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Permian operators drill deeper as production starts to plateau

Industrial Lubricants 507357208

According to BMO Capital Markets, over two-thirds of the premium land in the prolific US Permian Basin has already been drilled for oil, meaning that operators are looking for other opportunities to maintain production.

This has led to a record number of applications for permits to drill within the limits of Midland, a city in west Texas with a population of 130,000. This contrasts with the early days of the shale oil revolution, when operators could avoid bureaucratic procedures by developing the plentiful crude-rich land in unpopulated areas.

While production in the Permian Basin is not going to end anytime soon, it does signal that the American shale revolution is starting to run out of steam, with production potentially plateauing with the next five years. Indeed, ExxonMobil and Chevron, the makers of Mobil and Texaco industrial lubricants like spindle oil, have published output guidance indicating that growth in shale production will be at the lower end of projections.

To mitigate the problem, many of the larger producers are planning ahead and acquiring land to best support their long-term strategies. Others are improving their overall efficiency by simultaneously drilling multiple shale layers, including rock with a relatively low yield.

Nevertheless, despite running out of real estate, production in the Permian is expected to continue growing for the next few years. It should also be noted that many people have heralded the Permian’s demise in the past only for new technologies to enable access to new resources.

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