Lack of Permian Basin pipeline leads to growing number of unfracked wells

The number of unfracked wells is growing in the Permian Basin, thanks to a shortage of pipelines to haul the crude oil to refineries on the Gulf Coast.

And reports suggest the record pace of drillers quitting new wells isn’t letting up. Bloomberg News reports the number of drilled Permian wells that were left unfinished last month grew to 3,203. That’s a 90 percent increase from a year ago and also the highest number since the Energy Department started tracking them in 2013.

Exploration companies have had to put the screeching brakes on some of their projects while waiting for pipeline construction to catch up.

“I think without a doubt you’re going to see shut-in wells,” said Judy Stark, president of the Panhandle Producers & Royalty Owners Association, an Amarillo, Texas-based industry group that represents mostly small, closely held drillers.

Another energy official, Scott Sheffield, chairman of Pioneer Natural Resources Co. expects Permian pipelines to be totally full in three to four months.  And that will lead to more drillers shutting off wells.

 

“Some companies will have to shut in production, some companies will move rigs away, and some companies will be able to continue growing because they have firm transportation,” Sheffield said, using the industry jargon for guaranteed pipeline contracts.