Domestic crude oil and condensate production will continue to grow rapidly through the end of this decade, according to a recently released study by Tudor, Pickering, Holt & Co.
The report projected U.S. crude production will grow by 4.8 million barrels per day (MMbbl/d) from 2013 through 2020. That would represent an increase of more than 50% from production in mid-2014. The U.S. Energy Information Administration’s (EIA’s) current production estimate stands at 8.4 MMbbl/d for May, its latest figure.
The report projected 81% of the growth will come from three plays—the Permian, Bakken and Eagle Ford—then added, “we forecast the Permian, alone, will grow by 1.8+ MMbbl/d and compose ~40% of net oil growth.” It also said the Permian’s natural gas production will grow by 3 billion cubic feet per day [Bcf/d] during the period. That overall increase in production will have a major impact on the basin’s midstream sector and “will require meaningful infrastructure investment,” Tudor predicted.
The energy investment bank estimated domestic oil production will reach 12.3 MMbbl/d in 2020, with two-thirds of U.S. output in that year coming from the seven unconventional plays studied: the Permian, Eagle Ford, Bakken, Niobrara, South Central Oklahoma Oil Province, Mississippi Lime and Granite Wash/Tonkawa/Cleveland.
That would easily set a new U.S. record. The nation’s all-time peak for crude production came in fall 1970 at a little more than 10 MMbbl/d, according to government figures.
Tudor staffers took a bottom-up research approach to forecast potential crude production trends for the seven basins, based on current type curves and “basin-specific assumptions to achieve annual production estimates through 2020.” The findings indicate annual oil production will grow between 700,000 bbl/d and 900,000 bbl/d per year through 2017, then fall back to a strong—but slower—annual rate of around 450,000 bbl/d in 2020.
That good upstream news could be tempered if the downstream doesn’t respond appropriately to the increase, the bulk of which will be light crudes and condensate, the study said.
“If a combination of exports/refining expansions/flexibility doesn’t absorb a significant portion of the growth, then domestic light-crude prices could fall sufficiently to disincent supply growth,” it warned.
Condensate will make up a significant portion of the growth in liquids production. The report said that a “noticeable change in GOR [gas-oil ratio] moving from oil to condensate classification” has already occurred in recent years.
In the Eagle Ford, the report said condensate (higher than 45° API gravity) will continue to represent about one-third of the play’s liquids, even as overall liquids output grows.
“The pressure to allow oil exports will grow along with supply,” the report predicted. “We doubt free-flowing U.S. oil exports occur in the next couple years (more likely after 2016).” The nation’s refiners, focused for decades on heavy and sour feedstocks, will expand light-crude refining capacity “but we are not sure they can keep pace with nearly 1 MMbbl/d per year of growth.”
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