Permian Needs $300B in CAPEX for Growth through 2023

Permian Needs $300B in CAPEX for Growth through 2023
A new report by consulting firm Arthur D. Little finds that U.S. independents will need to adjust their business models to keep up with forecasted growth in the Permian.

While production in the Permian Basin has been abundant, U.S. independent operators will need to look at new ways of doing business to position themselves for long-term value, according to a report released Oct. 2 by consulting firm Arthur D. Little.

Data in the report forecasts Permian activity through the next five years to:

  • Rise by up to 3 million barrels of oil equivalent per day
  • Possibly produce up to 5.4 billion barrels of oil equivalent per day
  • Have a need for up to 41,000 new wells (mostly unconventional) to be drilled to meet production outlook
  • Require more than $300 billion in capital expenditures (CAPEX) to keep pace with growth projections

In turn, independents will need to “comprehend and exploit global markets,” the report states, while suggesting partnership opportunities for U.S. independents as refineries in Mexico, Latin America and China.

Independents will also need to collaborate.

The report called the demands on infrastructure “tremendous,” citing trucking, roads, water usage, power consumption, sand to frack wells and community services like housing, schools and hospitals.

Additionally, about one million barrels per day in production growth are at risk due to the inability of the local infrastructure to support daily operations, according to the report.

Pioneer Natural Resources’ effort to potentially pool power generation to benefit both the operator’s community and local towns and ranches was an example mentioned in the report of the type of collaboration needed.  

Still, the biggest challenge remains the amount of capital needed.

“It is uncertain whether this challenge can be met. It demands that U.S. independents go against their nature by collaborating in key areas. It requires establishing markets, building new partnerships to a level not yet seen in the sector, and giving up control of traditionally competitive capabilities in order to attract the necessary investment capital,” the report states.


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