The Permian Basin Provides the Ideal Environment for Horizontal Drilling
News of oil in the Permian Basin is not new, as that area has been an arena for commercial exploration since the 1920s with over 30 billion barrels of oil produced since then. At this time, the output hovers around 1 million barrels per day. This output has been greatly augmented by the discovery of new methods for extracting light crude oil from the shale play of the region. The Permian Basin contains many layers of this light oil, also called light tight oil or tight oil.
Hydraulic fracturing (fracking) and horizontal drilling technologies have proven successful in other shale plays for extracting tight oil. In the past, many of the resources such as oil, natural gas, and crude oil were not considered economically recoverable because of the cost to implement and maintain horizontal wells. Even though the costs have come down considerably as technology advances, many of the companies already successful with vertical wells in the Permian Basin have been slow to make the switch.
The complexity of horizontal drilling and the higher need for services and support keep the cost of implementing this technique out of the reach of smaller exploration and production companies. As many as three dozen vendors may be involved in the drilling, completion and servicing of a well. This is why, even though this technique has yielded exemplary results in other shale plays, it has been slow to catch on in the Permian Basin. New data suggests that this is in the process of changing.
Experts say that the equipment and manpower take time to bring together, but because of the success of horizontal wells and fracking in producing tight oil from shale plays, it is only a matter of time. In fact, in 2013 the horizontal drilling in the Permian Basin made up about half of that method’s increase in the US. By the end of this year it is expected to be the preferred extraction method in that shale play.
Most of the horizontal drilling has taken place within the Texas counties of Reeves, Ward, Martin, and Midland, as well as Eddy County in New Mexico. These counties encompass the Spraberry, Wolfcamp, and Bone Spring formations. About 50 of the 63 new horizontal rigs were located in these areas, and many more have been predicted by the end of the year.
One of the main reasons horizontal rigs are expected to replace most vertical rigs in the region is the potential amount of tight oil in the Permian Basin. While the Eagle Ford and Bakken shale plays only have between 200-300 feet of shale, the Permian Basin contains nearly 10 times as much, with about 3,500 to 4,000 feet.
Even as the shift to horizontal rigs continues, vertical rigs are not expected to disappear completely. Many smaller companies are waiting to get on board until the larger companies have worked out some of the issues and brought prices down. Currently, the horizontal drilling process often costs more than three times as much as conventional vertical drilling.
Ultimately, those who make the switch to horizontal rigs will be the most successful because of the amount of tight oil available in the Permian Basin. More than half of the 550 rigs in the shale play are already horizontal, and that number is only expected to increase.