(Bloomberg) – Enterprise Products Partners LP, one of the largest pipeline operators in the Permian basin, sees oil production in the region holding up this year despite an expected drop in crude prices.
Shale drillers will stick to guidance of output growth of 3% to 5% in the Permian basin of Texas and New Mexico as OPEC’s decision to bring back oil production will have limited impact this year, according to Anthony Chovanec, senior vice president for fundamentals and commodity risk assessment at the Houston-based company.
“We are just not in a ‘sky is falling’ scenario,” Chovanec said in an earnings call Monday. “OPEC has been shorting the market at least 2 million bpd for two years running and more on top of that. So there is a massive hole to be able to put oil into when and if the price drops.”
The forecast comes as the price for benchmark West Texas Intermediate is expected to fall in the second half as output ramps up in places like Brazil, Guyana and the Gulf of Mexico, and as OPEC restores production. Prices are seen sliding to the low $60s in the fourth quarter before diving to $52 a barrel next year, according to Goldman Sachs. That compares with the mid-$60s currently.
Other signs that point to growth this year is that some production areas are not declining as expected. “In Midland this year, we will have brought on 463 wells,” Natalie Gayden, senior vice president of natural gas, said on the call. “Next year, we have 498 on the schedule.”
The company expects production growth of 800,000 bpd in the Permian between 2025 and 2027, but says the forecast could be revised to as low as 600,000 bpd if prices fall further. Enterprise has also noticed that producers have been “aggressive” in hedging oil output for 2025, 2026 and even 2027, Chovanec said.
Enterprise also said it began service at a new ethane-exporting terminal in Texas. The Neches River Terminal and a 120,000-bpd ethane refrigeration train started operations in mid-July. The facility will be fully operational in the first half of next year, when the second refrigeration train enters service.
“Appetite for U.S. ethane and ethylene remains strong in both Asia and Europe,” Co-Chief Executive Officer Jim Teague said.
Enterprise said the Bureau of Industry and Security’s recent requirement of an export license to send ethane to China had little impact on the company. The requirement was in place for about a month, a period during which Enterprise was able to send ethane to other markets, and has now been removed.