January 2017, Vol. 244, No. 1

Features

USGS Estimates 20 Billion Barrels of Oil in Texas’ Wolfcamp Shale

The Wolfcamp shale in the Midland Basin portion of Texas’ Permian Basin province contains an estimated mean of 20 billion barrels of oil, 16 Tcf of associated natural gas, and 1.6 billion barrels of natural gas liquids, according to a recent assessment by the U.S. Geological Survey.

This estimate is for continuous (unconventional) oil, and consists of undiscovered, technically recoverable resources. The amount is nearly three times larger than that of the 2013 USGS Bakken-Three Forks resource assessment, making this the largest estimated continuous oil accumulation that USGS has assessed in the United States to date.

“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,” said Walter Guidroz, program coordinator for the USGS Energy Resources Program. “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.”

 

Although the USGS has assessed oil and gas resources in the Permian Basin province, this is the first assessment of continuous resources in the Wolfcamp shale in the Midland Basin portion of the Permian. Since the 1980s, the Wolfcamp shale in the Midland Basin has been part of the “Wolfberry” play that encompasses Mississippian, Pennsylvanian and Lower Permian reservoirs. Oil has been produced using traditional vertical well technology.

However, more recently, oil and gas companies have been using horizontal drilling and hydraulic fracturing, and over 3,000 horizontal wells have been drilled and completed in the Midland Basin Wolfcamp section. The Wolfcamp shale is also present in the Delaware Basin portion of the Permian Basin province, but was not included in this assessment. The Permian Basin province includes a series of basins and other geologic formations in West Texas and southern New Mexico. It is one of the most productive areas for oil and gas in the entire United States.

Continuous oil and gas is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences, such as those in conventional accumulations. Because of that, continuous resources commonly require special technical drilling and recovery methods, such as hydraulic fracturing.

Undiscovered resources are those that are estimated to exist based on geologic knowledge and theory, while technically recoverable resources are those that can be produced using available technology and industry practices. Whether it is profitable to produce these resources has not been evaluated.

In an article published on oilprice.com, energy consultant Robert Rapier said the area assessed is in a region that has been producing oil continuously for nearly 100 years. While the mainstream media mostly interpreted this as the biggest ever in the United States, he suggested this is a fundamental misunderstanding of what the news entails.

He said the geology of the Permian Basin is rich and complex, both horizontally and vertically. The Permian Basin has commercial accumulations of oil and gas in stacked layers, at depths ranging from 1,000 feet to over 25,000 feet.

It’s important to understand what the key point in the USGS assessment actually means, that this oil has been assessed as an “undiscovered resource,” Rapier said.

“This scientific assessment means the forecasters have a certain degree of confidence that the oil is there,” he said.

For this particular assessment, the 50% confidence level is that there are at least 20 billion barrels there. The study further estimates that there is a 95% chance that there are at least 11 billion barrels there, and a 5% chance that there are at least 31 billion barrels there.

However, the fact that the assessment refers to the resource means they are estimating the technically recoverable oil in place. This says nothing of the economics of recovering this oil. 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. It would even be zero at a sufficiently low oil price. This is merely an attempt by the USGS to estimate the amount of oil that could be extracted over time if cost was not a concern.

“Given the history of the Permian Basin, it’s a pretty safe bet there is still a lot of oil still left to produce,” Rapier said.

The Permian Basin began producing oil in 1921. The Texas side of the Permian has already produced nearly 30 billion bbls, as well as 75 Tcf of natural gas. Permian crude oil production has more than doubled since 2010, largely as a result of hydraulic fracturing in six low-permeability formations: Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso and Delaware.

According to the Energy Information Administration’s (EIA) most recent Permian Region Drilling Productivity Report, it is producing 2 MMbpd of oil and 7.3 Bcf/d of natural gas. This accounts for more than 23% of U.S. crude oil production and exceeds the combined oil output of the Bakken and the Eagle Ford.

 

Source: Energy Information Administration

“I have heard some characterize this news as a new oil discovery. It is not. This new USGS assessment is merely an attempt to put some framework around how much oil may exist in one of several producing formations within the Permian,” Rapier said.

“But to the critics that would hand wave this assessment away as much ado about nothing, I would remind them that the Permian has seen oil production more than double in the past six years. That is significant,” he added. “There is also still a lot of oil to be produced there. So while you are on solid ground when correcting anyone who calls this a new discovery, you shouldn’t underestimate the Permian Basin.”