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Horizontal Drilling Picks up Pace in Permian Basin

Texas’ Permian Basin remains the biggest oil producer in the US, and though its production has grown more modestly than other new plays this may be about to change with new planned investment in horizontal drilling expected for next year.

Some 70% of current operating wells in the Permian Basin are vertical, but with old wells maturing, more expensive horizontal drilling can potentially tap into deeper layers to raise production to almost 2 million barrels per day by 2018, analysts have predicted.

Occidental Petroleum Inc. (OXY), the largest producer in the basin, is planning to invest $500 million next year, while Apache Corp. (APA), the second-largest producer in the Permian, has also announced plans to increase investment now that its production there has grown a record 18% and it has extra cash thanks to a divestment of assets in Canada and Egypt.

"I think the Permian is going to have years of surprises in it and most of them are going to be good," the Wall Street Journal quoted Apache CEO Steven Farris as saying in a conference call with analysts earlier this month.

Related article: The Next Shale Revolution—Probably Russia

The number of new horizontal and vertical wells now being drilled in the basin are almost equal, Texas Railroad Commissioner Christi Craddick told the Permian Basin Petroleum Association’s 51st Annual Meeting in late October.  Producers have reported 19,000 well completions so far this year, up from 15,000 in 2012.

According to Wall Street Journal figures, horizontal oil wells have risen 23% to 800 wells this year, while horizontal wells targeting both oil and gas have risen 82% to 850.

Craddick noted that the Permian Basin was now producing 916,000 barrels of oil per day, which represents more than 50% of the 1.8 million barrels produced daily across Texas.

While horizontal wells cost up to four times more than vertical wells, they tend to produce more oil per day on average and more oil over the life of the well. The average production per day with a horizontal well is 500-1,000 barrels, compared to 100 to 150 barrels per day for the average vertical well, according to Steve Pruett, chairman of the Permian Basin Petroleum Association.

By. Charles Kennedy of Oilprice.com




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