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LONDON (Alliance News) - Moody's Investors Service on Wednesday said a lack of pipelines will hinder production on the Permian basin in the US until the end of 2019.
The surge in development on the basin, Moody's said, has constrained pipeline takeaway capacity, meaning volumes are set to fall until new pipelines come online towards the end of next year.
Moody's Vice President & Senior Analyst James Wilkins commented: "Pipeline capacity to transport oil and natural gas to markets outside the Permian is unlikely to be sufficient in early 2019, given the strong increase in production in the region.
"New pipelines will likely go into service at various times in the second half of next year, alleviating the bottleneck, but until then capacity constraints will likely limit producers' activity.
Midstream companies have attractive opportunities for new pipeline projects, Wilkins continued, though the sector is competitive.
He continued: "Potential pipeline shortfall issues in the Permian won't have significant negative credit implications for most of the exploration and production firms we rate, since new pipelines will alleviate the strain as they come into service.
"At the same time, the credit quality of smaller, pure play exploration and production firms won't easily improve without better midstream access."
London-listed firms with Permian basin interests include BP PLC, recently bought off BHP Billiton PLC, Nostra Terra Oil & Gas PLC, Mosman Oil & Gas Ltd, and Zoltav Resources Inc.
Engineering firm Weir Group PLC early September said demand for its equipment had softened in August, after oilfield services firm Schlumberger warned a surge in output for the Permian basin means production has now outstripped transport capacity.
