The Permian Basin | February 2021
Located in West Texas, the Permian Basin has been producing oil for over 100 years. It leads the US in oil production and estimates put 43 billion bbl of oil still in the Permian; 80% of those reserves are believed to be at less than 10,000 feet. Some top formations are the Wolfcamp, Upper/Lower Spraberry, and the Leonard.
State Drilling Statistics (End of February)
Active Drilling Rigs in Basin- 208
Total Rigs in Texas- 197
Total Rigs in United States- 402
Total U.S. Rigs down 49% YTD
Permian Top Producers
Top Gas Producer – Cimarex Energy
Top Oil Producer – Diamondback Energy
Big Delays from Texas Freeze
Texas was hit with 30 year low temps that froze a lot of the energy infrastructure in the state. Anywhere from half a million to 2 million barrels of crude production had to be shut in, and a lot of that is likely not going to come back online until well into March. Refineries were even denied energy and had to shut down while the state did its best to support its residents. Things got to be so bad that companies will fail to deliver on many of their contracts. These are all just immediate effects. Well completions fell 40% in February as the cold made it increasingly difficult to work. This means that supply chains have paused near the top, lots of production was taken offline, and incomplete wells have slowed. This has all placed upward pressure on pricing, but at a great cost for the state of Texas.
Texas Coalition Aims to End Flaring
A coalition of oil and gas trade groups and operators have banded together in an effort to end routine flaring by 2030. The Texas Methane and Flaring Coalition hopes to lead by example and only flare when safety deems it absolutely necessary. Since 2013 it is estimated over 1 trillion cubic feet of natural gas has been flared. A report from the Environmental Defense Fund shows that if 98% of natural gas is captured from wells by 2025, it could yield an additional revenue of $440 million dollars. The coalition has been working since late 2019 to implement creative solutions such as using drones or robots to quickly detect leaks. Colin Leyden, the fund’s director of regulatory and legislative affairs for Texas says, “The science is clear that flaring cannot be an afterthought. Left unchecked, the practice is compounding the industry’s methane problem at a time when investors and overseas markets are calling for cleaner production.”
Mexico Suffers from Freeze
Even though the US had struggled to supply natural gas to everybody, Mexico took the brunt of the blow with some 4.77 million households and buildings left powerless in February. Most of Mexico’s natural gas comes from the Permian. These blackouts will only further strengthen the government’s argument that Mexico should seek to be energy independent, but the biggest hurdle lies in finding producers large enough to compete with the state sponsored oil firm, PEMEX. In addition to a state sponsored firm, there is also a state electricity utility and president Obrador is seeking to push legislation that prioritizes state electricity usage to be used before any other utility company.
Top Gas Producers (2020 cum)
Top Oil Producers (2020 cum)
Texas Oil Production
Texas Gas Production
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