Prolific Permian Basin Reaches Second Production Peak in 2017, Eclipsing 1973 Levels by More Than 25 Million Barrels, IHS Markit Says

Permian production will push U.S. to new record liquids production by
end of 2018

HOUSTON–(BUSINESS WIRE)–The prolific Permian Basin, a mature hydrocarbon ‘super basin’ located
in west Texas and southeastern New Mexico, reached a new oil-production
record of 815 million barrels or more* in 2017—far exceeding its
previous peak of 790 million barrels set in 1973, according to new
analysis from IHS
Markit (Nasdaq: INFO), a world leader in critical information.

(*IHS Markit will revise final production figures after operators
report 2017 year-end production).

The 2017 production milestone does not just crawl past the previous 1973
peak, but eclipses the 44-year-old previous production record by more
than 25 million barrels, IHS Markit said.

“The magnitude of the rebound in Permian Basin liquids production is
unprecedented,” said Reed Olmstead, director, energy research and
analysis, IHS Markit. “Not so long ago, many in the industry were saying
the Permian was dead, but the Phoenix has again risen from the ashes and
is soaring to new heights. The Permian Basin is on track to add more
than two million barrels per day in new production since 2007, and after
the final-year production count is in for 2017, we will see the previous
all-time liquids-production peak of 2.16 million barrels per day during
1973 surpassed by a significant margin, with total Permian volumes at
roughly 2.75 million barrels per day. In turn, this surge in Permian
production is projected to push total U.S. liquids production to a new
all-time high by the end of 2018. We see U.S. production exceeding 10.5
million barrels per day by the end of 2018.”

According to the IHS Markit U.S. Energy Well and Production database,
peak annual liquids production for the Permian Basin during 1973 was
nearly 790 million, an average of nearly 66 million barrels of oil per
month. Peak-month liquids production in the Permian during 1973 occurred
in September, with slightly more than 68 million barrels produced.

By mid-year 2017, average monthly production already exceeded the best
month of Permian production during the former peak year of 1973. For
2017 year-to-date through July, Permian liquids production exceeded 484
million barrels, or an average of slightly more than 69 million barrels
per month.

Aside from the overall E&P activity and related investment that is
significant to the region, the state, and operators in the basin, “the
implications for U.S. energy security are significant—since we have
become, in a relatively short period of time, more self-sufficient in
terms of energy supply and are less reliant on imports,” Olmstead said.

Longer-term implications for Permian Basin oil supplies are evolving,
and the future looks promising, according to IHS Markit energy
researchers, who have completed the first, three-year phase of a massive
Permian Basin research project entitled: The Permian Basin
Interpreted in 3D: The IHS Markit Permian Basin Unconventionals Kingdom
Geology Project. It models and interprets the giant basin’s key
geologic characteristics to better estimate its remaining hydrocarbon
potential, and initial results indicate the giant basin still holds an
estimated 60 billion to 70 billion barrels of technically recoverable
resources – about twice as much as the cumulative oil production to
date. The initial research from the analysis was reported Sept. 25,
2017: https://t.co/Xk2nY92lj1

Since it first began producing in the 1920s from the famed Santa Rita #1
well, the legendary Permian Basin has produced more than 39 billion
barrels (cumulative) of oil reaching peak volumes in 1973. As
conventional oil production in the play declined steadily during the
following three decades, many in the industry thought the Permian’s best
days were behind it, but unconventional drilling and completion
technology changed the game in the 2000s. This advance made possible the
extraction of unconventional shale resources that were previously
uneconomic to produce, and changed the view of geologists, who, for
decades, had bypassed these less desirable targets in favor of
conventional reservoirs.

“The Permian is one of the most prolific basins in the history of oil
production, with the onset of horizontal drilling and new completion
technology during the past decade, the production decline in the Permian
has been reversed and the basin has eclipsed its previous peak,” said
Pete Stark, Ph.D., executive director, upstream research at IHS Markit.
“The significance of this second production peak cannot be overstated,
since it truly revived a basin, and in many ways, the U.S. E&P industry.
When we consider the impact on the world’s crude markets, the Permian
has to be considered a global disrupter.”

IHS Markit says the Permian Basin is of such significance to the global
oil and gas industry that the basin is the model IHS Markit uses as the
benchmark for its ongoing research study on super basins, entitled Super
Basins: The Basins that Keep on Giving Analysis. The IHS Markit
researchers identified more than onshore 25 ‘super basins’ that have
multiple reservoirs and source rocks, diverse play types across numerous
geologic horizons, infrastructure with access to markets, and
established service sector and supply chains.

To earn ‘super-basin’ status, the IHS Markit analysis said, basins must
have achieved greater than 5 billion barrels of cumulative production
and have an estimated remaining production potential that is greater
than 5 billion barrels. (The initial results, the IHS Markit Super
Basins: The Basins that Keep on Giving Analysis, were reported March
3, 2017: https://t.co/MlOAzJv0tN

IHS Markit estimates the potential upside recoverable oil from 25 global
super basins to be approximately 840 billion barrels. This is far larger
than the resources required to generate the 40 million barrels per day
of new oil supplies that may be required to meet estimated 2040 global
oil demand, IHS Markit said.

“The key question for truly optimizing the potential of these super
basins is whether the global petroleum industry has the wherewithal to
successfully implement the Permian Basin model in mostly onshore,
international super basins,” said Jerry Kepes, executive director, plays
and basins at IHS Markit. “Established, mature super basins offer many
potential advantages including lower subsurface risks, established
infrastructure, existing supply chains and service sectors, as well as
access to markets, but above-ground challenges pose substantial hurdles.”

To better explore this potential, IHS Markit and the AAPG (American
Association of Petroleum Geologists) are co-sponsoring a special Super
Basins Executive Conference, March 27-29, 2018, in Houston to discuss
and consider the future role of super basins in meeting tomorrow’s oil
and gas supplies. An agenda and registration information for the
conference is available at http://superbasins.aapg.org/2018/

To speak with Reed Olmstead, Pete Stark or Jerry Kepes, please contact
Melissa Manning at [email protected].
For more information on The Permian Basin Interpreted in 3D: The IHS
Markit Permian Basin Unconventionals Kingdom Geology Project or the IHS
Markit Super Basins: The Basins that Keep on Giving analysis, please
contact [email protected].

About IHS Markit (www.ihsmarkit.com)

IHS Markit (Nasdaq: INFO) is a world leader in critical information,
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Contacts

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Melissa Manning, +1 832-458-3840
[email protected]
or
Press
Team
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