Expert leaders predict the legendary Permian Basin will be a hydrocarbon production leader in the US For Years.

Viewed from the seat of an airplane high in the sky, the cities of Midland and Odessa in the West Texas portion of the petroleum-rich Permian Basin appear seemingly from nowhere.

The scene suggests a mirage in the midst of miles of desolate land dotted with gnarled mesquite trees, tumbleweeds, and varied species of cacti. In fact, the locals have been known to tell the story that God felt bad about what he did to the land there, so he gave it oil.

The two cities, whose boundaries seem to overlap, often are referred to as the oil and gas industry’s headquarters for the Permian Basin of southeastern New Mexico and West Texas.

Urban isolation is a fact of life across much of the basin. Even so, there’s bustling activity in this locale. The busy scene today is considerably mundane from a spectator point-of-view.

Now, geologists, geophysicists, seismic crews, and engineers often roam the land, given the plethora of hydrocarbons already discovered and awaiting discovery.

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 Permian Basin has accounted for 17%, or 327 MMbbl, of US oil production as recently as 2002, principally from formations ranging in age from the Ordovician through Permian. This production volume is remarkable considering the cycle of oil booms and busts the region has endured over the years.

The total 30.4 Bbbl of oil produced in the entire basin through 2000 can be broken down to 25.6 Bbbl from reservoirs in the Texas part of the basin and 4.8 Bbbl from the New Mexico portion.

The original commercial oil well in this region reportedly was completed in 1921. This marked the discovery of Westbrook, the first large oil field in the Permian Basin, and operators soon tapped into a succession of major discoveries, such as the well known Yates Field (1926) and the Wasson and

Slaughter fields (1937).

The number of major oil finds declined after the late 1950s when the cumulative reserves that were discovered began leveling off.

As of 2000, annual oil production from significant-sized reservoirs (cumulative production greater than 1 MMbbl through the year 2000) was 301.9 MMbbl, or less than half the peak production that was attained in the early 1970s.

Some of the largest plays in the Permian Basin – the Northwest Shelf San Andres platform carbonate and the Pennsylvanian and Lower Permian Horseshoe atoll carbonate plays – have experienced significant decline.

Despite the number of cyclical downturns and dwindling production over its productive lifetime, the region appears to have the makings of the kind of hydrocarbon province where production essentially will go on forever.

Today, pump jacks, or “nodding donkeys,” are a common sight as they pump oil from beneath the surface in myriad old fields, along with the not-sold. Drilling rigs also dot the landscape in various locales, making vertical as well as horizontal boreholes to wrest newer production from the subsurface.

Gas processing facilities and a raft of pipelines are integral to the scene.

There are water floods aplenty throughout this basin, some dating back many years. CO2 injection programs to improve recovery also have long been relatively commonplace.

It is significant that this still-productive basin is not just holding its own, so to speak, but staying current with the times. For instance, it now boasts activity in the relatively new hot phenomenon in the oil patch: unconventional resource plays. For example, there’s the high-profile Wolfberry (Wolfcamp-Spraberry) play surrounding Midland and the emerging Bone Spring play in southeastern New Mexico, which are attracting a number of oil finders.

The ongoing high interest in the Permian Basin recently was aptly demonstrated when mature field turnaround guru Apache Corp. ponied up US $3.1 billion to acquire West Texas and New Mexico Permian Basin oil and gas properties from BP. The acquisition includes 10 oil and gas fields, and the area holds an estimated 141 MMboe in proved reserves, with liquids making up 65%. The properties reportedly produced an average 15,110 b/d of liquids and 81 MMcf/d of natural gas in the first half of 2010.

There’s added spice in the Apache deal as the acquired assets include 1.7million gross acres with numerous drilling prospects anticipated to yield future production.

Structure Highlights

The Permian Basin has been characterized as a large structural depression formed as a result of downwarp in the Precambrian basement surface at the southern margin on the North American craton. It was filled with Paleozoic sediments along with younger sediments to a lesser extent, according to Mahlon M. Ball in the “National Oil and Gas Assessment” report by the US Geological Survey (USGS) in 1995. Its current structural form was developed by Early Permian time.

This massive feature is one of the largest structural basins in North America. Ball reported it has an aerial extent of approximately 260 miles by 300 miles and encompasses a surface area that exceeds 86,000 sq miles. It includes the Texas counties of Andrews, Borden, Crane, Dawson, Ector, Gaines, Glasscock, Howard, Loving, Martin, Midland, Pecos, Reeves, Terrell, Upton, Ward, and Winkler.

Major subdivisions in the basin are identified as the Northwest Shelf Delaware Basin, Central Basin Platform, Midland Basin, Val Verde Basin, and Eastern Shelf.

Although the Permian Basin, in the structural sense, lies beneath the surface, a large part of it occurs beneath two topographical highs:

   * The northwest part of the Edwards Plateau in south central Texas; and
   * The Llano Estacado (Staked Plains: named by early Texas explorers who placed marker stakes to avoid losing their way on the flat land).

Overall, the Permian Basin is separated into eastern and western halves by the north-south trending Central Basin Platform, according to Ball. He noted that in cross section, the basin appears as an asymmetrical feature, with the western half harboring a thicker and more structurally deformed sequence of sedimentary rock.

In the structural sense, Ball noted the Permian Basin is bounded by:

   * Marathon-Ouachita Fold Belt on the south;
   * Diablo Platform and Pedernal Uplift on the west;
   * Matador Arch on the north; and
   * Eastern Shelf of the Permian Basin and west flank of the Bend Arch on the east.

Reservoirs Group Naturally into Plays

The Permian Basin mainly is a carbonate province where carbonate reservoirs account for 75% of total oil production; clastics, 14%; mixed clastics and carbonates, 8%; and chert, 3%, according to a study funded by the Department of Energy (DOE). The 2004 study, “Play analysis and leading-edge oil-reservoir developments in the Permian Basin: Increased recovery through advanced technologies,” was a collaboration between scientists at the Bureau of Economic Geology (BEG), Jackson School of Geosciences, University of Texas at Austin, and the New Mexico Bureau of Geology and Mineral Resources. Shirley Dutton, senior research scientist at the BEG, was principal investigator for the project.

Original oil-in-place in the basin was estimated to be 106 Bbbl, and an estimated 30 Bbbl of unrecovered mobile oil remained as of 2002, according to the study’s findings. About 80% of significant sized oil reservoirs in the Permian Basin produce from depths less than 10,000 ft.

Because so much oil likely remains, a new oil play portfolio of the Permian Basin was developed as part of the DOE Preferred Upstream Management Practices Program. The portfolio includes the entire basin and geologically defines 32 distinct oil plays ranging in age from the Ordovician through the Upper Permian Guadalupian epoch. The variance in number of plays per geologic age group is considerable, ranging from one Mississippian-age play to 13 plays in the Upper Permian (Guadalupian).

Over the course of the study, researchers identified 1,330 significant-sized oil reservoirs and assigned each to a play.

The underlying factor is that a hydrocarbon reservoir is not an isolated occurrence. The 2004 study noted that reservoirs group together naturally into larger assemblages or plays where individual yet similar reservoirs are related geologically, demonstrating same source and trap characteristics and, in turn, similar production characteristics.

As a result, reservoir development methods that have proved to work successfully in one reservoir should be applicable to other similar reservoirs in the play.

It is anticipated that the bulk of future production in the basin will occur by improved recovery from existing fields. The ability to extrapolate characteristics of better known reservoirs to other reservoirs in the same play likely will go far to make the oil players’ jobs more straightforward.

The 2004 study determined that the largest plays relative to cumulative production are the Northwest Shelf San Andres platform carbonate play of Guadalupian age (4 Bbbl), the Lower Permian Leonardian-age Leonard restricted platform carbonate play (3.3 Bbbl), the Pennsylvanian-age Pennsylvanian and Lower Permian Horseshoe atoll carbonate play (2.7 Bbbl), and the Guadalupian-age San Andres platform carbonate play (2.2 Bbbl).

Percentage-wise, Upper Permian Guadalupian age reservoirs are the winners when it comes to cumulative oil production in the basin (54%), followed by Lower Permian Leonardian (18%) and Pennsylvanian-age reservoirs (13%).

Reservoir Development Methods can be Esoteric

The Permian Basin is reported to contain 29% of estimated future oil reserve growth in the US. Most of this is expected to come via application of improved reservoir techniques. There are many newly implemented techniques currently being used across the basin.

Harking back to the definition of a play, recovery methods that work well in one reservoir in a play should be applicable to the other reservoirs. Many reservoirs in the Permian Basin produce by solution gas drive yielding typically low primary recovery efficiencies. Average primary recovery in certain of the basin’s reservoirs characterized by solution gas drive was 14.8%.

Secondary recovery via water flooding has long been used in this region and heads the list of most common reservoir development methods. Where used to supplement solution gas drives, these floods increase recovery efficiencies considerably.

CO2 flooding (currently via horizontal injection wells in many cases) also has been applied successfully for some time in the basin.

The basin is a longtime industry leader in the use of secondary and tertiary CO2 flooding operations, with the process accounting for 750MMbbl cumulative production and growing by more than 60 MMbbl of oil annually, according to Ball.

He also noted that technology for transporting, injecting, and processing CO2 provides 450 Bcf, or 25 million tons, per year of “new” CO2 as well as processing and re-injecting 550 Bcf, or 31 million tons, annually.

CO2 has proven to work efficiently in many plays, including the Pennsylvanian and Lower Permian Horseshoe atoll carbonate, San Andres platform carbonate, Grayburg platform carbonate, Devonian Thirty one deepwater chert, and Delaware Mountain Group basinal sandstone. Reservoirs in these plays harbor clear target intervals with adequate seals.

CO2 floods tend to be less effective in plays with highly fractured, bottom-water-drive reservoirs; e.g., the San Andres karst-modified platform carbonate and the Ellenburger limestones.

Sometimes operators throw the proverbial book of enhanced methods at a field. This was the case at the Yates Field, which was subjected to gravity drainage assisted by nitrogen and CO2 injection, water coproduction, and steam injection.

There are plenty more tools in the enhanced recovery kit.

High-pressure air injection used in low-permeability reservoirs has been tested in Barnhart Field in the Ellenburger selectively dolomitized ramp carbonate play. Artificially created, downhole high-energy, low-frequency shockwaves designed to coalesce and allow bypassed oil to be swept to producers have been tested in the Wasson South Clearfork unit (Wasson 72 Field, Leonard restricted platform carbonate play).

There’s also activity in the basin targeting bypassed pay identified by 3-D seismic attribute analysis.

Permian Basin Still Attracting Experts

The Permian Basin is a big petroleum-rich region boasting still-sizeable volumes of hydrocarbon production, but can it really go on forever?

This behemoth play clearly keeps chugging along. The still-undiscovered oil and gas is estimated to be considerable.

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 Bbbl of undiscovered oil in the Permian Basin province. Undiscovered natural gas liquids (NGLs) tallied a mean of 1 Bbbl.

The agency outlines the province as being comprised of the Midland Basin, Delaware Basin, Pecos Basin, Central Basin Platform, Val Verde Basin, Ozona Arch, and the Northwestern Shelf, Northern Shelf, and Eastern Shelf.

The USGS is mandated by law from the Energy Policy Conservation Act of 2000 to provide these types of assessments of 32 priority basins in the US, according to USGS geologist Rich Pollastro. He noted that these priority basins hold about 96% to 98% of the known oil and gas resources for the US. They are prioritized based on resource potential and federal land percentage.

The assessments use a geology-based assessment methodology based on geologic elements of a total petroleum system (TPS) that includes:

   * Petroleum source rocks (quality, source rock maturation, generation, and migration);
   * Reservoir rocks (sequence stratigraphy and petrophysical properties); and
   * Traps (trap formation and timing).

For the Permian Basin, this assessment methodology resulted in identification of a Paleozoic composite TPS encompassing 31 assessment units (AU). A quantitative estimate was made of the undiscovered oil and gas resources within 30 of the AUs.

The USGS study assessed the potential for technically recoverable resources in new field discoveries only. Field growth, or reserve growth, of conventional oil and gas fields was not addressed.

For the first time, the agency defined continuous (unconventional) AUs in the Permian Basin province:

   * Spraberry Continuous Oil AU;
   * Woodford-Barnett Continuous Gas AU;
   * Delaware-Pecos Basins Woodford Continuous Shale Gas AU;
   * Delaware-Pecos Basins Barnett Continuous Gas Shale AU; and
   * Delaware Basin Wolfcamp Shale AU.

The assessment noted that the major portion of undiscovered natural gas in the province is estimated to be in three continuous AUs of the Delaware and Midland basins. Approximately 35 Tcf of gas of the total mean of 41 Tcf of gas in the province is estimated to be in these three AUs. Given that few wells have produced from these AUs, there is geologic uncertainty in the estimates, the USGS noted.

Regarding unconventional oil resources, the estimated mean was 510MMbbl of oil in the Spraberry Continuous Oil AU in the Midland Basin.

Chris Schenk, project chief with the USGS, commented that the greatest potential for the Permian is located in unconventional reservoirs, emphasizing that the current active Wolfberry play surrounding Midland would qualify as an unconventional resource.

This new play uses specially designed slickwater fracs to coax oil from the mostly packed-limestone Wolfcamp Formation and commingling it with that from the overlying Spraberry sandstone. The

Spraberry overall is a tight sand with isolated sandstone zones that are conventional pays. It has long been looked on as a formation where one can punch a well in almost any locale and essentially be guaranteed to tap into what can bemiddling production volumes, at the least, that have the potential to keep going for innumerable years.

Regarding conventional resources, the estimated means were reported by the USGS to be 747 MMbbl of oil, 5.2 Tcf of gas, and 236 MMbbl of NGLs in 26 AUs.

Schenk emphasized that although conventional reserves have declined in the Permian Basin, there is growth potential for reserves within existing fields.

He noted that the Permian Basin probably is the leading basin in the world in field growth, owing to new technologies such as horizontal drilling and improved fracturing techniques along with growth produced by secondary and tertiary recovery efforts.

Although the USGS study on new field discoveries doesn’t report on reserve growth, Schenk noted such growth is “key to the Permian Basin.” A combination of potential reserve growth and unconventional resources leaves little doubt this region will continue to be a hydrocarbon production leader in the US for many more years.