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article imagePermian Basin shale boom raises spectre of global oil glut

By Karen Graham     Nov 26, 2018 in Business
The Permian Basin has remained the nation's top producing oil field. However, a lack of crude oil pipelines has slowed growth in the labor market, including other basins such as the Bakken in North Dakota and New Mexico's part of the Delaware Basin.
According to Bloomberg, there is a fierce race to get American shale overseas - with at least nine proposed terminals hoping to be chosen as the likely one or two that will get built.
In the meantime, within the next 18 months, new pipelines are expected to be opened in the Permian Basin, allowing for the transport of an added 2 million barrels of oil a day to the Gulf Coast. But that crude oil will arrive in Corpus Christie at a time when the area can handle only 300,000 barrels a day of unused capacity.
Interestingly, some of the proposed terminals are being designed to load a supertanker every other day - each capable of carrying 2 million barrels. The competitive edge will undoubtedly go to a company like Enbridge. The company's Freeport plans could be fed by two pipelines it already owns interests in.
Active Permian Basin pumpjack east of Andrews  Texas in 2009.
Active Permian Basin pumpjack east of Andrews, Texas in 2009.
Zorin09/Wikipedia
"Anyone can build a terminal," said Chief Executive Officer James Teague of Enterprise Products Partners LP, one of the first companies to export oil from the U.S., in a conference call last month. "But it’s what’s behind that terminal that determines its success."
Basically, this means that if you build a terminal, like the proverbial baseball diamond, they will come - or not. You need the oil pipelines to feed the terminal.
Pipeline problems abound
Not having enough pipelines has led to a slowdown in parts of the oil and gas industry in the Permian Basin, a region that spans West Texas and parts of southeastern New Mexico.
Whatcom County Washington is fighting back against the increasing use of its Cherry Point terminals ...
Whatcom County Washington is fighting back against the increasing use of its Cherry Point terminals and loading facilities being used to ship fossil fuels.
Slecter
Even though oil and gas drillers have increased the number of drilled but uncompleted or DUC wells, they are waiting on the wells to be hydraulic fractured, or fracked, to begin production. There are already 3,800 DUC wells in the Permian, nearly half of the 8,545 DUC wells in the U.S.
Based on data from the Department of Energy, production in the Permian continues to push into record levels of production, estimated to reach 3.7 million barrels a day in December. That's more than 840,000 barrels a day from a year ago.
While the current administration is well pleased with the levels of production by the gas and oil industry, it's important to remember that over-production can be a double-edged sword.
The United States has aimed to end all of Iran's sales of oil  its crucial export  in a bid to ...
The United States has aimed to end all of Iran's sales of oil, its crucial export, in a bid to curtail the influence of the Shiite cleric-led state
ATTA KENARE, AFP/File
Volatile oil market
Increased U.S. output contributed to global overproduction in 2014 that slashed prices from above $100 per barrel to below $30, causing a three-year industry bust that ended in fall 2017. Crude oil volatility has soared in the second half of 2018, with prices going to a four-year high before entering their longest losing streak in three decades, according to Oilprice.com.
There are global fears of a supply glut on the market, however, OPEC and Russia are scheduled to meet on December 6, but the outcome of the meeting is far from certain. President Trump doesn't want OPEC to cut production, rather liking the low oil prices.
Russia has signaled it doesn't want to cut production, meaning there remains a chance OPEC will not cut production. Added to this is the fact that the U.S. could at any time cut the waivers it has given countries importing oil from Iran, and this action would upset oil prices again.
Daniel Fine, a long-time oil industry consultant in New Mexico, says, “The global economy is slowing and demand is sluggish. We could be looking at oversupply next year that’s even greater than in 2014. I see prices touching down at $50 a barrel rather quickly, and maybe even slightly lower at $48 or $49.”
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