Looking For The Next Oil Boom? Follow The Tech

Much larger than Eagle Ford and once thought to have reached peak production, new technology has brought us full circle back to the Permian Basin in Texas and New Mexico, where the recent shift to horizontal well drilling has rendered this play the unconventional ground zero.

Determining where the next real oil boom will be depends largely on following the technology, and while the Permian Basin has been slower than others to switch from vertical well drilling to horizontal drilling, horizontal has now outpaced vertical, and investors are lining up to get in on the game.

Until about 12 years ago, virtually all wells in the Permian were vertical. As of last fall, however, horizontal and directional rig counts-meaning, non-vertical drilling rigs-have now begun to exceed vertical, according to RBN Energy.

But what they're also looking for are developers who are seeing strong economics in both vertical and horizontal wells. It's all about balance, and this co-mingling of multiple zones, with the ability to complete both horizontal and vertical wells economically is the best bet for investors.

The Permian Basin now boasts the top rig count in the US. Just this week, the number of rigs exploring for oil and natural gas in the Permian Basin increased by to 560, according to the weekly rig count report released Thursday by Houston-based oilfield services company Baker Hughes.

What's more, according to Bernstein Research, the Permian Basin will top the charts for North American spending growth in 2014, with an amazing 21% increase. And 2013 was already a stellar year for the Permian.

Permian production last year increased by 280,000 boe/d to 2.3 million boe/d, comprised of 1.4 million b/d of oil and 5.3 bcfd of gas, according to the US Energy Information Administration.

This technology has changed the way we think about the Permian Basin, once the darling of American oil production and then lost in the shadow of Eagle Ford and Bakken. While Eagle Ford and Bakken were viewed as the "bigger plays" at the start of the unconventional boom in the US due to the fact that new technology debuted here harder and faster, the Permian is back and it's bigger than ever.

"The Permian Basin is much larger than the Eagle Ford play, and it also contains over 20 potentially productive zones, while Eagle Ford has only one zone," Parker Hallam, CEO of Crude Energy-a small-cap company, not publicly traded, operating in the Permian, told Oilprice.com.

Permian production last year increased by 280,000 boe/d to 2.3 million boe/d, comprised of 1.4 million b/d of oil and 5.3 bcfd of gas, according to the US Energy Information Administration.
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280,000 boe/d is a number I’ve not seen before. Likely next year production increases will be significantly higher. Why?
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The Permian Basin now boasts the top rig count in the US. Just this week, the number of rigs exploring for oil and natural gas in the Permian Basin increased by to 560, according to the weekly rig count report released Thursday by Houston-based oilfield services company Baker Hughes.

What’s more, according to Bernstein Research, the Permian Basin will top the charts for North American spending growth in 2014, with an amazing 21% increase. And 2013 was already a stellar year for the Permian.
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Anyone know what the correlation is between increased spending and increased production for the Permian basin. (likely these correlations are oil basin specific.)

(The articles about the Permian are getting more bullish about production increases.)

For the complete article go here.
http://www.gilmermirror.com/view/full_story/25445655/article-Mega-Growth-Plays-in-the-Permian-Basin?instance=home_news_bullets

I am not in the oil business directly but I deal with a lot of the service companies here in SE NM as a construction equipment distributor. My contacts say there is no end in sight but as you know there are many external forces and anything can happen. My business has been “flat” this year with growth of about 8%, but we are still at 250% of what we were doing four years ago, my facility is busting at the seams and I can’t hire enough help. Though, I sense more caution than I have seen in recent years.

It looks to me like the oil business will be great with rising production until 2020 and then it will be good until about 2025 as production increases flatten out. But after that the bleed off of demand for oil by natural gas trains trucks and buses plus electric cars will start to collapse the price of oil. That collapse will be a regular year after year thing until oil goes down to at least $35@barrel which on a btu basis is about where coal and natural gas are today. While that will kill new drilling the USA will have so many fracked horizontal wells with long tails and low maintenance costs that production will do a slow glide downward.

But after that the bleed off of demand for oil by natural gas trains trucks and buses plus electric cars will start to collapse the price of oil.

I think you over estimate that NatGas growth and underestimate the world demand. ......
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Well the natural gas growth won’t happen unless the rest of the world gets into fracking for natural gas...which looks likely especially in volume after 2020.

In the comments section of this anti fracking article a commentator who seems knowledgeable of the fracking industry (that is he knowledgeably rebuts the article) mentions something I’ve never heard about in relation to the EIA’s recent downgrade of the Monterrey formation. He says that “robotic drilling bits” have recently been tested that can find oil pockets as small as a few hundred barrels. Anyone ever heard of “robotic drilling bits?”
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From the comments section:

“And the “lost oil of Monterrey”? Since that report, new robotic drilling bits have been tested that can find oil pockets as small as a few hundred barrels. I would not bet against the wildcatters.”
http://www.mintpressnews.com/americas-1-oil-doesnt-really-matter/194076/

He is likely talking about steerable drilling using mud motors. Note that a drilling bit doesn’t find anything, it goes where it is told (usually).

An example is:
http://www.slb.com/services/drilling/drilling_services_systems/directional_drilling/powerdrive_family/power_drive_orbit_rotary_steerable.aspx

Watch the animation video for a better understanding.

“Well the natural gas growth won’t happen unless the rest of the world gets into fracking for natural gas...which looks likely especially in volume after 2020.”

Don’t know where you get these predictions.

Fraccing is not the panacea for the rest of the world.

Plenty of conventional natural gas accumulations exist.
Most have been avoided in preference to oil, including in the Middle East.

Takes a lot more effort to get gas compared to oil, and it doesn’t bring a high price.

The US, on the other hand, depends almost exclusively on fraccing in unconventionals for its future gas, with a few exceptions such as Prudoe Bay’s gas cap.

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