The present and future seem OK, too

Permian Has Productive, Colorful Past

Despite its many productive years, the petroleum-rich Permian Basin is still going strong.

The prolific province in southeastern New Mexico and West Texas exists for the most part in desolate areas rife with cacti, gnarled mesquite trees and tumbleweeds.

There’s a story among the locals that God felt so bad about what He did to the land there that He gave it oil.

A lot of it.

The basin has accounted for 17 percent, or 327 MMbbl, of U.S. oil production as recently as 2002, primarily from formations that range in age from Ordovician through Permian.

Given the many boom and bust cycles the region has endured, this might best be called amazing.

A study funded by the Department of Energy in 2004 estimated original oil in place in the basin to be 106 Bbbl, with 30 Bbbl of remaining unrecovered oil as of 2002.

About 80 percent of significant size oil reservoirs in the Permian Basin produce at depths shallower than 10,000 feet, the study continued, and carbonates reservoirs account for 75 percent of total oil production.

In assigning identified reservoirs to a play, the study noted that a hydrocarbon reservoir is not an isolated occurrence. Reservoirs group together naturally into larger assemblages, or plays, where individual yet similar reservoirs are related geologically, demonstrating same source and trap characteristics – and, in turn, similar production characteristics.

The DOE study was a collaboration between scientists at the Bureau of Economic Geology (BEG) at the Jackson School of Geosciences-UT at Austin, and the New Mexico Bureau of Geology and Mineral Resources.

AAPG member Shirley Dutton, senior research scientist at the BEG, was principal investigator for the project.

The original commercial oil well in the Permian Basin reportedly was completed in 1921. This marked the discovery of Westbrook, the basin’s first large oil field.

Westbrook was followed by a series of now-well-known discoveries, including the Yates field (1926) and the Wasson and Slaughter fields (1937).

A Little Old, A Little New

Despite the cyclical downturns and the significant production decline of some of the larger plays, e.g., the Northwest Shelf San Andres platform carbonate play, there’s obvious renewed interest in the Permian Basin, along with both old and new activity.

Pumpjacks, aka “nodding donkeys,” dot the landscape as they pump oil from old fields. Concurrently, drilling rigs make vertical as well as horizontal boreholes in order to rev up production from older producing zones as well as tap into newer targets.

Waterfloods have been commonplace here for many years, along with carbon dioxide injection programs to enhance oil recovery.

Just don’t call this basin old hat; it’s very much in step with the times.

Tired reservoirs are responding to new applications of advanced technology, e.g., horizontal drilling and multi-stage hydraulic fracturing. Unconventional resource plays such as the Wolfberry play surrounding the city of Midland, and the Avalon-Bone Spring play in southeastern New Mexico and far west Texas are attracting much attention.

The nomenclature can get a bit bizarre.

The Wolfberry gets its name from co-mingling of oil from the long-productive Spraberry sandstone with the deeper packed-limestone Wolfcamp. There’s even a so-called “Strawberry” play, a combo of the Spraberry and the Strawn that occurs above the deeper Atoka formation drilling target.

The Spraberry Trend field was discovered in 1949, and the Spraberry has acquired a reputation for producing from darn near any location drilled to tap into it.

Pioneer Natural Resources is the largest acreage holder in the field, with about 900,000 acres. Its net production is expected to average as much as 46,000 boe/d in 2011.

“We cored the entire Spraberry and found out there are shale zones with hydrocarbons in them, so we started opening those zones up in addition to the traditional silty sandstones,” said Pioneer chairman and chief executive officer Scott Sheffield, an AAPG member. “As a result, we increased the number of frack stages, so we’re getting more oil out of the Spraberry and (underlying) Dean than before.

“Then we started going deeper and picking up Wolfcamp and Strawn,” he said. “So a combination of opening up non-traditional pay and also new pay zones deeper, and increasing fracture stimulation, has allowed us to get much better economics.”

Horizontal Operations

Further to the west, away from the heart of the basin, operators are having a heyday with the Avalon-Bone Spring play, where they’re implementing horizontal drilling for the first time.

The Bone Spring members are said to include first, second and third Bone Spring sands and corresponding carbonates, and the shallower Avalon shale (sometimes called Leonard).

Apparently, it’s the liquids-rich feature of this play that the operators find especially alluring. In fact, the Avalon shale and the Bone Spring appear separately on at least one roster of the top 20 liquids-rich unconventional plays in North America.

Bone Spring player Anadarko has noted that wells testing 1,000 bopd IP are not that unusual, according to John Christiansen, communications director of corporate public affairs at the company. Even so, they’re expensive and technically demanding, as they can require going down a couple of miles and then out laterally for perhaps a mile. The price tag hovers north of $6 million.

Other high profile players in the new/old Permian Basin include Devon Energy, Chevron Corp., Concho Resources, Linn Energy, Occidental Petroleum, Apache Corp. and ExxonMobil.

Yates Activity

To the south of Midland, pipeline guru Kinder Morgan, which owns a 50 percent working interest in the old Yates field in Pecos County, is hard at work to wrest more oil from this mature giant.

One of the largest oil fields ever found in the United States, Yates has produced about 1.5 billion barrels of the estimated five billion barrels OOIP since its discovery about 85 years ago.

It has produced continuously all these years, albeit at declining rates.

“We increased production at the field with CO2 injection, and we’re currently working to offset a slight decline,” said Russ Roemer, director of operations for Kinder Morgan CO2. “Current production is 21,000 barrels per day.”

Even though used successfully in numerous fields in the basin, this type of enhanced recovery can be a bit tricky at Yates. The producing San Andres reservoir is highly fractured, shallow and low pressured – less than ideal conditions for effective response to CO2.

Then there’s the price. Once you get into enhanced recovery technologies such as gas injection, thermal, steam and others, the costs escalate – especially up front. But capturing even a small percentage of remaining oil at Yates is too big a prize to bypass.

And there are others.

“At Katz field (in the eastern Permian Basin), Kinder Morgan has invested about $230 million in a project expected to unlock an incremental 25 million barrels of oil to be produced over the next 15 to 20 years,” Roemer noted.

“In addition to delivering CO2 to the Katz field, KMP’s recently completed Eastern Shelf Pipeline provides third party customers in the region with access to a steady supply of CO2 for enhanced oil recovery,” he added.

Operational costs continue rising overall in the Permian Basin, no matter the type of project. Much of the current action kicked off when oil prices were in the mighty attractive $100/bbl range versus the high $70s, seen most recently in early October 2011.

Although the industry prefers to avoid calling anything a “boom” nowadays, the “B” word is tossed around freely in places such as Midland, the unofficial capital of the Permian, as well as the hyper-active Eagle Ford play in south Texas.

Unemployment is essentially a foreign word, but the trade-off is traffic congestion, overwhelmed restaurants, access to basic services and housing shortages.

It’s so bad in the Eagle Ford area that some of the locals joke that big cardboard cartons soon may be turned into rentals.

For those industry folks who have experienced the cyclicity of the industry, especially in this particular part of the world, this all sounds eerily familiar.

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