permian Permian Basin Overtakes Saudi’s Ghawar as World’s Top Producing Oilfield

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Permian Basin Overtakes Saudi’s Ghawar as World’s Top Producing Oilfield

Friday, April 05, 2019

 

Texans for Natural Gas

New data released by Saudi Aramco, Saudi Arabia’s national oil company, estimates the country’s Ghawar oilfield has a production capacity that is 300,000 barrels per day (b/d) less than what is currently being produced in West Texas’ Permian Basin. By surpassing the Ghawar, thought to be the world’s most prolific, the Permian has now solidified its position as the largest oil producing region in the world – with even more production growth expected. 

The Permian’s growth in oil production over the past several years is nothing short of incredible. According to the U.S. Energy Information Administration (EIA), oil output in the Permian Basin reached over 4.1 million b/d in March, with production forecast to increase in April by another 40,000 barrels. This impressive level of production represents a 2.7 million b/d increase from March 2014 – an almost 190 percent jump in just 5 years.

For comparison, Aramco’s data show Ghawar currently has a maximum production capacity of 3.8 million b/d. This is down significantly from the 5.8 million b/d that EIA estimated the field produced in 2017.

Even with this record growth, the future looks bright for the Permian. According to a U.S. Geological Survey (USGS) assessment published in December 2018, just two formations within the Permian Basin – the Wolfcamp Shale and Bone Springs Formation – are estimated to hold 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas and 20 billion barrels of natural gas liquids. This represents the largest continuous oil and natural gas resource potential ever assessed by the agency.

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The Permian is not played out, according to Regina Mayor, global sector head of energy and natural resources for KPMG, who made the statement in a recent television interview with Bloomberg.

“What the industry is proving is that the Permian is not played out yet,” Mayor said in the interview, which was published on Friday last week.

“I keep getting asked ‘is the Permian played out?’ and I keep saying no. Permania is alive and well and I think it’s here to stay,” Mayor added.

In a separate television interview with Bloomberg earlier this year, Fatih Birol, executive director at the International Energy Agency, said “we have not seen the full impact of the shale revolution yet”.

“[There is] more to come both for oil and gas and it will have huge implications for the oil industry, gas industry and the markets,” Birol told Bloomberg in the interview.

“There was a major problem in [the] United States in the Permian basin. It is a logistical problem, the pipe capacity was not enough to bring the oil to the markets. And now, as of end of 2019 this problem will be solved with the new construction of the pipelines,” he added.

Last month, Texas Independent Producers & Royalty Owners (TIPRO) Association President Ed Longanecker told Rigzone “we will continue to see oil and natural gas employment growth in the Permian basin this year”.

As of March, TIPRO was tracking over 1,000 open positions in the upstream sector in the Permian, including Texas and New Mexico. The full oil and natural gas industry in the Permian - including upstream, midstream and downstream - had approximately 2,700 open positions as of March, according to TIPRO.

Mayor has over 25 years of experience delivering large-scale business and technology changes to major energy companies around the world and serves as the lead partner for several of KPMG’s key Energy clients, KPMG’s website states.

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Tom Petrie, chairman of boutique investment banking firm Petrie Partners LLC, addressed the sway OPEC still holds on the world and the effect Permian Basin producers have on the group.

In our final Permian perspectives segment, Hart Energy’s Jessica Morales spoke with Petrie at the recent DUG Permian Basin Conference in Fort Worth, Texas, about where the Permian Basin fits in the “new world order” when it comes to oil production.

“[The Permian Basin] has become the most important factor in the most recent growth of U.S. output and that is really remarkable, because it has now taken us to meaningfully higher levels than we ever achieved in the past,” he said.

Petrie said the previous record for U.S. oil production was between 9.7 million and 9.8 million barrels per day in 1969 before beginning to decline for decades.

“But here we are now, producing at more than 11 million barrels a day, close to 12 [million barrels a day], with some potential for it to grow further,” he said. “And that puts us at a higher level of output than other world producers—Saudi Arabia and Russia.”

Petrie also discussed the collapse of Venezuela oil production and other geopolitical events that could possibly affect global oil markets.

If you missed any of the Permian Perspectives series you can view them at the links below:
HART ENERGY CONNECT: Floyd Wilson On Past, Future In Wildcatting
HART ENERGY CONNECT: Diamondback CFO: “Money should flow to the Permian”
HART ENERGY CONNECT: Political Challenges Facing Permian Basin Producers
HART ENERGY CONNECT: Noble Royalties CEO On Permian Basin Risk, Rewards

[Old-Ruffneck + 1,239]

6 hours ago, ceo_energemsier said:

Petrie said the previous record for U.S. oil production was between 9.7 million and 9.8 million barrels per day in 1969 before beginning to decline for decades.

For those old enough, the Middle East oil, not just KSA, was flooding the world with excess' and was cheaper to import the black gold than to drill our own. In 1960 OPEC formed and was fledgling and in-fighting, turf wars etc but kept the oil pumping to an ever thirsty world, mainly USA. By 73 they got the shi* together and embargoed us and caught us off guard. Hence the drilling activity restarted in to make us independent. So we have ourselves to blame for the situation we are in. But you can look at the timelines of when we got back to producing and then slacking off in the mid 80's for 15 plus years...we got lulled into the trap of KSA again and so?  

This is very brief synopsis, but it shows how Americans got lazy in their thinking and trusted OPEC. Made a fool of us couple times, let's learn from the past and show the f***ers WE are going to be independent and a leader and make the resources plentiful and reasonably priced. Remember who drove the planes into the towers. I personally think from my heart we should of made a glass bowl of the 1500 mile circle. IMHO of course.

Edited April 26, 2019 by Old-Ruffneck
adding

[John Foote + 1,135]

Americans weren't lazy, but we are too blame. Simple public company mercantilism. The nature of our system.

There really isn't a fundamental USA oil policy unless you count the tax code and the varying ease/difficulty of permitting etc.. We can open up, or toughen up, drilling somewhat, but in the end it's what the big boys thinks maximizes profits. But the drilling went crazy under Obama, hardly a friend, and coal will wither no matter what Trump says, economics dictate our system.

Imagine what would happen to American if 20% of revenues went to whatever our version of the Royal family is, and 20-50% of the  revenues went to the government as a tax, a sliding scale depending on the price of oil. The domestic industry would be wiped. We'd just buy from abroad, killing the golden goose. Our Venezuelan friends killed their goose. I do credit most of the Middle East for not doing that.  

King Faisal didn't do the '73 oil embargo for money, it was a represent Islam moment because of US support for Israel in what we call the Yom Kipper War (which is viewed as an Arab victory for standing up and being counted for once). An unintended side effect was learning the power they had. 

In their own way the Middle East not producing to the marginal profit has saved our domestic industry.

 

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5 hours ago, Old-Ruffneck said:

For those old enough, the Middle East oil, not just KSA, was flooding the world with excess' and was cheaper to import the black gold than to drill our own. In 1960 OPEC formed and was fledgling and in-fighting, turf wars etc but kept the oil pumping to an ever thirsty world, mainly USA. By 73 they got the shi* together and embargoed us and caught us off guard. Hence the drilling activity restarted in to make us independent. So we have ourselves to blame for the situation we are in. But you can look at the timelines of when we got back to producing and then slacking off in the mid 80's for 15 plus years...we got lulled into the trap of KSA again and so?  

This is very brief synopsis, but it shows how Americans got lazy in their thinking and trusted OPEC. Made a fool of us couple times, let's learn from the past and show the f***ers WE are going to be independent and a leader and make the resources plentiful and reasonably priced. Remember who drove the planes into the towers. I personally think from my heart we should of made a glass bowl of the 1500 mile circle. IMHO of course.

The major oil companies had also shifted their focus out of the US for a long time. That took jobs and growth away from the US for a long time and the home base industry was essentially crippled when it came to new exploration, development and production.

Now where we are, we should be able to sustain and grow the domestic production with the best application of the best technologies and a disciplined growth and production plan for not just 5 years but out 15-20 years.

 

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4 hours ago, John Foote said:

Americans weren't lazy, but we are too blame. Simple public company mercantilism. The nature of our system.

There really isn't a fundamental USA oil policy unless you count the tax code and the varying ease/difficulty of permitting etc.. We can open up, or toughen up, drilling somewhat, but in the end it's what the big boys thinks maximizes profits. But the drilling went crazy under Obama, hardly a friend, and coal will wither no matter what Trump says, economics dictate our system.

Imagine what would happen to American if 20% of revenues went to whatever our version of the Royal family is, and 20-50% of the  revenues went to the government as a tax, a sliding scale depending on the price of oil. The domestic industry would be wiped. We'd just buy from abroad, killing the golden goose. Our Venezuelan friends killed their goose. I do credit most of the Middle East for not doing that.  

King Faisal didn't do the '73 oil embargo for money, it was a represent Islam moment because of US support for Israel in what we call the Yom Kipper War (which is viewed as an Arab victory for standing up and being counted for once). An unintended side effect was learning the power they had. 

In their own way the Middle East not producing to the marginal profit has saved our domestic industry.

 

In the US we do (oil companies/lease holders) do pay 12.5-25% in royalties , just not to ROYALS !🍾, and there is the severance tax, there is the federal royatlies, federal taxes, state taxes etc on domestic oil production. But we are not wiped out, lot of dangers do exist that can make the industry be a dead goose or a very ill goose, mainly politicians and their misguided ideas.

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More than 620,000 miles of new oil and gas wells will be drilled over the next five years, according Rystad Energy’s latest forecasts. That’s enough to get to the moon and back with distance to spare.

The energy research company predicts that the number of onshore and offshore oil and gas wells drilled globally will increase to around 65,000 this year. Activity levels are then forecasted to remain around this level through 2023.

“North America will be in a league of its own thanks to the shale boom. Nearly six in ten new wells on the continent will be drilled in shale basins,” Erik Reiso, head of consulting at Rystad Energy, said in a company statement.

“These wells are typically longer than other supply segment wells. This helps explain why shale wells represent around 80 percent of the distance drilled in North America by 2023,” he added.

Reiso also revealed that the top four offshore operators will add a quarter of new offshore wells going forward, whereas the top ten in the onshore market represent around one-third of new wells from 2019 to 2023.

“[This implies] a much more diversified player landscape,” Reiso said.

Earlier this month, Rystad Energy revealed that free cash flow for public exploration and production companies “skyrocketed” last year to almost $300 billion.

“For these players, 2019 could turn out to be another blockbuster year,” Rystad Energy said in a company statement at the time.

Rystad Energy is an independent energy research and business intelligence company providing data, tools, analytics and consultancy services to clients exposed to the energy industry across the globe. The company is headquartered in Norway.

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Warren Buffett’s intervention in Occidental Petroleum Corp.’s $37 billion unsolicited bid for Anadarko Petroleum Corp. may tip the scales in the oil industry’s biggest bidding war in decades.

In a stunning escalation of the two-week-old contest for Anadarko, Buffett’s Berkshire Hathaway Inc. on Tuesday disclosed plans to inject $10 billion into Occidental in exchange for preferred stock and warrants. The bombshell landed in the midst of Anadarko board deliberations about whether Occidental’s offer is superior to a lower but already agreed-to deal with Chevron Corp.

The arrangement was announced just two days after Occidental’s corporate jet flew to Buffett’s hometown of Omaha. It’s contingent on the deal for Anadarko closing and would be his biggest investment in more than three years aside from Apple Inc. It also answers the question about what to do with a swelling cash pile just ahead of Berkshire’s annual shareholder meeting this weekend.

Furthermore, the transaction is a major sign of approval for the future of the Permian Basin, the world’s largest oilfield, from an investor who has previously plowed dollars into oil refiners, drillers and Canada’s oil-sands.

Midas Touch

The Occidental transaction follows Buffett’s classic playbook: Getting above-market rates on a preferred stake and the upside of stock options in exchange for the Berkshire seal of approval and a big check. In the past he’s lent his reputation to banks facing doubts about their capitalization, and now he’s backing a proposed acquisition bid that’s facing questions over its legitimacy.

Buffett’s imprimatur is apparently valuable to Occidental Chief Executive Officer Vicki Hollub: The 8 percent that’ll be paid out on the preferred shares is more than twice the average coupon on Occidental’s debt.

Chevron stuck to its guns following Buffett’s move. “We believe our signed agreement with Anadarko provides the best value and the most certainty to Anadarko’s shareholders,” Chevron company spokesman Kent Robertson said in an email.

The California-based oil explorer’s cash-and-stock bid was valued at $31.6 billion, or $62.93 a share, as of 12:16 p.m. New York time. Anadarko was trading 0.4 percent lower at $72.63, a premium of about 15 percent to Chevron’s offer price.

Anadarko didn’t immediately responded to requests for comment.

The world’s fourth-richest individual is demanding a high price for his support, according to Leo Mariani, an analyst at KeyBanc Capital Markets. The preferred stock represents “rather expensive financing,” he said in a note to clients. The arrangement with the Oracle of Omaha also came as a surprise, Mariani added, given that Occidental previously said it already had lined up financing for the Anadarko deal.

But Buffett’s backing means that Occidental may avoid a shareholder vote, said David Katz, chief investment officer at Matrix Asset Advisors Inc., which manages $800 million including Occidental stock. "It seems like the CEO with the board’s support is going to do everything and anything to get the deal done."

Omaha Meeting

For Buffett, it shows he can still find unique opportunities in an environment where he’s bemoaned the high prices for most companies. His annual shareholder meeting this weekend in Omaha is certain to feature questions about how he’d invest Berkshire’s cash, and he’s started laying the groundwork to increase share buybacks, an option he’s historically shunned.

Berkshire’s energy investments are mainly in renewables and power, but it also owns two natural gas transmission systems: Northern Natural Gas in the U.S. Midwest, and Kern River Gas Transmission in the West. Anadarko owns Western Gas Midstream Partners, which operates gas gathering and processing facilities in Texas, Pennsylvania and several western states.