American Oil and Gas Reporter - PBIOS 2016 Official Program Guide - 121

In South Hobbs, Occidental began the
first phase of CO2 injection in the MOC
in September 2015 and spent more than
$250 million on the expansion, Bergersen
says. Production has nearly tripled since
the beginning of injection. This summer,
Occidental began a ROZ development in
the South Hobbs Unit, and the second
MOC phase at South Hobbs is scheduled
to get under way in early 2017, with the
first CO2 injection targeted for the fourth
quarter of 2018, Bergersen adds.
Extra gas-handling capacity has driven
down development costs, allowing for
more reinvestment in Occidental's West
Seminole Field. Production has increased
by a factor of four since the first injection
in the MOC CO2 project. "In addition,

we initiated ROZ development in West
Seminole this past summer," she says.
Altogether, as of early fall, Occidental
had completed 74 well deepenings and
recompletions along with 28 news wells
in ROZ development.
"In Permian EOR, we anticipate an
additional 30 deepenings and recompletions, and 22 new wells by the end of
this year," Bergersen concludes. "In the
second half of this year, we will increase
our Permian operated rig count to seven
or eight for EOR and our unconventional
resources. With these rigs and additional
investment in our Permian Basin operations, we expect production growth in
2017."
❒

Permian Companies Investing
In Midstream Infrastructure
By Sandy Fielden
AUSTIN, TX.-After doubling from 1
million to 2 million barrels a day between
2011 and 2015, crude oil production in
the West Texas Permian Basin has leveled
in the face of lower oil prices. The slowdown in output has given take-away infrastructure a chance to catch up, and the
addition of more than 700,000 barrels a
day of new mainline capacity has transformed congestion into overcapacity on
long-haul pipelines out of the region.
While drilling has slowed considerably,
this summer's uptick in rigs deployed reflects optimism among producers that
the Permian offers the best rates of return.
Midstream operators continue to build
transportation networks to help secure
current and future market share. These
new projects confirm that active investment
in midstream infrastructure continues in
the Permian Basin.
The focus of development has moved
away from big, mainline pipes to get
crude to refining markets because the
slowdown in production has left that
sector overbuilt. Instead, midstream companies are connecting the first mile by
building gathering systems and protecting
their market shares by tying in producers
at the wellhead. The improved infrastructure will save transportation costs for
hard hit producers as new rigs roll into
Permian hot spots in response to the
partial crude price recovery since February
of this year.
From June through August, more than
40 mothballed drilling rigs rolled out in
the prolific Permian Basin as producers

responded to a modest recovery in prices
from a low of $27 a barrel in February to
the $50 a barrel range. Figure 1 shows
the history of drilling rigs deployed in
the Permian (blue line, right axis) increasing from 330 in January 2011 to a
peak of 565 in November 2014, and then
falling off a cliff to a low of 137 rigs in
May 2016.
Over the same period, Permian crude
production (red line, left axis) experienced
rapid growth from 1 MMbbl/d to 2 MMbbl/d, peaking in March 2016. Since then,
production has hovered around 2 MMbbl/d,
and is not expected to increase significantly
during the next year as drilling will at
best replace declines from existing wells.
We believe a return to crude prices
above $60 a barrel by 2018 will prompt
a stronger recovery in drilling activity
and a return to production growth in the
Permian.
Midstream Infrastructure
The slowdown in production has given
midstream infrastructure a chance to catch
up with higher output. Before prices
began to tumble in the fall of 2014, Permian crude output exceeded regional
take-away capacity, leading to pipeline
congestion getting oil out of the basin to
Midwest and Gulf Coast refining markets.
During 2015, that congestion was relieved
by new outbound capacity coming on
line between regional crude gathering
hubs and refining markets. Significant
pipeline projects in this time frame included:
* The Magellan Midstream Partners
and Plains All American joint venture
OCTOBER PBIOS 2016 121

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