Permian Basin inspires a deep and abiding faith
Last year, the energy conference CERAWeek by IHS Markit occurred just as crude prices were recovering and West Texas’ Permian Basin was beginning to boom again with drilling activity.
The event’s host, IHS Markit Vice Chairman Dan Yergin, coined the term “Permania” as the week’s unofficial theme, increasingly evoking eye-rolling as the wordplay was repeated again and again.
The made-up word wasn’t spoken nearly as much this year, but even more oil companies are banking on the Permian for years of production growth. That includes Big Oil’s Exxon Mobil, Chevron and Royal Dutch Shell.
“It's clear now that Permania — as some have called it — is really not a passing fad,” said Sara Ortwein, president of Exxon Mobil’s XTO Energy unit, which focuses on U.S. shale.
Indeed, the Permian has added well over 100 drilling rigs in the past year, ensuring that more than half of the nation’s roughly 800 oil rigs are drilling in West Texas and New Mexico, where the Permian extends.
The U.S. is producing more oil than ever, and that’s only expected to grow, soon surpassing global leader Russia. The Permian accounts for about 25 percent of U.S. crude volumes, and that percentage should keep rising. It is going to churn out so much that most of the new oil will be piped and exported through Corpus Christi, Houston and other Gulf Coast ports.
The Permian boomed decades ago and was on the decline when the 1980s bust hit. Mature fields like the Permian still had oil — which everyone knew — but it was considered too costly to extract conventionally.
The so-called shale revolution changed all that, coupling horizontal drilling with hydraulic fracturing. Those efforts moved to the Permian — arguably the world’s largest shale play — after companies honed their methods in East Texas’ Barnett Shale and South Texas’ Eagle Ford.
And plenty of energy executives are confident the Permian will boom for at least another 15 years.
“What we're staring at beneath our feet cannot be replicated anywhere else in the United States. That's a given," said Tim Dove, chief executive of Irving-based Pioneer Natural Resources. "We have a golden goose right before us."
With little investment in projects outside the continental U.S. in recent years, markets are counting on the Permian and other U.S. plays to meet global oil demand growth for at least the next five years.
Prices are hovering above $60 a barrel, and anything above $50 is now considered relatively healthy.
But long-term concerns about peak demand aren’t going away as electric cars gain popularity and governments adopt tighter emissions standards.
Shell CEO Ben van Beurden reiterated that climate change remains the energy sector’s biggest disrupter.
“We ignore that at our peril,” van Beurden said.
“We have a golden goose right before us.” Tim Dove, Pioneer Natural Resources