Permian Basin Wells to Shut Down in 4 Months as Oil Pipelines Reach Capacity

The Permian Basin, the biggest U.S. shale region that straddles west Texas and New Mexico, will need to shut down wells within four months due to the lack of pipelines to deliver oil to customers, Pioneer Natural Resources Company (PXD) Chairman Scott Sheffield said in an interview with Bloomberg on Wednesday at the OPEC meeting in Vienna.

“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.

Production at the Permian Basin is growing at 800,000 barrels per day annually, and currently stands at 3.3 million barrels per day. The pipeline capacity, however, is just 3.6 million barrels, which means that the region will reach capacity in the next three to four months, Sheffield said, with the bottleneck not expected to ease for at least a year.

The worsening bottleneck, however, is a boon for oil producers outside the United States, as surging production of U.S. shale producers have grabbed market share.