The CEO of Schlumberger told an audience at a Barclays conference in New York on Tuesday that Permian pipeline bottlenecks will likely slow growth in oil production and investments in the area.  San Antonio Express-News photo by John Davenport.

Permian pipeline constraints will have “a dampening effect on production growth”

Bottlenecks in the Permian pipeline system will likely lead to slower-than-expected growth in the west Texas and New Mexico booming shale oil play, according to the chief executive of the world’s largest oilfield service provider.

Schlumberger’s CEO Paal Kibsgaard told a Barclays conference in New York that the constraints on the pipeline system in the Permian basin could also result in less investment in the region.

Surging shale production in the area has outpaced transport abilities and the glut has left local prices at four-year lows.  The high discount in price compared to WTI is threatening to cut drilling activity.

Kibsgaard says an output slowdown could impact oilfield services companies that are just beginning to recover after the 2014 crash in oil prices.  He added  that the hydraulic fracturing market has softened more than expected because oil companies are holding off well completions until oil prices increase and more pressure-pumping fleets enter the market.

“These challenges will likely have a dampening effect on production growth, wellhead prices and investment levels in the coming year,” CEO Paal Kibsgaard said at the conference.

Kibsgaard added that the confidence that Permian production will continue to increase by 1.5 million barrels per day (b/d) annually is “starting to be called into question”.

According to the US Energy Information Administration, the Permian Basin output reached about 3.4 million b/d, or about 46 per cent of all US shale production.

But, Kibsgaard added that the lack of Permian pipeline capacity will likely be resolved by the end of next year.