This article was published by The McAlvany Intelligence Advisor on Friday, December 29, 2017:
Just a few years ago, the Permian Basin was considered nearly depleted. But with the advent of fracking technology, the enormous basin – called a “super basin” – could now contain two trillion barrels of recoverable crude oil. That is more than the reserves of Saudi Arabia’s Aramco oil field and all of Venezuela’s proven reserves put together. IHS Markit, the world leader in information gathering and analysis, just announced that the Permian Basin’s production exceeded its previous high registered back in 1973, producing a record 815 million barrels of oil in 2017. It estimates that its daily production will approach 3 million barrels a day (mbd) next year, which will set another record of a billion barrels produced in single year.
This far exceeds the requirements for any oil basin to quality as a “super basin”: 5 billion in reserves and 5 billion in accumulated production. It also far exceeds the reserves of Saudi Arabia’s Aramco oil field (265 billion) and those of Venezuela (300 billion).
It’s also a “disrupter,” according to Pete Stark, a director of IHS: “When we consider the impact on the world’s crude markets, the Permian has to be considered a global disrupter.” IHS’ Reed Olmstead added:
The magnitude of the rebound in Permian Basin liquids production is unprecedented. Not so long ago, many in the industry were saying the Permian was dead, but the Phoenix has again risen from the ashes and is soaring to new heights. The Permian Basin is on track to add more than two million barrels per day in new production since 2007, and after the final-year production count is in for 2017, we will see the previous all-time liquids-production peak of 2.16 million barrels per day during 1973 surpassed by a significant margin, with total Permian volumes at roughly 2.75 million barrels per day.
In turn, this surge in Permian production is projected to push total U.S. liquids production to a new all-time high by the end of 2018. We see U.S. production exceeding 10.5 million barrels per day by the end of 2018.
Santa Rita Rig #1 started producing on May 28, 1923. It was named for Rita of Cascia, the Patroness of Impossible Causes. On that day, it sprayed oil over the top of the derrick and covered 250 yards with the sticky stuff. This caught the attention of major investors, and the Permian Basin was born.
The basin is 250 miles wide and 300 miles long, and lies beneath huge swaths of west Texas and southeastern New Mexico. It is now estimated to contain some 70 billion barrels of recoverable oil (with some estimates, as noted, exceeding two trillion barrels). It’s already produced nearly 40 billion barrels since Santa Rita, and despite the field’s production approaching 3 million barrels a day, its recoverable reserves are growing instead of shrinking.
Developers are celebrating another rollback of the threat of an Obama-era intrusion. In 2015, that anti-American administration’s BLM issued its “final rule,” claiming that it had authority to regulate fracking on federal lands. In 2016, a federal court, to its credit, blocked implementation of the rule, and then refused to reconsider its ruling last week in Denver. The court ruled that, since the Trump administration was planning to repeal the Obama-era fracking rule in its entirety in January 2018, any effort to reopen the discussion was “moot.”
Trump’s BLM’s decision to roll back an unwanted, unneeded, and unconstitutional rule promulgated under the previous administration allows developers in the Permian Basin, and elsewhere, to go about their business of providing energy at ever lower costs to its end users: the American consumer. That decision is also helping relegate OPEC to a footnote in history as its influence continues to fade in the face of the increasing dominance of the U.S. oil industry in the global energy equation. American technology and less federal government interference are spelling the end of OPEC and its former influence. It can’t happen soon enough.
OilPrice.com: Permian Beats Own Record In Oil Production