Six formations within the Permian Basin region in Texas and New Mexico have provided the bulk of the basin’s 60 percent increase in oil output since 2007, positioning the Permian as the largest crude oil producing region in the United States, the U.S. Energy Information Administration (EIA) reported Wednesday.
Permian Basin oil production has grown from a low point of 850,000 barrels per day (bpd) in 2007 to 1,350,000 bpd last year, EIA reported. The growth has largely resulted in oil production in Permian Basin counties exceeding production from the federal offshore Gulf of Mexico since March 2013. Last year, the Permian Basin accounted for 18 percent of total U.S. crude production.
The recent growth in Permian crude production has come primarily from six low-permeability formations, including the Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso, and Delaware formations. The Spraberry, Wolfcamp and Bone Spring formations have played a significant role in boosting Permian production, comprising almost three-quarters of the increase in Permian crude production.
Production from these formations have driven the increase in horizontal oil drilling in the Permian in recent months, EIA reported earlier this year. Collective production from these formations has grown from approximately 140,000 bpd in 2007 to an estimated 600,000 bpd in 2013; as a result, their share of total Permian production has grown from 16 percent to 44 percent. According to the EIA, initial well production rates from Spraberry, Wolfcamp and Bone Spring wells are comparable to those in the Eagle Ford and Bakken shale formations.
“Production from these formations has helped drive the increase in Permian oil production – particularly since 2009 – despite declining production from legacy wells,” EIA said in its July 9 Today in Energy brief.
In the past, oil production came from more permeable areas in the basin, but horizontal drilling applications and hydraulic fracturing have opened up large, less permeable areas to commercial production, EIA reported.
EIA Analyst Phil Budzik told Rigzone that he expects Permian oil production to continue outpacing U.S. Gulf production, citing the ease of deploying resources in the onshore Permian basin versus offshore and the lag time of seven years to a decade from discovery of a new offshore reservoir to the start-up of production.
“The lag is probably the most important – the fact that you can drill quickly and get production and a return on your money more quickly,” said Budzik, adding that producers such as Apache Corp. are moving back into the region due to the faster return.
“Rigs can be quickly mobilized in the Permian,” Budzik explained. This mobilization of rigs, particularly horizontal drilling rigs, has resulted in the Permian leading the nation in terms of the number of horizontal rigs.
Describing the Permian as a “sandbox full of oil”, Budzik said the basin, which is approximately 250 miles wide and 300 miles long, offers greater opportunities for oil production over time as compared with the Eagle Ford and Bakken plays due to its multi-layer formations. Given enough time, technological development, and understanding of geology, some of the other formations such as the Glorieta and Yeso in the Permian could be just as productive as formations such as the Spraberry, Wolfcamp and Bone Spring formations.
Permian production growth faces a challenge in the availability of infrastructure to keep up with production increases – a challenge also seen in other U.S. tight oil plays. Producers have increasingly had to rely on more railroad transportation to ship crude to market, Budzik noted. This trend has been seen in the Bakken tight oil play in North Dakota.