Drillers operating in one of the country’s most prolific oil-producing regions are ramping up the number of rigs in use, partly in response to OPEC’s announced six-month cut in production.
The number of rigs operating in the Permian Basin in West Texas, where the U.S. Geological Survey (USGS) announced in November the largest assessment ever of oil in one area, has doubled in just over six months.
The survey’s assessment speaks to the long-term viability of the basin, particularly the Wolfcamp formation, where oil was discovered in 1921.
The area also, however, is in the midst of a mini-boom. The number of rigs operating in the basin was 267 in December, up from a low of 134 in April. Projections are there could be more than 30 billion barrels of continuous oil sitting underneath the the basin.
“The massive oil and natural gas deposits in the Wolfcamp formation will translate into massive opportunity for Texas jobs and a boost in tax revenue for our schools, roads and first responders,” Todd Staples, president of the Texas Oil and Gas Association, told Texas Business Daily. “Texas is already the No. 1 oil and natural gas producer in America and the staggering potential of the Permian Basin will cement that spot at the top, strengthening our economy, our environment and our future. This discovery further solidifies our nation’s energy security, so long as our laws and regulations allow for continued responsible oil and natural gas development.”
The USGS, when announcing what is potentially recoverable, said advances in technology and industry can have significant effects.
“The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, program coordinator for the USGS Energy Resources Program, said in a statement. “Changes in technology and industry practices can have significant effects on what resources are technically recoverable, and that’s why we continue to perform resource assessments throughout the United States and the world.”
Writer and chemical engineer Robert Rapier explained in Forbes that the oil is assessed as an “undiscovered resource.”
“This scientific assessment means the forecasters have a certain degree of confidence that the oil is there,” Rapier wrote in a piece posted after the USGS made its announcement. “For this particular assessment, the 50 percent confidence level is that there are at least 20 billion barrels there. The study further estimates that there is a 95 percent chance that there are at least 11 billion barrels there, and a 5 percent chance that there are at least 31 billion barrels there.”
The amount that would be economically worthwhile to recover at prevailing commodity prices -- which would be classified as “proved reserves” -- will be a smaller subset of the assessed amount, Rapier explained.
“It would even be zero at a sufficiently low oil price,” he warned.