OPEC’s dominance over crude markets isn’t yet drawing to a close, but it is facing stiff competition from non-member producers. The most notable of these producers is, of course, the United States. In fact, the Permian Basin on its own is quickly outpacing entire OPEC nations.

The Permian’s production has been growing substantially in the past decade and isn’t expected to slow any time soon. According to a new report from IHS Markit, production out of the play will grow by nearly 3 million barrels per day (bbl/d) by 2023. This would account for more than 60% of net global production growth.

Should the play hit this production forecast, its total production of about 5.4 million bbl/d would exceed the production from every member of OPEC besides Saudi Arabia. That would represent tremendous growth for a play that was producing just under 1 million bbl/d in 2010.

It isn’t just crude production that is expected to greatly increase in the coming years. The report also anticipates that natural gas and NGL production will double to 15 billion cubic feet per day and 1.7 million bbl/d, respectively.

“In the past 24 months, production from just this one region—the Permian—has grown far more than any other entire country in the world,” Daniel Yergin, vice chairman, IHS Markit, said in a release.

Notably, this growth is anticipated despite the report forecasting likely bottlenecks due to a lag in midstream infrastructure development.

“The infrastructure challenges in the Permian illustrate a fundamental mismatch between upstream oil producers and midstream players. The former are focused on fast growth while the latter require sustained high utilization of infrastructure over decades for projects to be viable,” said Jim Burkhard, IHS Markit’s vice president for crude oil markets.

Midstream development isn’t the only headwind expected to impact the Permian in the coming years. Wood Mackenzie is forecasting that higher costs for water in the region, as well as higher water volumes from more wells being produced may limit the play’s larger growth estimates.

Unconventional development may have been the spark that reignited the Permian Basin, but it has also made it more difficult for producers to dispose of water used in hydraulic fracking. According to a Wood Mackenzie report, “Permian Produced Water: Slowly Extinguishing a Roaring Basin?,” the water-to-oil ratio in the Delaware Basin is as high as 10:1. Water usage by producers is nearly 17 million gallons of water per well in the Midland Wolfcamp, which is a 50% increase from 2015.

Most of the produced water can’t be reinjected into tight formations. Additionally, the region doesn’t handle fracture fluids well and many volumes flow back to the surface, according to the Wood Mackenzie report. This requires producers to inject produced water into separate saltwater disposal wells, recycle it or reuse it.

“Water handling is expensive and unit costs are also expected to rise as the simple solutions such as local shallow injection become exhausted. Rising volumes and rising costs are a bad combination that poses an impending supply risk to the overall region,” the report said.

Wood Mackenzie said that higher water costs could impact the economics within the Permian’s largest sub-plays, the Midland and Delaware basins, by about $3/bbl to $6/bbl. As a result of higher breakeven costs in the play, production out of the Permian could decrease by 400,000 bbl/d by 2025. The bulk of this decrease would occur in the Delaware Basin.

“Managing this risk will require large amounts of capital, particularly in regard to water disposal. Producers need to prepare for these investments and some of the best E&Ps are already doing this, setting the stage for future winners and losers,” the Wood Mackenzie report said.

While Wood Mackenzie’s production forecast is about 1 million bbl/d less than IHS Markit’s, the outlook for water-related costs is the same: they will continue to take up a larger portion of the drilling costs in the Permian. Wood Mackenzie anticipates water-related expenditures in the play could reach $17 billion in 2018, which would be roughly 20% of total drilling costs.

The best way to manage water-related costs in the play will be through the development of new pipelines that can transport produced water to other disposal sites. Water recycling will also help producers manage produced water in the Permian and it could help operators recover costs by becoming a revenue source through the sale of volumes to farmers.

“Expect producers to invest more in water management solutions, and if budgets stay relatively flat the next few years, watch drilling capital be diverted to water-related investments. Just as the level of drilling intensity in the Permian breaks basin records, so should the scale of water management solutions,” the Wood Mackenzie report said.

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