Energy super basins grabbed the attention of the oil and gas industry during the past five years, with good reason. Now a period of re-evaluation has kicked in. Producers are looking beyond total resource potential to apply other criteria, including economic, environmental and regulatory considerations.
Those yardsticks could help identify which basins will dominate energy production in the decades ahead.
As the global energy transition progresses, companies and investors will face increasing challenges in accessing financing sources and markets for their oil and gas, noted Leopoldo Olavarría, counsel for large Colombian law and tax firm CMS Rodriguez-Azuero.
To increase access to those resources and markets, companies will seek to identify hydrocarbon resources that can be exploited with a low carbon footprint, he said.
Olavarría will serve as co-chair for the executive panel session “The Impact of Super Energy Basins on the Global Economy,” at the 2023 AAPG Energy Opportunities Conference in Mexico City, March 22-23.
Along with co-chair Julie Hutchings Mayo, a partner with international law firm Baker Botts, panelists include Julie Wilson, director of energy research for Wood Mackenzie, and Rob Cordray, senior vice president of consulting at Rystad Energy.
“Players that have access to resources located near plentiful clean electricity and hub-scale carbon capture and storage will have a competitive advantage in accessing financing sources and markets for their production,” Olavarría said.
“In organizing this session, we wish the presenters to explain, among other interesting developments, which regional basins and countries have access to clean electricity sources and CCS, and which governments and agencies are designing the regulatory and tax frameworks to make this happen,” he explained.
Super Basins in Perspective
By standard definition, a super energy basin is one that has already produced at least 5 billion barrels of oil equivalent and holds additional recoverable resources of 5 bboe or more. Super basins contain multiple producing zones, one or more prolific petroleum systems and established production and transportation infrastructure.
According to Wood Mackenzie, fewer than 50 traditional super basins supply more than 90 percent of the world’s oil and gas. The top 30 super basins contain about 57 percent of the biggest oil fields in the world.
Olavarría cited recent work on super-basin assessment done by Wood Mackenzie and included in a 2022 report as an inspiration for the conference session. The new approach could be described as total energy potential, with a twist.
In this evaluation, total energy includes prospects for and access to renewable energy – solar, wind and other – along with projected oil and/or gas production. The twist is that a basin’s future energy yield should have little or no additional impact on climate change.
Access to CCS as a carbon offset will be vital, and electrifying operations using green, renewable energy sources represents one of the fastest and best ways to eliminate emissions, Wood Mackenzie noted.
“The upstream industry of the 2030s will have a different footprint as investment migrates to the new energy super basins. With some basins set to be left behind, the industry will become even more concentrated in its top basins. At the same time, upstream strategies will increasingly merge with low-carbon businesses,” said Andrew Latham, Wood Mackenzie vice president.
The Permian Prototype
In the United States, the Permian Basin has become an archetype of super basin potential. It’s also an example of a basin coming under renewed scrutiny and re-evaluation, in both economics and infrastructure.
Super basins typically are assumed to have substantial production and transportation infrastructure in place because of their producing history. But in the Permian, a long-time oil province, an upturn in associated gas production has sometimes outstripped gas carry-away capacity.
Last October, as reported by industry market services, natural gas prices at the Waha hub in West Texas turned negative, falling to a minus-$2.25 per million Btu. That continued a pattern of periodic negative pricing at Waha because of pipeline constraints.
Large producers continue to invest in Permian development but the commitment level of Wall Street and private investors has come into question, especially as oil prices fell prior to the Russian invasion of Ukraine. Overall, evaluation of the Permian and other super basins has become much more situational.
Super Basin Scorecard
Wood Mackenzie ranks the Permian seventh in its list of large super basins, based on past and projected oil and gas production. The six largest are the Rub al Khali and Widyan basins in the Middle East, the West Siberian basin in Russia, the West Canadian basin, the Iran/Iraq Zagros basin and the Maturin basin in Venezuela.
The U.S. Gulf Coast, the Volga-Urals basin area in Russia and the Niger Delta basin in Nigeria round out the top ten. But new assessment criteria, including clean energy and low-carbon measures, point to a different future alignment.
In its report last year, Wood Mackenzie announced a scorecard approach to identifying super basins best suited for the coming low-carbon transition, using clean electricity and CCS indices. Some basins were obvious winners, scoring highly on all criteria, while others looked much less attractive, it noted.
“Of the remaining resources from traditional super basins, only 1,453 billion boe or half have been identified as future-fit energy super basins, defined as having abundant resources, access to low-cost renewables and hub-scale CCS opportunities,” Latham said.
According to the company’s analysis, favorable examples of future energy super basins and producing areas include the Gulf Coast and Permian in the U.S., the Rub al Khali basin, the North Sea, North Africa and Australia’s North Carnarvon basin.
Disadvantaged areas include the West Siberian basin and other Russian basins, Venezuela, Alaska, part of Central Asia and many smaller basins in Southeast Asia, Wood Mackenzie reported.
“These scores are not set in stone. Plenty of basins currently sit somewhere in-between (favorable) energy super basins and disadvantaged basins. Host governments may have opportunities to improve the outlook of a basin,” Latham said.
“Carbon taxes and other fiscal and regulatory moves to accelerate decarbonization – especially where they enable CCS – could play an important role and should be seized where possible,” he observed.
Interestingly, the Permian Basin leads the list of traditional super basins in potential for clean energy via solar or wind, according to Wood Mackenzie.
Both the Permian and the U.S. Gulf Coast offer plentiful clean electricity opportunity, and a substantial CCS industry should emerge based on CO2 sources from refining, petrochemical and other industrial facilities around the Texas coast, it noted.
The company forecast global CCS capacity to grow to between 2 billion tonnes per year and 6 bt/y by 2050. Existing and planned projects currently amount to less than 1 bt/y CO2-equivalent capacity.
While CCS doesn’t have to be in the same basin as production to offset carbon emissions, Wood Mackenzie assumes that carbon-capture growth will come mainly from countries that have hub-scale emissions sources available close to subsurface storage options.
Realigning global upstream portfolios with the new super basins outlook will take many years, even decades, Latham noted.
“The sooner the transition starts, the better,” he said.