The Permian, Williston and Eagle Ford basins – the three largest U.S. tight basins – already produce more than 8 million barrels of oil per day. And considering the United States consumes approximately 20 million barrels per day, the importance of these three basins is apparent.
But the important part of the story is this: there’s a lot more oil and gas where that came from.
How much more?
Specifically, in the Permian, located in west Texas and southeastern New Mexico, there are more than 20 billion barrels of crude still be discovered, according to Enverus Intelligence. At Williston, located in eastern Montana, western North Dakota and South Dakota, estimates by the US Geological Survey are approximately 4.3 billion barrels of unconventional oil still untapped, and Eagle Ford, according to the University of Texas at Austin’s Bureau of Economic Geology, there might be as many as 10 billion barrels of oil still to be recovered.
Strategies for Untapped Reserves
Dane Gregoris, managing director of Enverus, said the discussion begins with operational strategies. The challenge, he said, “is to develop strategies to make the most out of what’s left.”
One way to get to the untapped reserves, he explained, is to drill an infill well, which is a well drilled between two operation wells in the hopes of accelerating the recovery of hydrocarbons. These infill wells are drilled in areas where the original well spacing, as it turned out, was not optimal.
The other way to recover the sleeping hydrocarbons is to re-fracture the wells, which is returning to older shale-oil and shale-gas wells, previously fractured, but no longer in production. The hope is that new, more effective extraction technologies will capitalize on the well’s resources. Further, re-fracturing – because a significant portion of the capital expense has already been made – is considerably cheaper than drilling and fracturing a new well.
Both techniques – infill and re-frac’ing – are designed to optimize what is known as an asset’s “running room.”
“I think ‘running room’ is a kind of an industry phrase for how much undeveloped resource you have,” said Gregoris, “and how many potential locations are left to drill in a given area.”
The bottom line, he said, is that if you’re an operator, you are constantly searching for what is left to develop and the best way to get it,” he said.
“In general, the Permian has more running room from a years of development standpoint than the Williston or Eagle Ford,” added Gregoris. That has to do with the fact that Permian wells are more productive, and the basin has more stratigraphic targets to drill than the others.
Enverus specializes in the technology and the analytics necessary to unpack the toughest questions across the value energy chain. Gregoris said that operators have to thread the needle, in a manner of speaking, deciding between how many wells to drill per section of land and the rate of return of each one of those wells.
He said to think of straws in a soda can.
“You can imagine – the more straws you put in a soda can, the less soda comes out of the straws. So the economics on each straw is going to get worse the more you put in. The same reality happens in oil and gas,” he said.
If you drill too many wells in a given section the average production coming out of those wells is going to be worse than if you just drilled one, holding all else equal.
“And so it’s all about finding the balance between what is the optimum amount of wells given in each area,” said Gregoris.
As an example of the complexity, he points out that in the Permian, there are two sub-basins and dynamic geology across both, so not every area works the same.
“Some can host a lot of development, and still make very economic wells while other areas can’t,” he said.
In each of these three major basins, it’s about doing the best with the rock you have.
The possibilities and potentials of finding the untapped energy and the approaches operators are using will be discussed during a special session at this year’s Unconventionals Resource Technology Conference in Houston, entitled “Unconventionals in Focus: Enverus Presents the Latest Trends and Future Outlook.”
Gregoris, along with colleagues from his firm Stephen Sagriff and Ryan Hill, will explore such topics as low-cost running room, operational strategies that have proven effective, as well as the implications for commodity and E&P asset markets across North America.
‘Running Room’ on Existing Assets
Operators, he said, are excited about drilling economics today, but as with any large capital project, cautious.
“They don’t want to spend upwards of $200 million on a multi-well project that won’t pan out,” he said. “They are very careful not to overdevelop and have a horrible economic outcome. There’s a general high degree of focus to ensure that the wells they’re drilling are very economic.”
This is most evident in the Permian.
“In the Permian, that’s the hot topic,” said Gregoris, because it’s a newer basin than the Williston and Eagle Ford, and has more zones of interest.
“If you look at the average well in the Permian Basin, it’s very economic. So I don’t think we’re at the point where they’re so close to overcapitalizing the entire basin,” he explained.
And while it is true that the push toward cleaner energies with lower carbon footprint is affecting operational decisions, it is not like those factors weren’t already considered.
“A lot of these operators are definitely trying to reduce emissions on the wells that they’re producing today and so they are making some capital decisions based on that,” he noted.
He cites, for example, reducing emission intensity and flaring.
Ultimately, he said, “Going back and looking at the running room on existing assets is unlikely to be a dirtier process than it was originally. It’s probably better if you consider the sunk infrastructure. You’ve done a lot of development already. You’ve spent a lot of capital. You’ve built a lot of stuff that probably emits carbon in some way, shape or form.”
In fact, he said, going back to established wells and assets is arguably greener, potentially, because you’re using what you already have. Revisiting such wells likely results in less of an environmental footprint than drilling in new plays.
“Say they found a new Permian Basin and had to rebuild all the infrastructure required to allow the next Permian to grow; that would be a costly process and probably a bigger environmental footprint than exploiting what already exists,” said Gregori. “These are big dollars. Everyone’s trying to make money.”