The U.S. tight oil sector is likely to spend the first half of the decade navigating the gap between slower production growth rates and significant increases in pipeline capacity, according to a note from Wood Mackenzie.
On February 25, the consultancy said it expected this gap to be pronounced in the Permian Basin, the country’s largest source of tight oil. Pipeline operators serving Permian fields are set to see spare capacity reach 2.3 million barrels per day (bpd) by the end of next year, it stated.
John Coleman, Wood Mackenzie’s principal analyst for North American crude markets, said he expected conditions to improve by the middle of the decade. Upstream operators will probably start extracting more tight oil in 2022 and will need all existing pipeline capacity by 2025, he said.
Nevertheless, he said, “there’s a possibility the Permian may never need another new pipeline built.”