Permian Basin is helping US set record energy production
U.S. daily crude oil production in 2018 may shatter a record established nearly a half-century ago, the Energy Information Administration has suggested.What is unstated is that production costs for shale wells are now lower than the cost of production in many OPEC countries including Saudi Arabia. Most OPEC countries use oil revenues to subsidize their citizens, making it harder for them to cut costs. They sold gas at below their costs and took other steps to provide benefits for citizens. Taking those things away has a political cost for those countries. The capitalist system in the US has made companies more efficient. It is a system where the guy with the best product at the best price gets the deal.
The average production will be 9.9 million barrels per day next year, the federal agency revealed this week, up from 9.3 million barrels this year and more than the 9.6 million barrels produced in 1970, the landmark year.
Leading the U.S. production charge will be Permian Basin operations in western Texas and southeastern New Mexico and operations in the Gulf of Mexico.
The EIA said production in the Permian will increase to about 2.9 million barrels per day in 2018 as average production ramps up 515,000 barrels per day from June 2017 to the end of 2018. That 2.9 million barrels represents almost 30 percent of expected U.S. production next year.
Baker Hughes' rig count says there are 366 onshore rigs in the Permian alone; there are 915 onshore rigs in all in the lower 48 U.S. states.
Eight projects came online in the Gulf in 2016; another seven may come online in 2018. That will help Gulf production increase from 1.7 million barrels a day this year to 1.9 million barrels per day next year.
Specifically, the EIA said lower costs of production have enabled Permian producers to make a profit even with oil prices lingering in the $50-a-barrel range and falling into the mid-$40 range in recent weeks.
Some West Texas producers are producing oil at a cost of about $39, it has been reported.