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Last Updated: July 26, 2017
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graph of monthly U.S. crude oil production by region and forecasted change, as explained in the article text

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, July 2017


In EIA’s latest Short-Term Energy Outlook (STEO), total U.S. crude oil production is forecast to average 9.3 million barrels per day (b/d) in 2017, up 0.5 million b/d from 2016. In 2018, EIA expects crude oil production to reach an average of 9.9 million b/d, which would surpass the previous record of 9.6 million b/d set in 1970. EIA forecasts that most of the growth in U.S. crude oil production through the end of 2018 will come from tight rock formations within the Permian region in Texas and from the Federal Gulf of Mexico.


In the July STEO, the Permian region is expected to produce 2.9 million b/d of crude oil by the end of 2018, about 0.5 million b/d more than the estimated June 2017 production level, representing nearly 30% of total U.S. crude oil production in 2018. The Permian region covers 53 million acres in the Permian Basin of western Texas and southeastern New Mexico.


Within the Permian Basin are smaller sub-basins such as the Midland Basin and the Delaware Basin, which contain historically prolific non-tight formations as well as multiple prolific tight formations such as the Wolfcamp, Spraberry, and Bone Spring. With the large geographic area of the Permian region and stacked plays, operators can continue to drill through several tight oil layers and increase production even with sustained West Texas Intermediate (WTI) crude oil prices below $50 per barrel (b).


Based on data from Baker Hughes, 366 of the 915 onshore rigs in the Lower 48 states in June were operating in the Permian region. EIA forecasts that the Permian’s rig count will fall slightly to 345 at the end of 2017 and then grow to 370 by the end of 2018.


In addition to responding to changes in WTI price, increases in rig counts are also related to cash flow. In the Permian, operators have been able to maintain positive cash flow because of lower costs, higher productivity, and increased hedging activity by producers, many of whom have sold future production at prices higher than $50/b. Available cash flows could potentially contribute to the growth of rigs in this region despite relatively flat crude oil prices since December 2016.


EIA’s Drilling Productivity Report expects that productivity in the Permian, as measured by new-well oil production per rig in barrels per day, decreased for the 10th consecutive month in June. Output per rig is likely decreasing because operators are drilling more wells than they are completing.


Completing a well involves casing, cementing, perforating, and hydraulically fracturing to make it ready for producing. When operators drill a well but do not complete it, the inventory of drilled but uncompleted wells (DUCs) increases, which tends to lower output per drilling rig. Oil only flows after a well is completed.


The trend of operators drilling more wells than they are completing does not have a clear cause, but a widening of the WTI-Midland crude oil price discount to WTI-Cushing since the beginning of 2017 suggests the possibility of some minor transportation constraints. Lags in well completion may also reflect implementation of strategies that drill more wells from a single pad with completion equipment not deployed until all wells are drilled.

graph of Permian region wells and monthly change in Permian production per rig, as explained in the article text

Source: U.S. Energy Information Administration, Drilling Productivity Report, July 2017


Average output per well shows that productivity based on initial production rates continues to increase in the Permian region. Initial production based on average output per well year to date is higher than the 2016 annual average. Many operators are continuing to experiment with completion techniques to maximize output per well, suggesting the 2017 annual average initial production rate could continue to increase.

graph of Permian region average production per well, as explained in the article text

Source: U.S. Energy Information Administration, Drilling Productivity Report, July 2017
Note: 2017 is based on year-to-date data (through April). Other years represent annual averages.


The dynamics related to drilling in the Federal Gulf of Mexico (GOM) differ from those in Lower 48 onshore regions. Because of the length of time needed to complete large offshore projects, oil production in the GOM is less sensitive to short-term oil price movements than Lower 48 onshore production. In 2016, eight projects came online in the GOM, contributing to production growth. Another seven projects are anticipated to come online by the end of 2018. Based on anticipated production at both new and existing fields, crude oil production in the GOM is expected to increase to an average of 1.7 million b/d in 2017 and 1.9 million b/d in 2018.

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U.S. renewable electricity generation has doubled since 2008

U.S. annual renewable generation

Source: U.S. Energy Information Administration, Electric Power Monthly

Renewable generation provided a new record of 742 million megawatthours (MWh) of electricity in 2018, nearly double the 382 million MWh produced in 2008. Renewables provided 17.6% of electricity generation in the United States in 2018.

Nearly 90% of the increase in U.S. renewable electricity between 2008 and 2018 came from wind and solar generation. Wind generation rose from 55 million MWh in 2008 to 275 million MWh in 2018 (6.5% of total electricity generation), exceeded only by conventional hydroelectric at 292 million MWh (6.9% of total generation).

U.S. solar generation has increased from 2 million MWh in 2008 to 96 million MWh in 2018. Solar generation accounted for 2.3% of electricity generation in 2018. Solar generation is generally categorized as small-scale (customer-sited or rooftop) solar installations or utility-scale installations. In 2018, 69% of solar generation, or 67 million MWh, was utility-scale solar.

U.S. annual net generation, wind and solar

Source: U.S. Energy Information Administration, Electric Power Monthly

Increases in U.S. wind and solar generation are driven largely by capacity additions. In 2008, the United States had 25 gigawatts (GW) of wind generating capacity. By the end of 2018, 94 GW of wind generating capacity was operating on the electric grid. Almost all of this capacity is onshore; one offshore wind plant, located on Block Island, off the coast of Rhode Island, has a capacity of 30 megawatts. Similarly, installed solar capacity grew from an estimated less than 1 GW in 2008 to 51 GW in 2018. In 2018, 1.8 GW of this solar capacity was solar thermal, 30 GW was utility-scale solar photovoltaics (PV), and the remaining 20 GW was small-scale solar PV.

Growth in renewable technologies in the United States, particularly in wind and solar, has been driven by federal and state policies and declining costs. Federal policies such as the American Reinvestment and Recovery Act of 2009 and the Production Tax Credit and Investment Tax Credits for wind and solar have spurred project development.

In addition, state-level policies, such as renewable portfolio standards, which require a certain share of electricity to come from renewable sources, have increasing targets over time. As more wind and solar projects have come online, economies of scale have led to more efficient project development and financing mechanisms, which has led to continued cost declines.

Conventional hydroelectric capacity has remained relatively unchanged in the United States, increasing by 2% since 2008. Changes in hydroelectric generation year-over-year typically reflect changes in precipitation and drought conditions. Between 2008 and 2018, annual U.S. hydroelectric generation was as low as 249 million MWh and as high as 319 million MWh, with hydroelectric generation in 2018 totaling 292 million MWh. Generation from other renewable resources, including biomass and geothermal, increased from 70 million MWh to 79 million MWh in the United States between 2008 and 2018, and it collectively represented 1.9% of total generation in 2018.

March, 20 2019
Your Weekly Update: 11 - 15 March 2019

Market Watch

Headline crude prices for the week beginning 11 March 2019 – Brent: US$66/b; WTI: US$56/b

  • Global crude oil prices continue to remain rangebound despite bearish factors emerging
  • News that Libya was restarting its 300,000 b/d Sharara field could weaken the ability of OPEC to control supply, while a report from the US EIA hints that the market was moving into a glut
  • The EIA report showed that commercial crude inventories in the US rose by 7.1 million barrels, far higher than the 1.6 million barrel increase predicted, with a 873,000 barrel increase at Cushing and a 12% y-o-y drop in crude imports
  • By the end of 2019, with American output surging and Saudi Arabia curtailing production, the US could export more oil and liquids than the world’s largest exporter
  • Meanwhile in OPEC, PDVSA has received some aid from Russia with Rosneft agreeing to send heavy naphtha to Venezuela – a product necessary to thin heavy Venezuela crude to move by pipeline to the coast that have been affected by the American sanctions
  • On the demand side, Morgan Stanley has predicted that China’s oil consumption will peak in 2025, some 5-8 years earlier than most expectations, driven by a shift in cars towards electric vehicles and high-speed rail
  • The US active rig count fell for a third consecutive week, following a 9 rig fall with an 11 rig drop last week, with nine oil sites and two gas sites scrapped
  • Despite the bearish factors, it looks like crude has found a new comfortable range with Brent at US$65-67/b and WTI at US$56-58/b for the week


Headlines of the week

Upstream

  • Despite security concerns, Libya has restarted its largest oil field, with output at 300,000 b/d Sharara expected to reach 80,000 b/d initially, throwing a new spanner in the OPEC goal of controlling supply
  • A one-year delay to Enbridge’s Line 3 conduit in Canada due to regulatory issues has thrown new troubles onto Alberta’s beleaguered crude industry
  • ExxonMobil is planning a major acceleration of its Permian assets, aiming to produce more than 1 mmboe/d by 2024, an increase of nearly 80%
  • China has announced plans to form a national oil and pipeline company, part of a natural energy industry overhaul that will give the new firm control over at least 112,000 km of oil, gas and fuel pipelines currently held by other state firms
  • Equinor, with Petoro, ConocoPhillips and Repsol, have announced a new oil discovery in the North Sea, with the Telesto well on the Visund A platform potentially yielding 12-28 million barrels of recoverable oil
  • Aker Energy has reported a new oil discovery at the Pecan South-1A well offshore Ghana, with the Pecan field expected to hold 450-550 mboe of oil
  • Production declines at Kazakhstan’s three main oil fields will see the country slash crude exports by 2% to 71 million tons this year, with cuts mostly to China

Midstream & Downstream

  • Canadian Natural Resources is looking to ease pressure on the Alberta crude complex by bringing its 80 kb/d North West Redwater refinery online this year
  • Work has begun on the upgrade and expansion of Egypt’s Middle East Oil Refinery near Alexandria, with the project expected to boost capacity to 160 kb/d and quality to Euro V through the installation of a new CDU and VDU
  • Bahrain’s BAPCO has announced plans to expand its Sitra oil refinery by early 2023, growing capacity from 267 kb/d to 360 kb/d

Natural Gas/LNG

  • India has started up its first LNG regasification facility on the east coast, with the Ennore terminal expected to service the major cities of Chennai and Madurai
  • Total has signed an agreement with Russia’s Novatek for the formal acquisition of a 10% stake in the Arctic LNG 2 project, bringing its total economic interest in the 19.8 mtpa project in the Yamal and Gydan peninsuals to 21.6%
  • Thailand’s PTTEP has announced a new offshore gas find in Australia’s portion of the Timor Sea, with the Orchid-1 well striking gas and expected to be incorporated into the Cash-Maple field with 3.5 tcf of resources
  • Crescent Petroleum and Dana Gas’s joint venture Pearl Petroleum Company is aiming to boost gas production at Khor Mor block in Iraq’s Kurdistan region by 63% with an additional 250 mmscf/d of output
  • Petronas’ 1.2 mtpa PFLNG Satu – the world’s first floating LNG vessel – has completed its stint at the Kanowit field and will now head to its second destination, the Kebabangan gas field offshore Sabah
  • Chevron is looking to revisit its Ubon wet gas project in Thailand after a period of hiatus as the supermajor recalibrated its development costs
  • Nigeria’s NLNG Train 7 LNG project is expected to reach FID in the third quarter of the year after multiple delays
  • ExxonMobil and BP have agreed to collaborate with the Alaska Gasline Development Corporation to advance the Alaska LNG project
  • Energean Oil and Gas has started its 2019 drilling programme in Israel, focusing on four wells, including one in Karish North near the Karish discovery
March, 15 2019
Latest issue of GEO ExPro magazine covers New Technologies and Training Geoscientists, with a geographical focus on Australasia and South East Asia

GEO ExPro Vol. 16, No. 1 was published on 4th March 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.

This issue focuses on new technologies available to the oil and gas industry and how they can be adapted to improve hydrocarbon exploration workflows and understanding around the world. The latest issue of GEO ExPro magazine also covers current training methods for educating geoscientists, with articles highlighting the essential pre-drill ‘toolbox’ and how we can harness virtual reality to bring world class geological locations to the classroom.

You can download the PDF of GEO ExPro magazine for FREE and sign up to GEO ExPro’s weekly updates and online exclusives to receive the latest articles direct to your inbox.

Download GEO ExPro Vol. 16, No. 1

March, 14 2019