Last week, the U.S. Energy Information Administration (EIA) reported that U.S. exports of crude oil and petroleum products exceeded U.S. imports for the first time since the agency began keeping monthly records in 1973. Just 10 years ago, U.S. imports exceeded exports by 10 million barrels a day. In September, net petroleum exports exceeded imports by 89,000 barrels a day.

The largest piece of the shift in the relationship between petroleum exports and imports resulted from the Obama administration’s December 2015 lifting of the ban on U.S. crude oil exports. Crude oil exports rose from around 591,000 barrels a day in 2016 to 2.8 million barrels a day in the first nine months of this year. The largest factor in that increase has been crude oil production in the Permian Basin of Texas.

In January of 2016, the Permian was pumping more than 1.93 million barrels a day, and that total had risen to 4.61 million barrels a day by this past October, according to EIA data. The agency forecasts that by the end of this month, the Permian will produce about 4.73 million barrels a day.

Is Permian Basin production approaching its peak? Will production fall off over the next several years? If so, how fast will production decline? Is the boom about to bust?

Analysts at research firm IHS Markit on Thursday said that producers will have to drill “substantially more [Permian] wells just to maintain current production levels and even more to grow production.” The reason is the explosive growth in Permian production since the export ban was lifted. That growth has been speeding up “inherent production decline because newer, younger wells decline much faster than older wells.”

IHS Markit calls the phenomenon the “base decline” rate, which the firm defines as the difference between the actual or forecast flows of all producing wells at the beginning of a year and their flows at the end of that year. Raoul LeBlanc, the firm’s vice-president of unconventional oil and gas, commented:

Base decline is the volume that oil and gas producers need to add from new wells just to stay where they are—it is the speed of the treadmill. Because of the large increases of recent years, the base decline production rate for the Permian Basin has increased dramatically, and we expect those declines to continue to accelerate. As a result, it is going to be challenging, especially for some companies with cash constraints, just to keep production flat.

LeBlanc points to the difference between the base decline rate in 2010 and the expected base decline rate for this year. Permian crude oil production at the beginning of 2010 totaled around 880,000 barrels a day, virtually all from conventional (vertical) wells. At the end of the year, production from those wells had fallen 13% to around 776,000 barrels a day.

Permian wells were producing 3.8 million barrels a day at the beginning of this year, mostly from horizontal, fracked wells. IHS Markit expects production from those same wells to tumble by 40% to around 1.5 million barrels a day by the end of this month.

There are a number of thorny issues involved in these rapidly accelerating declines. LeBlanc notes that new, individual wells decline at a much faster rate than older wells. Production can fall by 65% to 85% in one year for a new well compared to a decline of around 20% or less for older wells. The new wells produce more but give up their riches more quickly.

That means the operator needs to drill more wells just to keep production levels flat. High-flyers that have produced the most oil in recent years also have the sharpest base decline rates. They need to drill more, but that costs money that has to come either from bank loans or investors willing to forego returns on the money they’ve already invested. Neither source of cash appears likely to ride to the rescue.

Analysts at Rystad Energy have forecast 2020 capital spending on oil exploration and production at slightly above the $75 billion allocated this year. Of estimated capital spending totaling an estimated $225 billion next year, offshore projects will receive more than $100 billion and onshore liquefied natural gas (LNG) projects are likely to get about $50 billion.

Rystad Energy also offers some relatively good news:

As the world transitions to a less carbon intensive future, Rystad Energy forecasts that the global inventory of already discovered oil fields with a breakeven oil price of below $60 Brent (real) is sufficient to meet demand growth and offset declines from maturing fields until around 2027. From that point on, however, additional volumes from not-yet-discovered fields will be needed in order to meet total liquids demand.

The other piece of good news, at least from a consumer’s point of view, is that the U.S. Geological Survey (USGS) in November of last year released a new estimate for the Permian’s Delaware basin indicating that there are 46.3 billion barrels of oil resources in just a portion of the Permian Basin. The USGS estimate should be read this way: The agency guarantees that there are no more than 46 billion barrels in the Delaware basin formations. Not all of the resource can or will be recovered, but if Brent crude prices remain solidly above $60 a barrel, production companies should break even or, perhaps, make a profit.

Brent traded near $65 a barrel just before noon Friday in a 52-week range of $50.36 to $75.60. Since mid-June, the price has fallen below $60 a barrel only for brief periods and never by more than about $4 a barrel.

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