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Robert Rapier

Robert Rapier

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A Look Inside The World’s Hottest Shale Play

Permian

Boomtown

Last week, my day job took me to the Permian Basin. A colleague and I arrived late at night at our hotel in Fort Stockton, Texas. The hotel parking lot was full. The vehicles in the parking lot represented every type of oilfield-related business imaginable.

At the front desk, I was told that the hotel had overbooked us. So, we had to search for new accommodations at 11 p.m., but every hotel parking lot in town was full.

After an hour of searching, we finally located a pair of the last rooms in town. The carpet in my room smelled like crude oil, but I was happy to have a bed for the night.

That’s the way it goes in the Permian these days. In fact, I heard someone say that if you can’t make money in the Permian right now, you aren’t trying.

A Century of Production

After the oil price crash that began in mid-2014, crude oil production growth in the U.S. stalled. In 2016, annual production in the Bakken and Eagle Ford formations fell by 10-20 percent, but production in the Permian Basin continued to grow.

Amazingly, the Permian is approaching a century of oil production. At present, production has reached a record 2.8 million barrels per day (BPD), making it the world’s second-most-prolific field, behind the legendary Ghawar in Saudi Arabia.

(Click to enlarge)

Permian Basin production is nearing 3 million BPD.

The Texas side of the Permian has already produced 30 billion barrels of crude and 75 trillion cubic feet (Tcf) of natural gas. Since 2012, Permian Basin production has increased by nearly 2 million BPD – which is a larger increase than any other oilfield in the world. This is why I consider the Permian Basin to be the world’s hottest oil play.

The Sand Men

It’s been two years since I was last there, but the area is booming as never before. In addition to the overbooked hotels, the restaurants were packed, and the highways were full of trucks hauling men, equipment, and materials.

Notably, there were numerous trucks filled with sand, headed to hydraulic fracturing (fracking) operations. Here is a picture I snapped of a line of trucks queued up at an active fracking site:

(Click to enlarge)

Sand trucks queued up at a fracking operation.

Related: The No.1 Challenge To The Oil Rally

As a quick primer for those who may not know, hydraulic fracturing (fracking) involves pumping water, chemicals, and a proppant down an oil or gas well under high pressure. In the foreground of that picture is a reservoir that is feeding water to the site.

The high pressure breaks open channels (fractures) in the reservoir rock trapping the deposit. Oil and gas do not travel easily through some formations, which is why they need to be fractured. The proppant is a granular material designed to hold those channels open, allowing the oil (or natural gas) to flow to the wellbore.

Sand has become the proppant of choice for most frac jobs, and producers have figured out that in general, the more sand they use, the more oil and gas they produce.

The Permian Basin is a cold, windy and desolate place — but it’s making a lot of people very wealthy. Even those who just own big piles of sand.

By Robert Rapier

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