EIA Predicts Production Growth from Permian and Other Shale Plays

In a piece of news that is not a surprise to anyone who follows U.S. oil and gas, the EIA released a note this week projecting that tight oil basins would be the dominant drivers of oil production growth in the U.S. for the foreseeable short term future.

The EIA’s Short Term Energy Outlook projects U.S. energy use through 2018, predicting both production and consumption. The January outlook projected U.S. crude oil production to increase from an average of 8.9 million BOPD in 2016 to an average of 9.3 million BOPD in 2018.

U.S. Oil Growth Driven by Tight Oil

Source: EIA

Permian basin activity to continue to grow

This increase is expected to be driven by growth in Texas, North Dakota, Oklahoma, and New Mexico, primarily due to production in the Permian, Eagle Ford, and Bakken. The growth in the Permian, where many companies have recently acquired acreage, has been driven by low costs and multiple stacked plays.

While overall U.S. oil production has been declining since mid-2015, production has continued to increase in the Permian region. In 2016, Permian production averaged 2.0 million BPD, a 5% increase from the level in 2015. The EIA expects this trend to continue, with Permian production projected to average 2.3 million BPD in 2017 and 2.5 million BPD in 2018.

With rigs in the Permian up 60% from levels seen last year, it is by far the most active basin in the country. According to Baker Hughes’ rig count, 40% of the rigs in the nation are in the Permian, with 291 out of an overall 712. The next-most active region, the Eagle Ford, currently has just 54 active rigs.

The Eagle Ford and Bakken declines are expected to continue through the first half of 2017. The EIA expects, however, that drilling in the areas will increase around Q3 2017, allowing production to grow or at least stay flat through 2018.

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