The success of the Permian Basin drilling in Texas has caused some stiff competition between different oil miners in the state. According to Energy Information Agency, in the last few years, the output of natural gas in Texas has nearly doubled and is becoming the world's top crude oil producer by providing the U.S. with 35 percent of its oil, reported Reuters.
With the high spike in crude oil coming from Texas, the Permian Basin is now the most productive onshore development in the country and it pumps more than 1.3 million barrels per day, according to Reuters. The Permian is different from the other oil-producing rock formations located in the U.S. because it has multiple layers of rock, which most of them have oil. Shale formations such as the Bakken Shale in North Dakota and the Marcellus Shale located in Pennsylvania and West Virginia don't have the multiple layers the Permian Basin brings to drillers.
Natural gas companies are finding more opportunities to drill in the Permian because miners can drill into multiple formations on the same acreage where they hold the mineral rights. What this means is that companies can target a 3,000- to 5,000-foot column of rock that contains multiple layers, instead of purchasing larger land areas searching through a single layer, according to Reuters. These smaller leases are bringing bigger payoffs and also have higher associated costs.
“You can have what may seem like a smaller acreage position in the Permian,” said the Chief Financial Officer of natural gas driller company ConocoPhillips, Jeff Sheets, reported Reuters. “But just because there are lots of different opportunities within that same acreage position it can make a pretty interesting prospect for you.”
Lower mining costs creating higher competition
The oil company West Texas Intermediate has fallen almost 11 percent since its peak earlier in the year to about $110 a barrel. Trends like this are getting companies to be more conscious on their maintenance costs to maintain profitability. Apache Corp. has plans to drill around 70 wells in the Permian Basin out of the 800-plus wells that already exist. However, the price per well has dropped around $1 million per well, or around 13 percent, to nearly $6.8 million per well in the last 18 months, according to Reuters.
Fracking in the U.S. has cut the price of natural gas around 75 percent in the last five years, according to Dallas Morning News. Fracking technology has made natural gas cheaper than coal plants for electricity generation. Fracking is becoming easier to invest in as it limits the amount of carbon dioxide emissions that coal plants produce.
Faster drilling key in oil race
With shale gas booming, companies are looking for faster ways to obtain the natural gas as they compete for the best locations. Apache is currently self-sourcing its own sand and chemicals used in the fracking process. They're also experimenting with different drill bits, which can cost $50,000 or more. However, if the new drill bit can work faster, the company can achieve faster drilling times and easily make more profit, according Apache's Head of Operations in North America, John Christmann, reported Reuters.
“We are not a one-trick pony,” said Christmann, according to Reuters. “There are always things that we are testing.”
Natural gas mining operations can turn to Broadwind for all their massive industrial gear needs. Broadwind provides custom gearbox design and gearbox refurbishment maintenance that can help fracking projects remain efficient.
Companies expect the Permian Basin to provide natural gas for years to come and the competition is only going to get more fierce. Even though the basin was in decline more than 10 years ago, new fracking technologies have given a resurgence to the U.S. oil production.