Posts Tagged ‘Permian Basin’

Like its salty neighbor to the east, the Permian Basin of west Texas and southeastern New Mexico has been proclaimed dead on many occasions. Such proclamations of their demise, however, are mere exaggerations as the Gulf of Mexico and the Permian Basin continue to thrive.

These historic oil and gas production powerhouses have delivered to global markets billions of barrels of oil and trillions of cubic feet of natural gas over the past century. Through the booms and the busts, the resiliency of each was made possible by the combination of ingenuity and perseverance and by advancements in techniques and technologies.


Thirty years ago the Gulf of Mexico was called “the Dead Sea” because of the decline in drilling and production activity. Deepwater technology reversed that trend and led to record Gulf of Mexico oil production averaging 1.9 million BOPD in 2019.

Similarly, horizontal drilling and hydraulic fracturing technology launched the shale revolution, and Permian oil production has risen impressively to 5.4 million BOPD.

Both the Permian and the GoM have the potential to sustain or increase production. The Permian Basin, much of which is privately owned, is more adaptable to market conditions and less exposed to political risks. The offshore program is dependent on effective long-term planning and supportive lease management policies. Unfortunately, the proposed 5 year leasing plan suggests a commitment to throttling offshore production rather than sustaining it. When will our energy policy pendulum swing back to a more balanced position?

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The administration has taken steps toward a resumption of leasing on Federal onshore lands, which account for only 7% of domestically produced oil and 8% of our natural gas. While this is a positive step, our economy is largely being driven by production on private lands, absent which we would have a serious supply crunch. This new EIA graphic illustrates where the growth in natural gas production has been, and most of that growth has been on private land.

The growth in US oil production has been largely dependent on the Permian Basin:

Industry leaders have raised concerns about the extent to which Permian production can continue to grow and the country’s over-reliance on shale production.

There are no private offshore lands, and the future of US offshore production is almost entirely in the hands of the Federal government. It has now been 525 days since the last offshore lease sale. The Administration chose not to appeal the DC Federal Court decision vacating Sale 257, leaving that to the State of Louisiana and API (parties that actually support offshore oil and gas leasing).

It’s disappointing that the reasoning behind the judge’s Sale 257 decision has received so little attention, especially given that it hinged on BOEM not analyzing the benefit of high oil prices. (i.e. <leasing = <production = >prices = <intl consumption = < CO2) The decision was issued as Russian troops were amassing on the Ukraine border only 28 days before the invasion. Oil prices (WTI) had already reached $87/bbl and would soon spike to $120/bbl, so the decision embracing higher oil prices was (at best) bad timing. Keep in mind that this was not a matter of BOEM failing to consider GHG issues; BOEM had conducted those assessments. The judge’s decision was specific to BOEM not analyzing the GHG benefits of reduced foreign consumption as a result of the higher prices associated with reduced leasing.

Meanwhile, The 5 year program, without which offshore leasing cannot proceed, expires in June. Fellow Democrats Manchin and Kelly sent a letter to the President on 31 March urging the Administration to develop and implement a new 5 year program without delay. There is no online evidence of a response. Presumably, the 5 year program issue will be addressed in the bipartisan energy legislation that Senator Manchin is drafting.

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Consistent with our concerns about the lack of investment in offshore exploration and production, Aramco CEO Amin Nasser made this comment at CERAWeek in Houston:

“Today, we only have 2% of effective spare capacity, which is an imbalance,” Nasser said. “You need a resilient and strong spare capacity to make sure that you can absorb any supply shocks. Look at what’s happening. Before the Ukraine crisis, the spare capacity was declining fast.

Oxy CEO Vicki Hollub’s comments further justify our concerns about US over-reliance on shale production. She noted these impediments to production growth in the Permian Basin, the world’s largest shale basin:

  • Severe supply-chain constraints 
  • Labor shortages
  • Few already drilled wells ready to be completed
  • Rig shortages

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