Purvin & Gertz estimates future unconventional oil output

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, June 24 -- Unconventional oil production from the Bakken, Eagle Ford, and Niobrara plays is expected to approach 900,000 b/d in 2015 and exceed 1.3 million b/d by 2020, a consultant forecast.

Purvin & Gertz Inc. estimates current oil production from the Bakken, Eagle Ford, and Nobrara plays at 350,000-400,000 b/d.

The Bakken formation is in North Dakota and Montana, the Eagle Ford is in South Texas, and the Niobrara is in Colorado and Wyoming.

Geoff Houlton, a vice-president with Purvin & Gertz in Houston, told OGJ that shale oil production likely will help offset US oil import volumes in coming years.

Increasing supplies of light, sweet crude from shale oil plays are expected to reduce oil imports of similar quality crude into the Gulf Coast by greater than 500,000 b/d by 2016, he said.

Purvin & Gertz released its base-case forecast in a study entitled “US Midcontinent Crude Oil Market Analysis,” which examined oil logistics and pricing. Consultants compared price differentials between US benchmark West Texas Intermediate oil and Bakken oil related to the US Gulf Coast and international crudes.

The discount for WTI vs. Brent widened to $21.80/bbl during June 13 trading (OGJ Online, June 14, 2011). Houlton believes it could shrink to about $2/bbl after completion of planned pipeline expansions to Cushing, Okla.

The addition of planned pipeline capacity from Cushing to the Gulf Coast is expected to provide enough capacity to relieve current tight conditions in Cushing’s crude inventories, Houlton said.

On June 15, Raymond James & Associates Inc. said, “Almost 6 months after the initial blowout in WTI pricing, refiners and oil market participants are still finding new ways to move crude out of Cushing.”

For instance, Petro Source LLC plans to use barges to move 5,000 b/d from Catoosa, Okla., to St. James, La., at a cost of $5-7/bbl, RJA analysts said.

“With Cushing inventories sitting just under 39 million bbl, it will take additional logistical solutions (rail, truck, etc.) to relieve the current glut and reduce the WTI discount to a transportation differential,” RJA said. “Until these solutions materialize, Midcontinent refiners should continue to benefit from a hefty discount in WTI prices.”

Contact Paula Dittrick at paulad@ogjonline.com.

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