Permian’s output is near a record
Prolific basin in West Texas and New Mexico is likely to soon produce more oil in a year than the previous high mark set in 1973
In coming decades, oil producers using advanced drilling rigs and fracking tools could extract up to 70 billion barrels of crude from the sprawling Permian Basin, researchers say.
John Roberts, a researcher for IHS Markit, began work on that estimate in 1987, when he started collecting geological data in West Texas for a small company in the midst of a crushing oil bust. Over the past 2 ½ years, Roberts has led a sprint to build a gigantic database cataloging more than 440,000 wells drilled since the oil industry began plowing the Permian Basin in the 1920s.
“We looked at the whole thing, grass to granite,” said Roberts, executive director of global subsurface content operations at IHS Markit.
What IHS found was that those 75,000 square miles in Texas and New Mexico could hold more crude in so-called recoverable resources — the amount that can be extracted with modern technology — than Kuwait and Argentina combined. And that’s if U.S. shale drillers can only extract 4 to 6 percent of the crude stuck in 52 different rock formations – a typical figure for such plays.
In 1973, the year OPEC’s oil embargo prompted gas lines in the United States, oil companies in the Permian Basin pumped more
crude than they would in any of the next 44 years, yielding a record 763.5 million barrels that year.
But almost a decade ago, drillers figured out how to extract crude from shale that had fed conventional oil-bearing formations for millennia. Since 2010, companies drilled about 20,000 sideways wells into the Permian, reversing the region’s decadeslong decline.
Last year, the oil industry almost beat its production record in the Permian, extracting 740 million barrels of oil. The industry is set to break the record this year or next. Over the past century, the Permian has yielded 39 billion barrels, according to IHS. That it could pump another 70 billion barrels will keep companies busy for decades.
That’s not to say oil companies will ever reach all that crude. Drilling some of these fields, Roberts said, isn’t financially feasible until crude prices reach $70 a barrel. Oil settled in New York at $51.88 a barrel Tuesday.
Last week, Wood Mackenzie, an energy research firm, said un- less oil prices rise high enough to spur technological innovations to overcome the Permian’s geological constraints, the region’s production could peak as early as 2021, around 3.5 million barrels a day.
Roberts agreed. One piece of evidence that many in today’s cluster of oil wells aren’t profitable: Oil companies have left almost 2,300 wells dormant, waiting for crude prices to rise before they bring the drilled but unfinished wells into production.
“They’re waiting on rosier times,” Roberts said.