Permian Pipeline Constraints Cause of $1.4B in Deferred Completion Spend

Pipeline issues in the Permian are expected to stall growth, according to Westwood Global Energy Group’s U.S. Drilling and Completions report released Aug. 28.

The latest report, which takes a look at key basins in the onshore market, finds that the Permian will see 345 deferred completions by the end of 2019 due to constraints with pipeline takeaway capacity. The supply chain, logistics and capital allocation toward 345 expected completions will have to find new buyers or storage, which will reduce utilization of equipment and increase supply.

Westwood anticipates 2.5 million tons of sand and five billion gallons of water to be directly impacted by deferred completions, with demand for 1.6 million horsepower for pressure pumping expected to evaporate in 2H 2018. Additionally, capital expenditures (CAPEX) for completion operations to the tune of $1.4 billion will be delayed or reallocated on other basins.

Source: Westwood Global Energy Group

Still, there’s a silver lining, according to Todd Bush, vice president, commercial, at Westwood Global Energy Group.

“Midstream, on the other hand, is experiencing a second heyday thanks to unconventional plays,” said Bush. “Crude and NGLs need to be moved, often from areas with little or no infrastructure, so you can expect operators to be more creative to find and fund new projects to lessen the current constraint. We estimate $3.1 billion in 2018 of CAPEX and $3.6 billion in 2019 will be spent on pipeline construction which equates to a 21 percent increase from 2017. This also confirms the urgency and the level of activity in the basin needed to alleviate pressure.”