Don’t look now, but there’s a shale rebound underway, and it’s being powered by Texas’s Permian Basin. The U.S. has added 482,000 barrels of oil per day since mid-October, an increase of more than 5 percent that’s been driven in large part by burgeoning output out of that west Texas shale formation. This resurgence can partly be put down to an uptick in oil prices, itself a result of the recent petrostate production cut that’s helped add more than $10 to the price of a barrel of oil. But, as the New York Times reports, the real driver behind the Permian’s prowess lies in its geology (or, more accurately, its stratigraphy):
“The Permian Basin has now become the crown jewel of the world’s oil and gas industry,” said Scott Sheffield, the executive chairman of Pioneer Natural Resources, a large producer in the area.
[T]he Permian received new life about a decade ago when drillers began experimenting with hydraulic fracturing to blast through shale fields that course through the region. Exploration by Pioneer Natural Resources and a few other companies found multiple layers of shale — six to eight oil-rich zones, one on top of the other, like a layer cake — that offer companies the opportunity to drill through multiple reservoirs on the same real estate.
The geological virtues of the Permian, along with an existing robust array of pipelines, have made the basin the cheapest to develop of any shale oil field in the country. The break-even price for the best acreage in the basin is as low as $40 a barrel, where in most other shale fields the break-even price can be $10 to $20 higher. With acreage prices for oil properties multiplying by 10 times or more since 2012, oil executives are starting to talk of “Permania.”
Geology is one of the (many) reasons American shale producers have enjoyed such wild success over the past decade while their counterparts abroad have struggled to get any sort of commercial production off the ground. Tectonic movement often “crunches” rock layers into uneven, tangled messes, which can be problematic for drillers looking to hit a specific layer to extract hydrocarbons. Here in the continental United States, our rock layers are relatively evenly layered, so much so that they have even been compared to a wedding cake. That makes it much easier for producers to drill the horizontal wells into productive zones, frack the shale rock, and then extract the oil and gas trapped within.
But in the Permian’s case, multiple shale layers are stacked on top of one another, which makes rigs plumbing plays in the region that much more productive. That in turn has helped to bring down the region’s breakeven costs well below current prices, which helps explain why west Texas is leading the shale rebound.