Permian could top out in 2021 unless tech overcomes geology, Wood Mac says

The world’s hottest oil field could run out of steam in just a few years if shale drillers can’t overcome the natural constraints of the region’s geology, a new study says.

By 2021, oil production could peak in Permian Basin, as rapid drilling and fracking exhaust underground pressure in the most prolific areas of the West Texas play, according to one scenario outlined by energy research firm Wood Mackenzie.


In five years, the firm said, oil companies could be drilling wells that pump as much as 30 percent less crude than the ones that kicked off the region’s oil boom.

“We’re drilling so many wells and with such tight spacing, should we really expect well No. 5,000 to perform like well No. 5 did?” Robert Clarke, a research director at energy consultancy Wood Mackenzie in Dallas.

It’s impossible to predict exactly when drillers will reach the limits of the Permian Basin. Some believe that day is still far off. But it wouldn’t be the first major U.S. oil field to slow down after a few go-go years.

In South Texas, oil companies discovered the sweet spots of the Eagle Ford Shale were much smaller than anticipated. The industry had expected the Haynesville Shale, primarily in northwestern Louisiana, to thrive for years. But development there slowed dramatically after natural gas prices tumbled. North Dakota’s Bakken Shale also has not yet lived up to early projections, Clarke said.

In a few years, the problem in the Permian could be so-called child wells, the offspring of the region’s first horizontal wells. They produce less oil than so-called parent wells because some amount of reservoir pressure depletes as drillers exploit an oil field.

Wood Mac believes oil production in the Permian Basin could peak around 3.5 million barrels a day in 2021 unless drillers can continue to develop technologies to boost production. Roughly half a decade in the life of several major U.S. shale plays, “something happens, and the growth slows,” he said.

That’s not to say the Permian Basin’s oil production will drop dramatically after reaching its peak. The firm expects the region’s output to continue to pump a little less than 3 million barrels a day out to 2030.

And Wood Mac also laid out another scenario, in which drilling and fracking technology outpaced the Permian’s geological constraints. In that scenario, the region’s output would peak at 5 million barrels a day in 2025.

“They’ve got to keep pushing on technology,” Clarke said. “A higher oil price would absolutely help. If you can control costs, you might have more big wells that become profitable to drill.”

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