More on the spectacular rebound in oil production in “Saudi Texas,” which has doubled in only 30 months (see chart above) thanks to advanced drilling technologies accessing shale resources, and has to be one of the most remarkable energy success stories in US history, from David Blackmon (“Oil and Gas in Texas: Abundance, Abundance, Abundance“):
So abundant are the resources in the Lone Star State that, as of June 27th, there were 843 oil and natural gas drilling rigs operating in Texas, representing an amazing 48% of all the rigs operating in the United States. Even more amazing, that number represents 26% of all the drilling rigs operating anywhere on the face of the earth!
Today, Texas produces more than 30% of America’s oil and natural gas. If Texas were a country, it would be the third largest natural gas producing nation on earth, and the 13th largest oil producer. As the Eagle Ford production continues to grow and the massive potential of the Cline Shale begins to be tapped in earnest, the state could find itself once again in a position of global pricing influence.
Home to more than 260 of those active drilling rigs, the Eagle Ford continues to amaze analysts with the rapid nature of its growth. March 2013 daily oil production from the play grew to more than 529,000 barrels, a 77% increase from just one year earlier. RBC Capital Markets’ proprietary database pegs Eagle Ford’s oil production as high as 800,000 barrels per day, in the same range as the Bakken in North Dakota. Regardless of which number is more accurate, there is no question that Eagle Ford will overtake the Bakken in the next several months to become the largest oil producing field in the U.S.
Meanwhile, the Permian Basin, which as recently as 6 years ago was thought to be a dying province for oil and gas production, continues to rebound in dramatic fashion, and is now home to more than 500 active rigs. According to a recent report from the Independent Petroleum Association of America, “Production in the Permian Basin reached about two million barrels per day in the early 1970s, declined to 850,000 barrels per day in 2007, but has since rebounded to 1.3 million barrels per day.”
The report goes on: “The potential of multi-stage fracturing in both vertical and horizontal wells has recently attracted a revival of activity to the Permian. There are currently almost 500 rigs active in the region, which makes up more than a quarter of the U.S. total. Of the rigs active in the Permian, nearly 40 percent are drilling horizontal wells, particularly in the Delaware Basin, double the share of two years ago. Vertical drilling is still very strong – more than 6,000 Wolfberry wells have been drilled within the last 10 years.”
All of that dramatic increase in activity and production has taken place while what many believe to be potentially the biggest oil shale in the U.S. – the Cline Shale – has barely begun to be tapped. The Cline is an enormous underground structure, averaging about 70 miles wide from east to west, and about 140 miles from north to south, with a target zone for oil production that is between 200 and 500 feet thick. Because it partially underlies the Wolfcamp Shale to the West, some companies are drilling wells with dual completions in each formation.
Activity in the Barnett, Haynesville and the dry gas window of the Eagle Ford has recently been slow due to low prices for natural gas. But make no mistake about it: the gas is still there in enormous quantities, and whenever the commodity price does move back up into a more healthy zone – which it inevitably will – we will see many more natural gas rigs come on line in Texas and elsewhere to begin tapping it once again.
Because the one thing we do know for certain about oil and natural gas prices is that they are cyclical in nature. That is the way it has always been, and you can bet the family farm it will never change. It’s just one of so many factors that have always made the oil and natural gas industry one of the most interesting to be involved in. The next 20 years or so may well become the most exciting time the industry has ever seen, and I just hope I live long enough to see it all play out.
God Bless Texas.