Wednesday, July 11, 2012

Rising Production in the Permian Basin

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The Permian Basin, a long time oil and natural gas producing region in west Texas and eastern New Mexico, is showing signs of new life. The active rig count has grown from 100 rigs in mid 2009 to over 500 rigs in May 2012. According to data from the Texas Railroad Commission and the New Mexico Energy, Minerals and Natural Resources Department, oil production from the Permian has increased fairly steadily over the past few years, reaching the 1 million barrels per day (bbl/d) threshold in late 2011, the first time since 1998.

graph of Monthly Permian Basin rig count and oil production, as described in the article text
Sources: U.S Energy Information Administration, based on Baker Hughes, Railroad Commission of Texas, and New Mexic

Growing oil production in the Permian Basin and other Texas plays, most notably the Eagle Ford shale, may be starting to strain existing takeaway capacity and is creating a need for Texas oil to serve more distant refineries. While new pipeline projects are scheduled to come online, current transportation constraints have caused Permian crude oil, which is priced in Midland, Texas, to sell at a significant discount to WTI beginning in January 2012.

graph of Spot prices of WTI and Midland crude oil, as described in the article text

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