We’ve talked a lot in recent issues of Shale Magazine about the fact that the Permian Basin in West Texas and Southeast New Mexico is currently undergoing a tremendous boom in oil and gas activity. We’ve also pointed out that other oil shale basins, like the Eagle Ford in South Texas, the Bakken in North Dakota/Montana, and the DJ Basin in Colorado are not enjoying a similar boom in drilling operations.
Here are 5 reasons why this is the case:
- Most of the Permian Basin lies within Texas. Why does this matter? Because Texas and most Texans like the oil and gas industry. We’ve been around it for a long, long time, we understand the industry’s enormous benefits to our economy and schools, and love the jobs it creates. Because of this reality, the industry does not see the same level of anti-oil and gas activism that it experiences in other states.
- The Texas government is largely pro-business, and has created a favorable but effective regulatory system that accommodates oil and gas operations while protecting people and the environment.
- The Permian Basin resource is gargantuan, so huge that many observers like to refer to it as “Saudi Texas.” Drilling Info Executive Chairman Allen Gilmer contends that the amount of oil in place beneath the Permian soil is “almost inexhaustible” in scope.
- “Stacked” oil-bearing formations – Where shale plays like the Eagle Ford and Bakken consist of a single, if huge, oil and gas-bearing formation, the Permian is made up of more than a dozen oil-containing shale formations. In many parts of the Permian region, several of these formations are “stacked” one atop another. This means that multiple formations can be accessed in a single wellbore, creating cost efficiencies and elevated production levels that make each individual well more profitable to drill.
- Because of the combination of these factors, producers are able to make a profit drilling Permian wells at lower prices than are required to be profitable in other shale plays. In other words, a producer might be able to drill profitable Permian wells when the price of oil is $35, where a $50 price might be required to be profitable drilling wells in the Eagle Ford or Bakken plays.
Given that the price for West Texas Intermediate (WTI) now stands at $70 and promises to move higher as the year progresses, we may well see the drilling boom begin to expand to some of these other shale plays during the rest of 2018. But for now, there are very good reasons why the boom has to this point been limited to the Permian Basin
That concludes your Shale ‘Splainer for May 16, 2018.