Bottlenecks impose extra cost on energy production in nation's largest field

Reuters:

The west Texas drillers that drove the shale revolution have overwhelmed the region’s infrastructure with oil production -driving up costs, depressing regional oil prices and slowing the pace of growth.

The U.S. government continues to forecast the country’s oil output rising to fresh record. But competition for limited resources in Texas is making it harder for shale producers to turn a profit and encouraging some to invest elsewhere.

Texas is home to the Permian Basin, the largest U.S. oil field and the center of the country’s shale industry. In the past three years, production from the Permian has risen a whopping 1.5 million barrels per day (bpd) to 3.43 million bpd.

All that oil means pipelines from the shale patch are full, so producers are paying more to transport oil on trucks and rail cars. Shortages of labor, water and even the fuel used in fracking are driving up production costs.

At the same time, Permian producers are getting less for their oil, which in August traded as much as $17 a barrel below the U.S. crude benchmark. Sellers have to offer the discount to compensate for the higher transport costs.

“We’re our own worst enemy,” said Ross Craft, chief executive of Approach Resources, a small west Texas oil producer which last year averaged about 11,600 barrels of oil equivalent daily output.

“We can drill, bring these wells on so quickly that we basically outpace the market. It is going to take a little bit of time,” he said, for the infrastructure to catch up to producers.
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This is why many wells are drilled but not complete.  They are standing by waiting for the infrastructure to catch up, which should be significantly increased production when it does.  But it tells you something about the increased efficiencies of the operation that they can still afford to drill the wells even with teh $17 a barrel discount.