SHORT-TERM ENERGY OUTLOOK
U.S. Liquid Fuels
https://www.eia.gov/outlooks/steo/report/us_oil.phpSupply. EIA forecasts total U.S. crude oil production to average 10.3 million b/d in 2018, up 1.0 million b/d from 2017. If achieved, forecast 2018 production would be the highest annual average on record, surpassing the previous record of 9.6 million b/d set in 1970. In 2019, crude oil production is forecast to rise to an average of 10.8 million b/d.
Increased production from tight rock formations within the Permian region in Texas and New Mexico accounts for 0.8 million b/d of the expected 1.2 million b/d of crude oil production growth from December 2017 to December 2019. EIA expects most of the remaining 0.3 million b/d of growth to come from the Federal Gulf of Mexico, as seven new projects are expected to come online by the end of 2019.
The Permian region is expected to produce 3.6 million b/d of crude oil by the end of 2019, which is roughly a 0.9 million b/d increase from estimated December 2017 levels and would represent about 32% of total U.S. crude oil production in 2019. The Permian region is the geographic area that predominately spans the Permian Basin of western Texas and southeastern New Mexico and covers 53 million acres. Within the Permian Basin are smaller sub-basins, including the Midland Basin and the Delaware Basin, all of which contain historically prolific non-tight formations as well as many prolific tight formations such as the Wolfcamp, Spraberry, and Bonespring. With the large geographic area of the Permian region and stacked plays, operators can continue to develop multiple tight oil layers and increase production, even with sustained prices lower than $50/b. Increases in proppant intensity, lateral lengths, changes to slick-water completions, and drilling in sweet spots have driven increased initial production (IP) rates and rig activity in the Permian, allowing it to remain one of the most economic regions for oil production. The Permian region rig count is projected to grow from about 398 at the end of 2017 to 490 at the end of 2019.
Production from the Eagle Ford region is expected to be between 1.2 million b/d and 1.3 million b/d in 2018 and 2019, slightly higher than the 2017 level. Compared with the Permian, the Eagle Ford region has a significantly smaller geographic area (16 million acres), fewer prolific stacked formations, and fewer opportunities to drill. However, similar to the Permian, Eagle Ford wells have high IP rates and fast decline rates, requiring the continuous drilling of new wells to maintain production levels. Historically, rig counts have been very responsive to price changes in the Eagle Ford region. Consequently, they have been declining since May 2017 because of oil prices dropping below $50/b in mid-2017. With EIA’s forecast WTI price averaging $55/b in 2018 and $57/b in 2019, Eagle Ford rigs are expected to grow from 80 at the end of 2017 to 95 at the end of 2019.
The Bakken region is expected to produce an average of 1.2 million b/d in 2018 and 1.3 million b/d in 2019, up from 1.1 million b/d in 2017. The Bakken region predominately spans the Williston Basin that contains the Bakken and Three Forks formations. Although the Bakken region is geographically large (23 million acres), it contains fewer identified prolific formations than the Permian region. In addition, operators in this region are affected by winter weather and have greater transportation constraints in moving oil to refineries and markets. Rig counts in this region are expected to grow from 49 at the end of 2017 to 69 at the end of 2019.
Gulf of Mexico production is forecast to average 1.7 million b/d in 2018, which would be relatively unchanged from 2017 levels, and then increase to 1.8 million b/d in 2019. The anticipated start of production in 2019 from the Appomattox project in the Rydberg field and the Mars projects in the Kaikias field, along with other projects that will begin operations in 2018 and 2019, are expected to contribute to increases in production from the Gulf of Mexico.
Crude oil production in Alaska is expected to remain flat at 0.5 million b/d in both 2018 and 2019. Ongoing exploration and developmental drilling in the North Slope and the anticipated start of production from 1H News project in November 2017 and the Greater Moose’s Tooth project in 2018 are expected to keep production in Alaska from declining as it has been in recent years.
Growth in crude oil production, especially in the Permian Basin, is expected to result in increased associated natural gas production and natural gas processing. EIA forecasts HGL production at natural gas processing plants will increase by 0.5 million b/d in 2018 and by 0.4 million b/d in 2019. EIA expects higher ethane recovery rates in 2018 and 2019, following planned increases in demand for petrochemical plant feedstock in the United States and abroad.
