From the San Antonio Express-News
All U.S. shale fields have had growing pains, and the Permian Basin’s could be that there are just too many wells in the popular field.
A new report from the research and consulting firm Wood Mackenzie says that drillers in the Permian Basin, who have poured into the field in West Texas and eastern New Mexico at breakneck speed, risk bumping into the limits of the field’s geology in a few years.
The Permian next month will pump around 2.6 million barrels of oil daily and is expected to reach 5 million barrels per day by 2025, according to the U.S. Energy Information Administration.
Wood Mackenzie thinks oil production in the Permian Basin could peak at around 3.5 million barrels a day in 2021, though, unless drillers keep developing technology to boost production. The report notes that the first few years of an oil boom are typically the easiest.
“We’re drilling so many wells and with such tight spacing, should we really expect well No. 5,000 to perform like well No. 5 did?” said Robert Clarke, a research director at Wood Mackenzie in Dallas.
As companies develop the field aggressively with more wells, pressure gets depleted in the formations, and newer wells don’t produce at the same rate of older wells, the report says. The Wood Mackenzie report looked at infill wells located next to older producers.
There already are plenty of wells in the Permian, an immense and historic behemoth of an oil field in West Texas and eastern New Mexico. It’s been pumping oil since the first commercial well in 1921.
The most recent drilling boom started to pick up there in earnest around 2014, when operators started switching from drilling traditional vertical wells to drilling more horizontal wells using shale drilling techniques. Horizontal drilling was combined with hydraulic fracturing, a process of using massive amounts of water, sand and chemicals pumped at high pressure to crack open tight rocks.
Billions of investment dollars have flooded the Permian, where production grew even during the lowest points of the oil bust in 2016. Oil production is up 37 percent in the last two years, according to EIA data.
The Permian Basin had 380 drilling rigs at work last week, about 40 percent of all U.S. rigs, according to the service firm Baker Hughes.
All U.S. shale field have bumped into growth problems of one kind or another, the report said.
After a frantic leasing spree that started around 2009 and 2010, criss-crossing South Texas, operators discovered that some parts of the Eagle Ford delivered vastly better results than others. The so-called “sweet spots” weren’t as large as companies originally thought, and drilling started to focus on a formation that roughly follows the Karnes-DeWitt county line.
In the Bakken formation in North Dakota and Montana, producers ran into logistics problems. There weren’t enough pipelines to carry their oil and gas to the refining center on the Gulf Coast.
The Haynesville Shale in Louisiana and East Texas saw the collapse of natural gas prices.
In the Marcellus Shale centered in Pennsylvania, operators ran into regulatory delays and found a more complex operating environment than in other states.
The Houston Chronicle contributed to this report.
