Aug. 18 (UPI) -- The expansion of a Texas oil pipeline is likely to support more production from the prolific Permian shale basin, the Federal Reserve Bank of Dallas said.
Texas is the No. 1 oil producer in the United States and home to the Permian and Eagle Ford shale reservoirs, some of the more robust basins in the Lower 48. The latest monthly figures from the Federal Reserve Bank of Dallas show Permian production increased nearly 3 percent from June to 2.47 million barrels per day. Eagle Ford production increased 3.1 percent to 1.35 million bpd.
"Recent expansion in the capacity of the BridgeTex Pipeline, from 300,000 bpd to 400,000 bpd in second quarter 2017, will likely help support growth in the Permian," the bank's report read.
The pipeline, co-owned by Magellan Midstream Partners and Plains All American, starts in Colorado City, Texas, and connects Permian production to the Houston area.
An early August report from global consulting firm McKinsey & Co. found that, under a scenario where the price of oil moves above $60 from 2019, output from the Permian shale could drive about 20 percent of the growth in exploration through 2021, in part because efficiency has improved.
McKinsey & Co. forecast a break-even price for Permian operations at around $41 per barrel this year for West Texas Intermediate, the U.S. benchmark for the price of oil.
Gauged by rig counts, the Dallas Fed said earlier this month that activity nearly tripled from May 2016 lows, but has held more or less steady during the second quarter. Fed contacts said the pace of increase, however, might not be sustainable and could drop off in the second half of the year.
The number of wells drilled, but uncompleted, in the Permian shale basin hit a record high in July at 2,300, an increase of nearly 5 percent from June. The Dallas Fed added that the number of wells completed is also on the rise, however.
"The DUC-to-completion ratio - the total number of DUCs divided by the number of wells completed in a specific month - was 6.7 in July, matching the average for 2017," the report read. "The ratio signifies the number of months it would take for the inventory to be depleted, assuming no new wells are drilled."
Wells completed loosely equates to the prospect for commercial operations, with completions indicating an operation is close to actual production. Uncompleted wells could indicate a potential slowdown in Texas production, though economists at the Federal Reserve Bank of Dallas said the rising number of drilled, but uncompleted, wells in the Permian basin could indicate the reservoir could respond with a larger increase in production when market conditions are more favorable.