Operators’ eyes tend to light up like Christmas trees when talking about the Permian Basin, located in west Texas and southeastern New Mexico.
The basin encompasses an area about 260 miles wide and 300 miles long. Major subdivisions include the Midland, Delaware, Pecos and Val Verde basins along with the Central basin platform, Ozona Arch and the northwestern, northern and eastern shelves, according to the U.S. Geological Survey.
The basin once was covered by the Permian Sea, which was hindered by a restricted outlet when it began to recede. The resulting inland sea evaporated over time in the hot dry locale.
This ultimately led to formation of thick deposits of mineral-rich sediment, creating one of the world’s most productive oil regions.
The “USGS Assessment of Undiscovered Oil and Gas Resources of the Permian Basin Province of West Texas and Southeast New Mexico 2007” report estimated a mean of 41 Tcf of undiscovered natural gas and a mean of 1.3 Bbls of undiscovered oil in the province. Undiscovered natural gas liquids tallied a mean of 1.0 Bbls
Following the initial commercial well discovery in the Permian Basin in 1921 at Westbrook Field in Mitchell County, Texas, exploration and drilling took off. The ensuing production over the years ultimately peaked about two million b/d in the early 1970s.[PFItemLinkShortcode|id:1897|type:standard|anchorText:RELATED STORY|cssClass:|title:Permian: A Basin Full of Stories|PFItemLinkShortcode]
The major companies gradually moved on to bigger opportunities, oil prices continued to do their usual cyclic thing, and the Permian’s position as Oil Central became a mere memory.
The Permian Basin rig count reportedly tallied a mere 43 wells in 1999, suggesting the once-roaring giant had been left for dead.
Fast-forward to today, and there’s a virtual beehive of activity in the basin.
The Permian’s cumulative production of more than 30.4 billion barrels through 2000, principally from formations ranging in age from Ordovician through Permian, clearly is on the upswing.
It’s No Secret
Beneath this mostly barren land there’s a whole lotta bubblin’ crude that’s being produced, in large part from unconventional plays that often include long-produced conventional reservoirs as well.
In March the basin rig count had soared to 470, according to the Midland Reporter-Telegram.
The giant has been resuscitated.
Various strategies, both old and new, are being implemented to rev up oil and liquids production in the current plays:
♦ Waterflooding has long been successfully applied to reservoirs in the Permian. Ditto for carbon dioxide injection using CO2 supplies moved via pipeline from the Sheep Mountain storage facility in Colorado and Bravo Dome in New Mexico. This process is said to produce 25 percent of the basin’s production.
♦ Horizontal drilling is increasingly being applied, although many new wells tend to be vertical as in the past. Target zone geology – and cost – rule in this instance.
♦ Drilling to greater depths below known producing intervals has yielded increased production in numerous instances.
♦ Multi-stage hydraulic fracturing in both horizontal and vertical wells is key to much of the current successes.
Deeper drilling is responsible for whole new plays, which have taken on a sort of kitschy industry-invented nomenclature. For example, when operators in the long productive Spraberry sandstone opted to go deeper to the packed-limestone Wolfcamp, suddenly there was a “Wolfberry” play, owing to commingling production from these zones along with the intervening Dean formation.
It gets even funkier, e.g., Strawberry (Spraberry and the deeper Strawn) and Wolfbone (Bone Spring and underlying Wolfcamp). The Strawn occurs directly above yet another deeper drilling target, the lowermost Pennsylvania Atoka formation.
In other words, these relatively new plays in general are a result of drilling into and beyond a specific producing zone to deeper hydrocarbon-bearing intervals and combining production.
These may be conventional reservoirs or unconventional. For instance, the widely drilled Spraberry is a tight sand overall with hydrocarbon-bearing shale zones, as well as isolated sandstone lenses that are conventional pay zones.
The key to the Wolfberry play successes is said to be the ability to use multi-stage fracturing on multiple zones in vertical wells and commingling these. The success of the wells can be attributed to more fracture stages into deeper wellbores rather than the size of the fractures, according to Tim Dove, president and COO of Pioneer Natural Resources, the Spraberry’s largest leaseholder, driller and producer and a major player in the Wolfberry/Wolfcamp.
Going Out in the Cline
Horizontal drilling appears to be providing a lot of bang for the buck in varying locales, such as the relatively new Bone Spring shale play (often dubbed Avalon/Bone Spring) in the Delaware Basin in far west Texas and extending into southeastern New Mexico.
Laterals also have been drilled into the Cline formation to the east in Glasscock County where the Spraberry starts to thin, and vertical wellbores ordinarily have tapped the Wolfcamp on the way to deeper zones, such as the Cline, Fusselman and Strawn.
The formerly low profile Cline shale, equivalent to the Cisco, has captured the attention of Tulsa-based Laredo Petroleum and, more recently, other operators.
Laredo’s Permian activity is centered on the basin’s eastern side about 35 miles east of Midland, Texas, which has long been dubbed capital of the Permian Basin.
The company’s production/exploration fairway is about 20 miles wide and 80 miles long. In 2011, it drilled 262 wells (234 operated) on its Permian Basin assets with a 100 percent success rate on the 239 wells that were completed during 2011.
“The overall Wolfberry interval, which is the principal focus of our vertical drilling activities, is an oil play that also includes a liquids-rich natural gas component,” said Laredo founder, chairman and CEO Randy Foutch, an AAPG member.
“Prior to our purchase of Broad Oak, the exploration and drilling efforts in the southern half of our acreage block were centered on the shallower part of the Wolfberry,” he said. “But the emphasis in the northern half has always been on the deeper intervals, including the Wolfcamp, Cline shale, Strawn and Atoka formations.
“We have identified significant potential throughout our total acreage block for the entire Wolfberry interval from the shallow zones to the deepest,” he noted.
Consequently, the company expanded its drilling program to include a horizontal component targeting the Cline and Wolfcamp shales.
“Our Cline shale drilling began after we conducted an extensive technical review, including whole core analysis and single zone testing in vertical wells,” Foutch said. “We believe the Cline shale exhibits similar petrophysical attributes and favorable economics compared to other liquids-rich shale plays, such as in the Eagle Ford and Bakken shale formations.
“We have acquired 3-D seismic data to assist in fracture analysis and the definition of the structural component within the Cline shale,” he added.
Eighteen wells were drilled as part of the company’s Cline drilling program in 2011, and Laredo had two horizontal rigs drilling in the program at year-end. Efforts are under way to optimize well performance according to lateral length, fracture density, proppant amounts and pumping rates.
Laredo also has completed six horizontal wells in the Wolfcamp shale.
“This is all very fast moving,” Foutch commented. “No one was talking about horizontal Wolfcamp even 18 months ago.
“We think there will always be vertical drilling in the Wolfberry, but the results in the horizontals are such that you’ll see expanding horizontal drilling activity,.
“We were the only ones doing much Cline work until maybe six months ago, and now the industry has picked up on it,” Foutch continued. “We anticipate it will turn out to be a pretty spectacular world class horizontal oil shale target.”
Permian player Devon Energy recently announced an 18 percent increase in planned E&P spending this year, which includes $350 million budgeted for the Cline shale.
A Major Development?
The Permian Basin has long been heavily populated by smaller companies like Laredo, veteran-player Henry Petroleum and the like, which adds to the region’s allure. Concho Resources snapped up much of Henry’s Permian assets in 2008 and has become a major producer in the basin. Concho is among the players showing interest in the Cline.
Ironically, some of the industry heavyweights also are finding the basin to be irresistible, e.g. ExxonMobil (via its purchase of XTO Energy) and ConocoPhillips. Independent Occidental Petroleum continues to be the basin’s largest leaseholder and oil producer, where about two-thirds of its production comes from EOR projects based on CO2 injection.
At the end of the day, the Permian Basin’s current oil and associated liquids “boom” (yes, you can say it) can be attributed in large part to the huge disconnect between crude oil and natural gas prices.
The now-available technology to economically stimulate the wells, especially long reach horizontals, plays a key role in making this possible.