US to Drive 60 Pct of Non-OPEC Output Growth in 2024

Oil production in the United States’ main oil-producing basin is poised to slow down this year but the country would still account for 60 percent of growth outside the Organization of the Petroleum Exporting Countries (OPEC), according to Goldman Sachs.

The Permian is expected to post an annual average growth of 340,000 barrels per day (bpd), slashed from 520,000 bpd last year. Growth can remain “robust” through 2026, at 270,000 bpd that year, the bank said.

It pegged the overall U.S. production growth in 2024 at 500,000 bpd, down from over one million bpd a year ago.

While “technological and efficiency gains” have made the Texas-New Mexico shale basin account for all growth in U.S. petroleum production since 2020, “the Permian is maturing, and its deteriorating geology will weigh on the production of crude oil down the road,” Goldman Sachs wrote in an article on its website. It blamed Permian geological deformations on “years of intense exploration and production.”

Moreover, the most productive wells are also depleting and upstream activity is, as broadly the case in the U.S., declining, it said.

“The Permian weekly rig count has dropped nearly 15 percent from last year’s April high, and is down 30 percent from its 2018-2019 average”, Goldman Sachs said, expecting the trend to continue in 2024.

“The rig count will likely keep edging downwards, from 309 today to fewer than 300 by the end of 2026,” it added. “But output per rig will keep growing, as industry consolidation increases the share of more productive rigs, and as technologies improve.

A typical Permian oil well achieves peak production a month after going online “but declines fast afterward to modest and roughly flat production in three-four years,” Yulia Grigsby, an energy economist at Goldman Sachs, explained.

This year, Goldman Sachs projects that the initial production of wells will rise by 100 bpd, before falling to 50 bpd between 2025 and 2026, only a third of the growth in 2019.

Growth through 2026 will remain “robust” thanks to drilling and completion efficiency, it said.

“This year, every stage of a well’s building cycle in the Permian was 20-50 percent faster than in 2019, with the total average time from rig to production decreasing by a third to 63 days,” Grigsby commented. “This acceleration will boost the share of new and productive wells amid the stock of declining wells.”

On the trading side, Goldman Sachs expects that “price swings are unlikely to spark deep cuts in Permian production.”

“Permian oil exhibits a differential sensitivity to global oil prices,” it said. “When WTI prices remain above $50 per barrel, a 10 percent drop in price leads to only a modest average drop of 1.3 percent in Permian production.

“If WTI prices are below $50 per barrel, though, that same 10 percent drop in price triggers a much larger drop of 4 percent in Permian production.”

Source: www.rigzone.com