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Oil Production in the Texas Permian Basin

This blog frequently shares news regarding developments in the oil and gas industry, particularly in Texas, and how growth in that industry effects Texas mineral owners. As the industry grows, increased opportunities arise for Texas land owners, such as the opportunity to negotiate oil and gas leases. (for more information on leasing, please see my previous blog on this topic that you can access here.

Texas has an oil output of more than 3 million barrels per day, which is one third of the total U.S. oil production. Texas could soon outpace the second biggest oil producing country in Organization of the Petroleum Exporting Countries (OPEC), which is Iraq (after top producer Saudi Arabia).

Production data from the Permian basin shows that in the last year it has become the largest crude oil producing region in the U.S. In 2013, Permian oil was 18% of total U.S. crude oil production according to the U.S. Energy Information Administration. Production in the Permian basin has increased to 1.35 million barrels per day up from 850,000 b/d in 2007 and is exceeding production from the federal leases in the Gulf of Mexico.

Production in the Permian basin is largely from six low-permeability formations: Wolfcamp, Spraberry, Bone Spring, Glorieta, Yeso, and Delaware. The Energy Information Administration says that “(p)roduction from these formations has helped drive the increase in Permian oil production-particularly since 2009-despite declining production from legacy wells. [A]lmost three quarters of the increase in Permian crude oil production came from the Spraberry, Wolfcamp, and Bone Spring formations.”

The Spraberry, Wolfcamp, and Bone Spring formations have increased their production from 140,000 b/d in 2007 to 600,000 b/d last year. In 2007 these three formations were 16% of the total production in the Permian basin, and last year the three comprised 44% of total Permian production. They have initial well production rates similar to those in the Bakken formation and the Eagle Ford formation. The Energy Information Administration said that “(a)lthough oil production has previously come from the more permeable portions of the Permian formations, the application of horizontal drilling and hydraulic fracturing has opened up large and less-permeable portions of these formations to commercial production.” In the other three formations, the Delaware, Yeso, and Glorieta, the production increased during the same years but less than in the other formations.

One thing holding the Permian basin and other shale areas back is a lack of infrastructure. Oil and pipeline companies are struggling to keep up with the fast evolving field. More pipelines will probably be needed, and so more Texas landowners will receive requests for pipeline easements. For example, Sunoco Logistics Partners has been looking for shippers who will commit to a new pipeline. They have a new project, the Permian Longview and Louisiana Extension pipeline. It will take the oil from west Texas to refiners in east Texas and Louisiana and then to the market. Sunoco expects the project will have an initial capacity of 100,000 barrels per day and be operational by the end of 2016.

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