The Permian shale play is all about setting records. Now, the region will probably become the world’s largest oil patch over the next decade.
Output in the basin is forecast to reach 3.18 million barrels a day in May, according to the Energy Information Administration. That’s the highest since the agency began compiling records in 2007. The size of the oil deposits coupled with increased technology and efficiency are fueling the rampant growth.
“The technology is the biggest driver,” said Rob Thummel, managing director at Tortoise, which handles $16 billion in energy-related assets. “The basin in and of itself could end up being the largest oil field in the world.”
By contrast, top-producing members of OPEC such as Iran and Iraq pump less than 5 million barrels a day. Iran produced about 3.81 million barrels day in March, according to data compiled by Bloomberg.
“If the Permian was part of OPEC, it would be the fourth-largest OPEC member, right behind Saudi Arabia, Iran and Iraq,” Thummel said. “By the end of the year, the Permian probably overtakes Iran.”
WTI versus Brent
Meanwhile, oil traders with access to pipelines out of West Texas to export terminals along the Gulf Coast are raking it in from the rapid supply growth in the Permian Basin.
The 800,000 barrel-a-day output surge in the past year has outpaced pipeline construction and filled existing lines, pushing prices of the region’s crude to almost $13 a barrel below international benchmark Brent crude, the biggest discount in three years.
That’s about double the cost to ship the oil via pipeline and tanker from Texas to Europe, signaling U.S. exports are likely to increase.