Another oil and gas operator sought to expand operations into the Permian basin in southeast New Mexico and West Texas as the fossil fuel markets continued to grow in early 2022.
Split Rock Resources, based in Fort Worth, Texas, announced Jan. 18 it purchased about $97.5 million worth of non-operated lands in the basin from a private seller, hoping to begin producing oil in western Delaware and eastern Midland sub-basins of the Permian.
The assets included in the deal were located in Eddy and Lea counties in southeast New Mexico and Midland and Glasscock counties in Texas, currently producing about 2,000 barrels of oil equivalent (Boe) per day.
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They also included about 1,000 net acres targeting the productive Wolfcamp and Bon Spring formations.
The company hoped to double that production in 2022.
"The assets are operated by a diverse group of top-tier companies and 2022 development activities are expected to increase daily production rates to over 4,000 Boe per day," read a statement from Split Rock.
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Hydrocarbon processing capacity in the Permian was also set to expand as Odessa, Texas-based Saulsbury Industries was awarded contracts to build and install a cryogenic gas processing facility in the Permian, partnering with an unnamed "major" oil and gas producer, per a news release.
The facility was designed with an initial capacity of 200 million cubic feet per day (cfd), the company's 63rd such facility in the last 15 years that would bring Saulsbury's total processing capacity to 11 billion cfd.
Under the deal, Saulsbury would be responsible to build the facility to include molecular sieve dehydration, cryogenic gas process, refrigeration and residue gas compression.
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Saulsbury will also oversee the balance of plant equipment, utilities, instrumentation and controls infrastructure while supporting expansion of existing storage capacity.
"We are extremely excited to be the selected partner for these expansion projects," said Jeremy Nelson, Saulsbury vice president of operations. "Long-term, repeat clients are core to Saulsbury's continued success and integral to our growth and position as the contractor of choice in the midstream oil and gas sector.
"This is a significant achievement for Saulsbury, and we look forward to providing another safe, high quality project in this challenging environment."
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The growth in Permian Basin operations both to extract oil and gas and process the resources met an upswing in energy prices and drilling operations that continued through late January.
As of Tuesday, the Chicago Mercantile Exchange reported domestic oil was trading at $83 per barrel, continuing to surpass prices seen before the historic price disruption brought on by COVID-19 health crisis in 2020.
Tuesday's price followed a slight dip from the year's peak of about $86 per barrel reported on Jan. 20, per historical data from Nasdaq, but represented an overall $8 growth from about $75 per barrel reported at the start of the year.
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Rising prices meant growth in extraction operations in the last year as the latest data from Baker Hughes reported 292 drilling rigs in the Permian Basin, as of Friday, an increase of 104 in the last year.
New Mexico had 95 rigs, records show, up 30 in the last year, and Texas added 105 since the same date in 2021 for a total of 280 rigs.
Oil and gas experts expected 2022 to be a year of growth in the industry as the U.S. and world seek to meet growing demands.
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The U.S. Energy Information Administration (EIA) predicted U.S. oil production will continue to grow, climbing to 12.4 million barrels per day by 2023, growing in nine consecutive quarters from the fourth quarter of 2021 through next year.
That would surpass the record high for domestic production set in 2019, per the EIA's report, with crude oil inventories rising to 465 million barrels at the end of 2023 - about 11 percent more than last year.
The EIA also expected the Organization of Petroleum Exporting Countries (OPEC) to increase its production to 28.9 million barrels of oil per day by 2023, up from an average of 26.3 million barrels per day last year.
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EIA Acting Administrator Steve Nalley said crude oil production was set to grow faster than other petroleum products, which could support lower prices for consumer products like gasoline and jet fuel.
"We expect global demand for petroleum products to return to and surpass pre-pandemic levels this year, but crude oil production grows at a faster rate in our forecasts," said EIA Acting Administrator Steve Nalley.
"We expect that as crude oil production increases, inventories will begin to replenish and help push prices lower for gasoline, jet fuel, and other products in the short term."
Natural gas production in the U.S. was also expected to grow, the EIA reported, to an average of 98 billion cubic feet per day by September 2023, and then average 98.2 billion cubic feet per day in the second half of the year.
"We expect global demand for natural gas to remain strong, especially in Europe and Asia, which will lead to record U.S. liquefied natural gas exports in 2022 and 2023," Nalley said.
Adrian Hedden can be reached at 575-618-7631, email@example.com or @AdrianHedden on Twitter.
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