Plains sees Permian oil output growth slowing to 400,000 b/d by year end

Washington — Plains All American Pipeline expects Permian oil production growth to shrink to 400,000 b/d by the end of 2020 as drillers focus on capital discipline, executives said Tuesday.

US production growth has dropped steadily from a 1.64 million b/d year-on-year increase posted in 2018 to 1.25 million b/d in 2019, according to the US Energy Information Administration.

The recent drop in crude prices related to the coronavirus outbreak and global oil demand concerns has not prompted Plains to lower that outlook, the company said.

"Obviously, the last two weeks weren't in anybody's forecast," said Jeremy Goebel, executive vice president of commercial, on Plains' fourth-quarter earnings call. "But in November, the sentiment was very similar to what it is today."

Slowing Permian output growth, along with last year's buildout in pipeline infrastructure to the Texas Gulf Coast, have increased competition among pipeline owners like Plains.

Goebel said the Permian still holds "substantial opportunities" for drillers with choice acreage.

"What we're seeing is a concentration of activity in the core block," he said. "So those with core acreage dedications, we'll continue to see it with well-capitalized producers. There will be 'haves' and 'have-nots' throughout this."

The EIA expects Permian drillers to pump 4.8 million b/d in February, up 45,000 b/d from January.

In August, the 670,000 b/d Cactus II pipeline started service from West Texas to Taft, Ingleside and Corpus Christi. Plains owns a 65% stake.

Plains is still targeting early 2021 service for the Wink-to-Webster pipeline to the Houston area.