IHS Markit forecasts Permian basin oil production will double from 2018-23

Permian basin oil production is forecast to reach 5.4 million b/d by 2023—more than current production from any single Organization of Petroleum Exporting Countries member other than Saudi Arabia, IHS Markit said in a new report.

Permian oil production already is a major force in world supply growth, the report said, adding that IHS Markit analysts expect a “stunning” level of growth that will comprise more than 60% of net world production growth.

The growth will come from nearly 41,000 new wells and $308 billion in upstream spending during 2018-23. Production of natural gas and natural gas liquids in the Permian also is forecast to double during this period, reaching 15 bcfd and 1.7 million b/d, respectively.

“In the past 24 months, production from just this one region—the Permian—has grown far more than any other entire country in world,” said Daniel Yergin, vice-chairman, IHS Markit. “Add an additional 3 million b/d by 2023—more than the total present-day production of Kuwait—and you have a level of production that exceeds the current production of every OPEC nation except for Saudi Arabia.”

The new IHS Markit Permian production outlook draws on information from the company’s proprietary Performance Evaluator database, which includes detailed information of more than 1 million wells globally along with the combined analysis of IHS Markit experts covering crude markets, North American gas, midstream and infrastructure, costs, NGLs, and company research.

The outlook expects operators will operate wells with positive cash flow unlike previous years. Analysts anticipate light, sweet crude oil prices will stay about $60/bbl or higher.

“The infrastructure challenges in the Permian illustrate a fundamental mismatch between upstream oil producers and midstream players,” said Jim Burkhard, vice-president and head of crude oil markets at IHS Markit.

The IHS Markit Permian production outlook factors in logistical bottlenecks, causing some wells to be deferred to late 2019. The Permian’s robust production growth is expected despite constraints.

“Far from a ‘best case’ forecast, the IHS Markit outlook applies realistic scenarios and anticipates likely bottlenecks,” said Raoul LeBlanc, executive director and head of the IHS Markit Performance Evaluator. “That the outlook still expects the Permian to exceed existing (and already lofty) expectations speaks to the region’s unique and growing prominence to the world oil market. The level of growth—from 0.92 million b/d in 2010 to 5.4 million b/d in 2023—is truly stunning.”