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Today’s Shale ‘Splainer: No, the Permian Won’t be out of oil in 7 Years

Many readers have no doubt seen the remarks recently made by a long-time geologist at the recent Texas Energy Council Conference in Dallas, claiming that the Permian Basin has just 7 years of “proven reserves” remaining in it.  This remark by Art Berman was then turned by the news media into breathless reports that the Basin is going to “run out of oil” 7 years from now.  That isn’t true, Mr. Berman knows it isn’t true, and it would have been great if he’d taken the time to correct the record.

Since he hasn’t done that, Shale ‘Splainer will do it for him:

  • The “7 years” assertion is based on “proven reserves” that are required to be reported by corporations to the Securities and Exchange Commission (SEC);
  • These “reserves” are an estimate of the amount of oil in a given formation based on wells that have already been drilled into it;
  • Every successful well drilled into a formation “proves” that a certain volume of oil that can be produced using current technology that exists as of today;
  • This estimate does not account for all the oil that will be “proved” to exist when additional wells are drilled around the well being counted, nor does it account for future advances in technology that will allow the producing company to get even more oil up out of the ground;
  • Here’s a crucial fact, so pay attention:  In the oil and gas industry, technology advances every day; 
  • So, the “7 years” assertion is based on a wildly conservative, gross understatement of the amount of oil that will ultimately be produced from the many massive shale formations that underlie the ground in the vast region we call the Permian Basin.

The Permian will not run out of oil in 7 years.  Nor will it run out of oil in 70 years, for that matter.  In fact, it is very likely that, 7 years from today, overall production coming out of the Permian Basin will still be rising.

While Mr. Berman’s statement, taken in a vacuum, is technically accurate, the media reporting surrounding it has been wildly inaccurate, verging on irresponsible, and somebody needed to attempt to correct it.

You’re welcome.

That concludes your Shale ‘Splainer for May 18, 2018.


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