The much-touted boom in US shale production is facing a potential crisis, with the emergence of bottlenecks up and down the supply chain.
There is a “crisis at the heart of US shale,” Nick Cunningham writes at OilPrice.com. Drillers are facing rising prices across the board for labor, rigs, services and land, he says, while a lack of pipeline capacity is beginning to force discounts for oil up to US$9 per barrel.
Cunningham cited a new report from Rystad Energy, which found that there just isn’t enough pumping power to go around.
“Capacity is expected to be particularly tight in the Permian in the second quarter before the majority of new equipment comes online in the second half of the year,” according to the report. Though it adds that more capacity will come online by the end of the year to relieve some strain.
According to a statement from oilfield services provider Schlumberger, it’s “increasingly likely that the industry will face growing supply challenges over the coming year.” Citing the statement, Bloomberg added that “shareholders have been worried about a double whammy of sorts: a lack of growth brought on by customers’ more prudent spending plans coupled with production concerns in their biggest growth area, the Permian Basin in West Texas and New Mexico.”
Following the release of the statement, which announced first-quarter results, Schlumberger shares fell more than 1.0% in early trading Friday.