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Page added on December 10, 2018

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Permian Oil Reserves May Be Twice As Big As We Thought

Production

The U.S. Geological Survey has revised the technically recoverable reserves in the Wolfcamp Basin, in the Permian shale play, to 46.3 billion barrels of crude and 281 trillion cu ft of natural gas. That’s up from 20 billion barrels of crude and 16 trillion cu ft of gas in recoverable reserves in late 2016.

It’s worth noting, however, the new estimate also includes the Bone Spring formation that makes up part of the Delaware Basin in the Permian. This is the first time this formation is included in the USGS oil and gas reserves assessment.

Recoverable reserves are calculated based not just on exploration results and geology but also on the price level that makes the oil and gas commercially viable for extraction. The USGS carried out its revision earlier this year, so it must have reflected the improvement in oil prices, notably West Texas Intermediate that has now largely disappeared, sparking worry about the sustainability of production growth, which has been steady throughout the year.

The national total hit 11.7 million bpd last month, an all-time high and also the highest in the world and the Permian was the major driver behind this growth. It is the shale play that produces the most oil and also boasts the fastest rate of production growth: in November the Permian yielded 3.63 million bpd of crude and the Energy Information Administration expects this to rise further to 3.695 million bpd this month.

So, the Permian is already a star, but now it will shine more brightly. The USGS numbers mean it is the largest single reservoir of oil and gas in the United States and one of the largest on a global scale.

The Albuquerque Journal quoted the head of the state’s Oil and Gas Association as saying “Even for someone who understands the resources and potential of the Permian Basin, I can’t help but be surprised by the sheer enormity of what the USGS has reported. Ryan Flynn added “The Permian resources shared by New Mexico and Texas make this area one of the most important places in the world in terms of oil production.”

While this is true, this rush to the Permian, aptly dubbed Permania, has led to some problems, namely price discounts as there are not enough pipelines to get the product to refiners and export markets. However, these problems are being addressed already and the Permania looks like it will only intensify unless prices slump below US$50 a barrel for WTI.

By Irina Slav for Oilprice.com

 



12 Comments on "Permian Oil Reserves May Be Twice As Big As We Thought"

  1. I AM THE MOB on Mon, 10th Dec 2018 11:08 am 

    Chevron CEO warns US shale oil alone cannot meet the world’s growing demand for crude
    https://www.cnbc.com/2017/05/01/us-shale-cannot-meet-the-worlds-growing-oil-demand-chevron-ceo-warns.html

    All-Time Low For Discovered Resources in 2017: Around 7 Billion Barrels of Oil Equivalent https://www.rystadenergy.com/newsevents/news/press-releases/all-time-low-discovered-resources-2017/

    HSBC Global Bank: 81% of world liquids production already in decline and world oil shortages ahead
    https://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

  2. Davy on Mon, 10th Dec 2018 11:25 am 

    I waiting to hear from Noney or Rock on this one.

  3. Anonymous on Mon, 10th Dec 2018 11:36 am 

    Pipeliners are some of the most conservative types in the oil patch. And there are 2+ MM bopd of additional pipe coming online in 2019. (And more lined up for 2020.)

    There is a growing, huge backlog of DUCs in the Permian. I would not be surprised to see a wave of new oil hitting Houston (they are calling it the tsunami or a flood of Biblical proportions).

    That extra 2 MM bopd is looming, is coming. The pipes are there. The DUCs are there. It’s baked in.

    Given prices have dropped $20 recently, I would not be surprised by some slowdown. $50 versus $70 makes a big difference for these projects. But that just means the 2020 pipes get delayed. The 2019 growth is baked in. Expect it next fall.

  4. Exergy Enslavement on Mon, 10th Dec 2018 11:52 am 

    From USGS Energy Glossary:

    “technically recoverable – Those resources producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.”

    No mention of the economic viability of recovery. This is just Zinke politicizing a USGS report.

  5. Anonymous on Mon, 10th Dec 2018 11:52 am 

    As far as USGS, they have generally been very conservative, slow, and lagging. Their process takes a year or two, so they end up using data that is 2-3 years old. In the Bakken, they went from 0.15 B to 4 B to 8 B for TRR. Just looking at production to date as well as proved reserves, 8 B is going to be easy to hit (most of the way there).

    So it’s noteworthy that independent analysts gave this projection but if anything, I always assume USGS is low. Just because the use old data and because shale continues to progress.

    The Haynesville is another play where a new study caused them to double their TRR.

    The possible criticism of TRR is that it doesn’t take price into account (i.e. includes too much resource in fringe acreage). But in general the conservatism of the method as well as how it uses old data has still led to low calls by USGS that end up getting revised up over time.

    I know it will make peak oilers unhappy because they want to believe the opposite. They want to believe USGS is crazy optimistic. But it really a bit more to the opposite.

    Same holds for EIA and production. Peakers love to diss EIA for optimism and then production exceeds even crazy EIA numbers. Peak oilers are left with an ever expanding list of peak shale estimates that were wrong.

  6. A Nony mouse on Mon, 10th Dec 2018 12:23 pm 

    Drill Baby Drill!

    Burn Baby Burn!

    “Stanford Earth System Science Professor Noah Diffenbaugh stated that atmospheric conditions for California wildfires are expected to worsen in the future because of the effects of climate change in California and that “what we’re seeing over the last few years in terms of the wildfire season in California [is] very consistent with the historical trends in terms of increasing temperatures, increasing dryness, and increasing wildfire risk.” Other experts agreed, saying that global warming is to blame for these extreme weather conditions.”

    https://en.wikipedia.org/wiki/2018_California_wildfires

  7. I AM THE MOB on Mon, 10th Dec 2018 2:12 pm 

    Anonymous

    University of California: Environmental Science & Technology (Malyshkina 2010)

    1. It Will Take 131 Years to Replace Oil with Alternatives

    2. World oil production will peak between 2010-2030

    3. World proven oil reserves gone by 2041

    https://www.scribd.com/document/394656677/Future-Sustainability-Forecasting-by-Exchange-Markets-Basic-Theory-and-an-Application-Malyshkina-2010

    A global energy assessment (Jefferson 2016)

    An extensive new scientific analysis conducted by the Former Chief Economist Michael Jefferson at Royal Dutch Shell published in Wiley Interdisciplinary Reviews titled “A Global Energy Assessment 2016” : says “that proved conventional oil reserves as detailed in oil industry sources are likely “overstated” by half.” & “punt bluntly,the standard claim that the world has proved conventional oil reserves of nearly 1.7 trillion barrels is overstated by about 876 billion barrels. Thus, despite the fall in crude oil prices from a peak in June 2014, after that of July 2008, the “peak oil” issue remains with us.”

    The World in the 21st Century is faced with huge challenges that go far beyond, but importantly include, energy challenges on the supply, access, and use sides. So severe are these challenges, mainly arising from the demands of a rapidly increasing human population on the Earth’s limited resources, that the future existence of large numbers of people may be threatened with extinction. In that sense, we may be observing the twilight of the Anthropocene (Human) Age.
    https://www.scribd.com/document/394043449/A-Global-Energy-Assessment-Jefferson-2015

    Projection of world fossil fuels by country (Mohr, 2015) Fuel

    Over 900 different regions and subfuel situations were modeled using three URR scenarios of Low, High, and Best Guess. All three scenarios indicate that the consistent strong growth in world fossil fuel production is likely to cease after 2025. The Low and Best Guess scenarios are projected to peak before 2025 and decline thereafter. The High scenario is anticipated to have a strong growth to 2025 before stagnating in production for 50 years and thereafter declining.
    https://www.scribd.com/document/375110317/Projection-of-World-Fossil-Fuels-by-Country-Mohr-2015

    IEA Chief warns of world oil shortages by 2020 as discoveries fall to record lows
    https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

    Saudi Arabia’s Energy Minister Warns of World Oil Shortages Ahead
    https://www.wsj.com/articles/saudi-minister-sees-end-of-oil-price-slump-1476870790

    There will be an oil shortage in the 2020’s, Goldman Sachs says
    https://www.cnbc.com/2018/11/09/goldman-sachs-there-will-be-an-oil-shortage-in-the-2020s.html

    Wood Mackenzie warns of oil and gas supply crunch
    https://www.ft.com/content/a1eb0e58-d7a4-11e8-ab8e-6be0dcf18713

    Imminent peak oil could burst US, global economic bubble – study
    https://www.theguardian.com/environment/earth-insight/2013/nov/19/peak-oil-economicgrowth

    German Military (leaked) Peak Oil study: oil is used in the production of 95% of all industrial goods, so a shortage of oil would collapse the world economy & world governments
    https://www.scribd.com/document/387459134/german

  8. Mark on Tue, 11th Dec 2018 10:18 am 

    Technically recoverable doesn’t equal economically recoverable. Most shale producers operating in a sea of red ink currently.

  9. rockman on Wed, 12th Dec 2018 9:55 am 

    Davy – I’m pretty sure you’re not confused about the use of “technically recoverable reserves”. When I see that term used I ignore any info that follows since it has no practical value. As Mark says: not “economically recoverable”. Unfortunately Mark ruins his high score as he apparently understands little about the practical economic value of the shale plays. It truly boggles my mind that some believe the shale players have been losing money for 10 YEARS AND ARE STILL IN BUSINESS. A complete lack of common sense IMHO.

  10. Davy on Wed, 12th Dec 2018 10:06 am 

    Rock, I follow you and Nony for oil advice. Many others here hate big oil because it is convenient for their agenda. They could give a shit about the part they play in the big picture. I want to know the story less the agenda. I don’t like fossil fuels but we survive because of them. Until we can change our lifestyles to “REAL GREEN” not fake green, we are stuck with them.

  11. Planet Earth on Wed, 12th Dec 2018 10:09 am 

    “The American way of life is not up for negotiations. Period.”

    I don’t negotiate with human beings.

  12. JuanP on Thu, 13th Dec 2018 7:09 pm 

    Do you have any evidence to back up your ridiculous claims that I engage in identity theft, moron? No, you don’t, yet you keep throwing the first stone. Well, I promise you that I will make your life hell until you stop. Enjoy it! I am going to be on your ass until at least next year now, prick. You asked for it. You will regret it like you always do because I can beat the crap out of you all the time if I want.

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