The U.S. Geological Survey has revised the technically recoverable reserves in the Wolfcamp Basin, in the Permian shale play, to 46.3 billion barrels of crude and 281 trillion cu ft of natural gas. That’s up from 20 billion barrels of crude and 16 trillion cu ft of gas in recoverable reserves in late 2016.
It’s worth noting, however, the new estimate also includes the Bone Spring formation that makes up part of the Delaware Basin in the Permian. This is the first time this formation is included in the USGS oil and gas reserves assessment.
Recoverable reserves are calculated based not just on exploration results and geology but also on the price level that makes the oil and gas commercially viable for extraction. The USGS carried out its revision earlier this year, so it must have reflected the improvement in oil prices, notably West Texas Intermediate that has now largely disappeared, sparking worry about the sustainability of production growth, which has been steady throughout the year.
The national total hit 11.7 million bpd last month, an all-time high and also the highest in the world and the Permian was the major driver behind this growth. It is the shale play that produces the most oil and also boasts the fastest rate of production growth: in November the Permian yielded 3.63 million bpd of crude and the Energy Information Administration expects this to rise further to 3.695 million bpd this month.
So, the Permian is already a star, but now it will shine more brightly. The USGS numbers mean it is the largest single reservoir of oil and gas in the United States and one of the largest on a global scale.
The Albuquerque Journal quoted the head of the state’s Oil and Gas Association as saying:
“Even for someone who understands the resources and potential of the Permian Basin, I can’t help but be surprised by the sheer enormity of what the USGS has reported."
\Ryan Flynn added “The Permian resources shared by New Mexico and Texas make this area one of the most important places in the world in terms of oil production.”
While this is true, this rush to the Permian, aptly dubbed Permania, has led to some problems, namely price discounts as there are not enough pipelines to get the product to refiners and export markets. However, these problems are being addressed already and the Permania looks like it will only intensify unless prices slump below US$50 a barrel for WTI.