The Eagle Ford Shale of South Texas is likely the biggest potential driver of U.S. oil production growth for the next five to 10 years with production on track to pass 1 million b/d by the middle of next year and 1.7 million b/d by the end of 2015, analyst at Raymond James & Associates said in a note Monday.

“The potential of the play is probably best exemplified by its rapidly increasing rig count, which grew from 63 rigs in January 2010 to over 250 rigs, currently,” Raymond James said. “We expect to see rapid production growth as these rigs translate into production. Importantly, even though the rig count clearly isn’t growing at the same linear rate as it has over the past several years, we expect production efficiencies, longer laterals and pad drilling to continue to drive production gains.”

According to NGI’s Shale Daily Unconventional Rig Count, there were 241 rigs active in the Eagle Ford last week, a 5% increase from a year ago.

Eagle Ford output has grown from 8,000 b/d in January 2010 to more than 900,000 b/d currently, including condensate and natural gas liquids (NGL), they said. And that growth might have been greater were it not for infrastructure constraints that have kept some production from market, the analysts added.

Oil, of course, has drawn producers to the Eagle Ford during a period of particularly low prices for dry gas. But liquids associated with natural gas and oil production are a big part of the Eagle Ford story, too. NGLs have made the Eagle Ford a boom region for the gas processing industry.

Liquids content is expressed as gallons per 1,000 cubic feet of gas, or GPM. A rating above 2 or 3 GPM is generally considered to be high, or liquids-rich, Raymond James noted. But in the Eagle Ford, production can be 5-6 GPM, which represents 1,280-1,400 Btu/cubic foot of energy content, on average. Raymond James said some producers in the Eagle Ford are seeing GPMs as high as 7 or 8.

The buildout of gas processing infrastructure to handle all of the rich gas is well under way in the Eagle Ford, and the new plants are particularly efficient compared with previous generations of processing. They are particularly good at recovering ethane, the analysts noted.

“We estimate that ethane (C2) recoveries at such plants are materially above 90%; propane recovery is between 95% and 99% (bias toward the upper band of the range, and normal and iso-butane (C4s) or heavier are almost fully recovered,” the analysts said. “Moreover, new plants often have a greater degree of efficiency as it relates to rejecting ethane while retaining as much propane as possible. In a world of 30 cent/gallon ethane and 90 cent/gallon propane, this can be a critical factor in supporting the profitability of processing.”

The analysts said they’ve seen a good deal of ethane rejection — 100,000-125,000 b/d — across the Midcontinent and the Rockies in light of the fact that ethane prices have dropped 65% since the beginning of the year while natural gas is up 25%.

“Given the high percent of ethane in the standard Eagle Ford y-grade barrel, what does this mean for gas processors? The uplift from processing and fractionating is still profitable,” the analysts said. “We estimate that the uplift from processing gas, including the cost of shrink/plant fuel and quality degradation is currently $1.58/Mcf of gas.

“…[R]egardless of the low price of ethane, propane and the heavier end of the [NGL] barrel support gas processing and fractionation margins. When considering the forward curve for purity products, we believe that gas processing and NGL fractionation will remain advantaged despite backwardation of the heavy end of the barrel.”

However, the analysts said the uplift from processing Eagle Ford gas will trend down as oil prices decline next year.

On the oil side of the production ledger, the outlook for the infrastructure that handles crude, that is to say refineries, is more uncertain. There is plenty of refinery capacity in the Eagle Ford region, but the problem is it was mainly designed to handle heavier, sour imported crudes. Therefore, Eagle Ford crude must move to the larger Gulf Coast refining complex, driving its price to $5-7/bbl below that for Louisiana Light Sweet crude, the analysts said.

There is talk of converting some of the Eagle Ford capacity to run a lighter crude slate, but doing this is more complicated, costly and time-consuming than many realize, Raymond James said.

However, the analysts wrote that “ultimately, the Eagle Ford stands to be one of the best opportunities to move America closer toward energy independence, and its attractive geographic proximity to the heart of America’s refinery and North American petrochemical industry doesn’t hurt either.”