According to analysts at Wood Mackenzie, the prolific Permian Basin of West Texas and New Mexico still has more than a decade of high production.
Production in the basin stood at a respectable 2.2 million barrels per day (bpd) in 2017. It has since risen dramatically to over 6 million bpd – almost half the total oil production in the US. Nevertheless, the shale industry is not immune to market forces. As oil prices have declined and costs have risen, production growth has slowed.
Wood Mackenzie expects an extra 200,000 bpd in Permian production this year, making for an average of 6.6 million bpd. Growth is then expected to continue slowing until 2035, when it will reach a peak total production of 7.7 million bpd before plateauing at this level. The analysts at Wood Mackenzie say in their report:
“The prospect of substantial production growth and low-cost barrels has been a magnet for the US industry for more than a decade. Organic investment complemented by M&A and consolidation have made the Permian a huge store of future value.”
The report separates shale companies into what it calls the “haves” and “have-nots”. The former includes big companies like ExxonMobil and Chevron, which make products like the Mobil and Texaco hydraulic oil ranges. These companies have large footprints and can benefit from improved efficiency, so they benefit more from the “ups” and are less exposed to the “lows”. The latter, however, are already struggling to maintain profitable production.
