There is no doubt that the 86,000-sq-mile Permian Basin, encompassing 52 counties in west Texas and eastern New Mexico, is experiencing a renaissance in drilling activity. According to the Railroad Commission of Texas (RRC), the Texas Permian Basin rig count climbed from 129 in 2005 to 355 in 2011, sustaining a dip to 103 in 2009 with no drop in crude oil production. Total Permian Basin rig count climbed to 500 in May 2012, according to a US Energy Information Administration (EIA) report, and as of late December 2012, stood at 454. The number of drilling permits issued by the RRC has exhibited a similar rise, from 4,459 in 2005, with a downdip to 3,369 in 2009 and then a steep climb to 9,347 in 2011.
The price of natural gas remains depressed in the US, largely because of a glut due to a rush to exploit very tight gas resources in shale plays such as the Marcellus, Eagle Ford, Barnett, Haynesville-Bossier, Fayetteville, Woodford, and Bakken. A trend over the past few years has therefore been building towards a focus on liquids-rich plays.
As a result, US production of crude oil is reaching levels not seen in 15 years, at approximately 2.1 billion bbl/year as of September 2012, according to the US Department of Energy’s (DOE) EIA. The US now produces an average of 6.41 million BOPD, a 14% increase from 2011, according to a December 2012 DOE report—around 50% of the crude oil it consumes.
The two US states emerging as yielding the greatest amount of liquids are North Dakota (the Bakken) and Texas (Permian Basin and Eagle Ford).
From September 2011 through September 2012, Texas onshore crude oil production increased by more than 500,000 BOPD, due to increases in Eagle Ford and Permian Basin production.
The Permian Basin now accounts for more than 18% of domestic US crude oil supply. It has more than 400 active drilling rigs, by far the most of any US basin, that are drilling a large number of wells very quickly. The EIA estimates (Fig. 1) that crude oil production from the Permian Basin surpassed 1.25 million B/D in November 2012, 33% greater than the estimated 0.93 million B/D in the Western Gulf basin and 45% greater than the 0.86 million B/D in the Williston basin.
Proved reserves of US oil and natural gas in 2010—the most recent year for which they were calculated—rose by the highest amounts ever recorded since the EIA began publishing proved reserves estimates in 1977. Net additions to US proved reserves of crude oil plus lease condensate in 2010 totaled 2.9 billion bbl, surpassing by 63% the previous high of 1.8 billion bbl added in 2009. Helping drive proved reserves increases in 2010 were higher prices used to assess economic viability relative to prices used for the 2009 reporting year, particularly for oil. In tandem with increased crude oil prices, another factor impacting the increase in reserves is the creative use of hydraulic fracturing combined with horizontal drilling. One also should note that operators also get at a great deal of Permian Basin assets through multistage hydraulically fracturing vertical wells, then commingling resources from various intervals along the borehole.
Thus a key contributor to the rise in US reserves has been the Permian Basin, as economically recoverable acreage is on the rise daily.
Zeroing in on the Wolfcamp and the Spraberry
A number of companies with acreage in the Permian Basin have honed in on a formation previously thought to be promising but uneconomic to develop—the Wolfcamp play. The estimated ultimate recovery of this thick and ubiquitous source rock is now gauged at about 3 billion bbl of oil. Activity in plays variously called the Wolfcamp, Wolfberry, Wolfbone, Wolffork, Wolftoka, Wolfwood, and Cline has surged, with myriad drilling and completion strategies used to economically exploit the resources.
But, although the Wolfcamp has long been known, its exploitation has become viable economically only recently. Instead, it is the Spraberry trend area, discovered in 1943 and one of the top five fields in the Permian Basin in terms of cumulative oil production, that still garners attention as a current producing play. The Spraberry trend area was ranked by the EIA in 2009 as the second-highest area (after Alaska’s Prudhoe Bay) in the US in terms of reserves of crude oil plus lease condensate.
Recent Permian Basin Transactions |
|
Taking On the Permian Basin Today
According to EIA estimates, crude oil production from the Permian Basin surpassed 1.25 million B/D in November 2012, 33% greater than the estimated 0.93 million B/D in the Western Gulf basin and 45% higher than the 0.96 million B/D in the Williston basin. In December 2012, the Permian Basin Completions Congress chose to focus on techniques to improve the economics of horizontal and vertical wells in the Permian—specifically, the Wolfcamp, Cline, and Bone Spring formations. There is no doubt that activity targeting these formations is driving the Permian Basin’s current steep rise in production.
This is not to discount steady input from the basin’s mainstay, the Spraberry trend area, which is still the largest accumulation of oil and gas proved reserves in the Permian Basin. The Spraberry is ranked by the US Energy Information Administration as second in the US by total proved reserves (after Prudhoe Bay in Alaska).
Unlike the Spraberry, however, the Wolfcamp formation appears to extend throughout much of the Permian Basin, acting as source rock underlying the Permian’s Delaware, Central, and Midland basins. The productive limits of the play have yet to be fully established, but some sources are saying the play could be prospective for as much as 1 million or even as high as 2 million or more acres.
The Wolfcamp generally varies in thickness from 800 ft to 1,200 ft, with some areas extending to 2,000 ft or more. It lies directly beneath the Leonard Age formation across a great amount of the 800-mile-by-300-mile Permian Basin, ranging in depth from 5,000 ft on the normally pressured southeastern side of the play to more than 10,000 ft in the overpressured northwest, where the play is more prospective for oil. It consists of multiple benches—the Upper Wolfcamp (Bench A), Middle Wolfcamp (Bench B), and Lower Wolfcamp (Benches C and D).
By way of contrast, the Bakken has a thickness of 20 ft to 140 ft; the Barnett oil, 150 ft to 1,500 ft; and the Eagle Ford, 150 ft to 350 ft.
A formation designated the Cline has also risen in prominence. The Cline formation can be found from about 6,000 ft to 9,000 ft in the eastern Permian Basin area. It is also known as the Lower Wolfcamp or the Cisco/Canyon formation.
Within the Spraberry trend, producers such as Apache, Pioneer Natural Resources, Occidental USA, Devon, EOG Resources, and Laredo are targeting commingled resources from the Spraberry and the Wolfcamp, known as the “Wolfberry.” More than 2,000 wells have been drilled since the play began in late 2007. The key to Wolfberry play success is said to be the ability to use multistage hydraulic fracturing on multiple zones in vertical wells and commingling production from these zones. The wells’ success depends on more fracture stages into deeper wellbores rather than size of the fractures.
The overall Wolfberry play is an oil play that also includes a liquids-rich natural gas component. The gas produced by Wolfberry wells tends to be very rich, with an energy content of 1,200 to 1,500 btu/cf. Operators are experiencing initial productions from 80 to 180 BOEPD and estimated ultimate recoveries (EURs) from 120,000 to 150,000 bbl.
Where the Midland basin has the Spraberry, the Central basin has the Clearfork and the Delaware basin has the Bone Spring formation. With the Wolfcamp underlying the entire basin area, commingled resources from it and the Permian formations just above it are known as the “Wolffork” and the “Wolfbone.” Sometimes the Wolfcamp is commingled with lower formations, such as the Atoka in the Midland basin, resulting in yet another play name, the “Wolftoka.” In addition in the Midland basin, the Lower Wolfcamp is sometimes known as the Deadwood, and commingled Wolfcamp and Deadwood production can be referred to as “Wolfwood.”
The Dean formation lies between the Spraberry and Wolfcamp and is commonly produced and commingled in vertical wells. The formation has been drilled since the 1950s, but is viewed as of greater value as an additional zone rather than a standalone commercial producer. The Spraberry trend is itself part of the larger trend known as the Spraberry/Dean play, within the Midland basin.
Photo by Robin Beckwith
Enhanced-Oil Recovery: A Permian Basin Mainstay
Enhanced-oil-recovery (EOR) methods—primarily waterflooding or CO2 injection—are used in aging fields throughout the Permian Basin that cannot yield economic returns by other means. For example, across the Central basin platform, Apache has 47 operated waterflood fields.
In addition, ExxonMobil cites CO2 injection as having yielded 1 billion bbl of incremental oil production in the Permian Basin. Approximately 53% of US CO2EOR projects (about 70) are located in the Permian Basin, and they produce about 70% of US production from CO2 EOR. While the various Wolfcamp plays are getting a lot of attention and driving up overall Permian Basin oil production, CO2EOR represents a reliable source of steady production. The Permian Basin’s largest producer of crude oil (around 15% net share of total), Occidental Petroleum, for example, in third-quarter 2012 produced about 209,000 BOE/D from its Permian Basin operations—more than 25% of the company’s worldwide total for that time. About 64% of its Permian Basin production is from CO2-related EOR projects, its stated “most profitable business.” During 2012, Oxy injected more than 550 Bcf of CO2 into oil reservoirs in the Permian Basin. Oxy states that this makes it “the largest injector of CO2 for EOR in the United States.”
However, Oxy stated recently that its “Permian non‑CO2 business is one of Oxy’s fastest growing assets.” Its share in the various Wolfcamp and commingled plays throughout the Delaware and Midland basins is significant. “Since beginning delineation and development efforts in 2010,” Oxy writes in an investor presentation, “we have grown production by more than 25%.” The company has grown its Permian acreage “where we believe resource development is likely,” from about 3 million gross acres earlier in 2012 to about 4.8 million in October 2012. During this time, its net share of that acreage grew from about 1 million acres to about 1.7 million acres.