains All American Pipeline just announced their intent to build a 1 million-barrel-a-day crude oil pipeline connecting the Permian Basin to the Houston area.