Too much oil? Texas boom outpaces supply, transport networks

The west Texas drillers that drove the shale revolution have overwhelmed the region's infrastructure with oil production -driving up costs, depressing regional oil prices and slowing the pace of growth. The US government continues to forecast the country's oil output rising to fresh record. But competition for limited resources in Texas is making it harder for shale producers to turn a profit and encouraging some to invest elsewhere.
Texas is home to the Permian Basin, the largest US oil field and the center of the country's shale industry. In the past three years, production from the Permian has risen a whopping 1.5 million barrels per day (bpd) to 3.43 million bpd.
All that oil means pipelines from the shale patch are full, so producers are paying more to transport oil on trucks and rail cars. Shortages of labor, water and even the fuel used in fracking are driving up production costs. At the same time, Permian producers are getting less for their oil, which in August traded as much as $17 a barrel below the US crude benchmark. Sellers have to offer the discount to compensate for the higher transport costs.
"We're our own worst enemy," said Ross Craft, chief executive of Approach Resources, a small west Texas oil producer which last year averaged about 11,600 barrels of oil equivalent daily output. "We can drill, bring these wells on so quickly that we basically outpace the market. It is going to take a little bit of time," he said, for the infrastructure to catch up to producers.
Approach Resources is leaving some wells uncompleted. That means the firm drills the wells, but does not fracture the rock to produce the oil. Other shale producers are also leaving the oil in the ground, waiting for higher prices to make the drilling more profitable. The number of uncompleted wells in the Permian jumped by 80 percent to 3,630 in August compared with a year earlier, according to US Energy Department data. For the rest of the United States, uncompleted wells are up 10 percent from the same period a year ago.