Good and Bad: Plenty of Natural Resources, Not Enough Pipelines

The Permian Basin in Texas and southeast New Mexico has exhibited a resurgence in oil and natural gas production the likes of which hasn’t been seen in the area since the mid-1970s. Companies are now faced with a unique problem: there is no commodity shortage, only a shortage of means to transport the oil and natural gas out of the basin and to the consumer.

The Dallas branch of the Federal Reserve estimated an increase in oil production of 34.1% during the 4th quarter of 2017 for counties in the Permian Basin while the remainder of Texas increased 9%. Natural gas is a similar story. Permian Basin counties increased output by 24.9% while Texas counties outside the basin had a decrease of production by 0.3%. A recent report from the U.S Energy Information Administration highlights the Permian region as a leader in oil and gas production, often competing in yield and growth with the Appalachia and Niobara resource fields. The rapid increase in productivity is mirrored by oil and gas rig count. In 2009 just 92 rigs operated in the Permian Basin. That number has since grown 416% to a June 2018 rig count of 475.

With new rigs come new jobs. Employment in the Permian Basin has outpaced statewide employment growth in Texas and New Mexico by 2.7% and 3.5%, respectively. Every statistic shows growth in this part of the country but that development is at risk of being stunted. The lack of infrastructure is one major source of growing pains in the Permian Basin as companies struggle to get commodity to consumer.

To ensure the most effective and safest transportation of oil and natural gas, elected officials must focus on streamlining the expansion of pipeline infrastructure from the Permian Basin to areas of need and export potential. Industry representatives are taking the Permian bottleneck very seriously. Pioneer Natural Resources Co. Chairman, Scott Sheffield, expects “Some companies will have to shut in production, some companies will move rigs away,” as current Permian pipelines are anticipated to be full for three or four months. Too much of a good thing should never be a problem, however it is being seen more and more along Permian rigs. Realistically, supplemental train and truck transport methods will not suffice in meeting growing production and demand. Pipelines are the only transit that can safely and efficiently handle current and future output volumes as business in the Permian region continues.

Pipeline shortages are not unique to the Permian Basin as natural resource booms in the Marcellus and Utica regions experience similar bottlenecks. Expanding pipeline infrastructure will benefit suppliers, refineries, distributors, and consumers. The United States will miss out on an important opportunity to assert itself in the global energy market if it cannot add the pipeline transportation component to its natural resources.

Similar Posts