Oil Prices Still Struggling, But Production Predicted To Soar To Record Highs By 2018

Oil Prices Still Struggling, But Production Predicted To Soar To Record Highs By 2018

By Miguel Suazo and Chelsea Allen

Whatever your role or stake in the world of energy production, it is an interesting time to witness the broad and dynamic growth in U.S. energy sources and development. The production and popularity of natural gas continues to boom, and exciting developments in solar and other renewable energy sources continue apace. Crude, too, is not just holding its own, but flourishing in the United States. It is true that oil prices may not be at, or even close, to all time highs, but U.S. crude oil production is nonetheless meeting new milestones. It is doing so well, in fact, that the U.S. Energy Information Administration, (“EIA”) predicts record high oil production in 2018 of approximately 9.9 million barrels per day (b/d).  The EIA is one of 13 principal, independent agencies (along with the National Agricultural Statistics Service and the Bureau of Economic Analysis, for example) that make up the Federal Statistical System. The EIA “collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.”

Of the growth in crude production expected in 2018, the EIA predicts that the majority of that expected 9.9 million b/d will come specifically from production in the Permian Basin region in the southwestern United States. Productivity in that region is expected to continue to be so prolific that drilling in the Permian Basin will remain profitable even if crude prices remain near or somewhat below $50 per barrel (measured in West Texas Intermediate, or “WTI,” crude prices). This is important news for Texas and New Mexico, whose economies both rely heavily on oil and gas production. According to the EIA, crude production in the Permian region, covering somewhere around 53 million acres (although the total productive area is debated to be considerably greater when all its stacked plays are taken into account) and spanning from western Texas to southeastern New Mexico, will account for “30% of total U.S. crude oil production in 2018.” This surge in Permian production will provide increased economic benefits to Texas and New Mexico, providing taxes, direct employment, and jobs and resources for supporting industries.

The Permian Basin is a concentrated hotbed of crude production – as of June 2017, it contained more than a third of the total number of active, onshore drilling rigs in the Lower 48 states (about 366 out of 915 are located in the Permian region). The region features a rich mix of productive strata, which continues to prove attractive and viable to producers. Featuring stacked plays and both tight and non-tight formations, it offers an abundance of drilling opportunities. Now especially, new drilling technologies have made previously under- or non-developed plays accessible and commercially feasible targets for drillings.

The EIA isn’t alone in recognizing the crude production boom. Reports from he American Petroleum Institute (“API”) confirm the EIA’s analysis that the rate of crude production overall is headed up. While 2018 may be expected to break new crude production records, the API reports that 2017 has shown record high numbers as well. As of August 2017, the API’s Monthly Statistical Report relayed the fact that “U.S. crude oil production remained above 9.0 million barrels per day for the seventh consecutive month.” And, though production appeared to have dipped slightly in the days following the recent rash of hurricanes, it was nonetheless up overall for “the second highest August output level in 45 years.”

Continued and increased drilling and crude production in the Permian region will likely lead to increased economic opportunities and almost certainly present the complex legal needs that inevitably follow dynamic drilling and production activity. Investors, landowners, and producers in the Permian region may therefore find themselves with increased needs for legal services related to oil and gas activities. All are encouraged to contact our experienced legal team for help navigating legal concerns surrounding their oil and gas activities.






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