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Permian Investments Represent $2 Of Every $10 In Global OFS Spend

Oil rig

Investments in the Permian Basin represent $2 of every $10 spent on oilfield services and equipment worldwide, according to analysis by an Oklahoma-based consulting firm.

Spears & Associates said spending on drilling in the Texas basin, which is roughly the size of Florida, will rise by 50 percent this year from the boom of 2014.

“The oil is a half day’s drive from the global headquarters of most oil companies, sits smack in the middle of the world’s largest consuming nation, the natives are friendly, and the government’s ‘take’ is light,” Spears wrote. “We are confident that the Permian will grow from here.”

After the oil price crash that began in mid-2014, crude oil production growth in the United States stalled. In 2016, annual production in the Bakken and Eagle Ford formations fell by 10-20 percent. Still, 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.

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.

Related: Can European Car Giants Dethrone Tesla?

However, signs have started to emerge that the relentless intensification of drilling leads to diminishing returns, Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, said in an article late last year. Pumping twice as much sand as usual into Permian wells and drilling longer laterals doesn’t deliver commensurate volumes of oil, Flowers notes.

“Drilling costs rise exponentially with depth, and there’s a suspicion that longer wells are hitting a cost efficiency ceiling,” WoodMac’s chief analyst writes.

By Zainab Calcuttawala for Oilprice.com

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