The New Adventures of Good-Ole-Boy Permian

Permian basin oil production rose above 1 MMb/d last year (2011) for the first time since 1998, after sliding from a 1973 peak of 2.1 MMb/d. A lot of new Permian production uses conventional drilling and enhanced oil recovery techniques, but horizontal drilling is making its mark as well. The West Texas crudes this basin produces are sold the same way as any other except they have their own futures contract trading 60 MMb/d. Today we turn the RBN spotlight onto the Permian Basin.

The Permian Basin is not your typical overnight sensation oil shale play. For one thing it has been producing oil – lots of oil - since 1921. The Permian is a good-ole-boy oil field from the days when boardrooms had cigars and spittoons. Oil production in the Permian peaked in the 1970’s before declining in the face of lower oil prices and the exhaustion of conventional oil reserves. The renaissance of US domestic crude oil production in the past 3 years sparked renewed interest in the Permian. According to the Energy Information Administration (EIA) the number of rigs drilling in the Permian has grown five-fold since mid 2009, to 500 in May 2012. The latest BENTEK estimate of Permian oil production is 1.32 MMb/d (September 2012).

Source: Occidental Presentation

The Permian gets its name from the Permian geological era. The Permian sits beneath an area of West Texas and Southeast New Mexico approximately 250 miles wide and 300 miles long (see map above) and contains several smaller basins including the Midland, Delaware and Central basins within its boundary. The Permian is home to many oil producing formations such as the Spraberry, Wolfcamp, Bone Spring, Avalon, Devonian and Clearfork. In many places these

producing formations are vertically stacked on top of each other enabling oil companies to produce oil at different depths with a single vertical well. Permian drilling activity today focuses on these “stacked” formations that marketing guys have dreamed up clever names for such as Wolfberry (Wolfcamp and Spraberry), Wolfbone (Wolfcamp and Bone Springs) and Wolffork (Wolfcamp and Clearfork).

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