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Not As Much By Way More Than Half

In 2018 the United States Geological Society said that Wolfcamp and Bone Springs formations in the Delaware Basin would be good for 46.3 billion barrels and, along with the Midland Basin, would provide potentially recoverable resources for 49 more years.

Five years later, based on declining liquids productivity and increasing gas to oil ratios per well, America will be lucky to recover 40% of those USGS estimates.

Remember this? "The Largest Continuous Oil and Gas Resource Potential, Ever." In this press release the USGS went on to say the Permian Basin had 49 years of oil left in it, clearly suggesting that most of its resource estimates per square mile were accurate.

This press release rocked our country and led to really misleading statements from important people of influence, like this dumb one:

"Christmas came a few weeks early this year," said U.S. Secretary of the Interior Ryan Zinke. "American strength flows from American energy, and as it turns out, we have a lot of American energy. Before this assessment came down, I was bullish on oil and gas production in the United States. Now, I know for a fact that American energy dominance is within our grasp as a nation."

...which was only slightly less stupid than this statement, from then President Donald Trump in 2018, also directly related to the USGS resource assessment for the Delaware Basin:

"For America, conserving oil is no longer economically imperative."

So, it's been just five years since the USGS resource assessment in the Delaware Basin; how are we doing?

Left, since 2014 there have been nearly 19,000 HZ wells drilled and the estimated cumulative production from these wells is a little south of 4 billion barrels. By late 2022 production was beginning to slip, in spite of very high product prices, consistent rig counts and ever increasing lateral lengths. Associated gas production is increasing rapidly. Resource depletion is underway.

Half of all the HZ wells drilled in the Delaware Basin have been drilled in the west 1/2 of Lea County and the east 1/2 of Eddy County in New Mexico and half of the current C+C production from all HZ wells in the entire Delaware Basin comes from the same two counties.

Right chart, above, take Lea and Eddy Counties out of the Delaware Basin HZ picture and there would have been no growth in the sub-basin since 2020. The Texas side of the Delaware Basin has been stalled out or declining since 2021.

After five years of delineation the actual productive limits of the Basin are about one half of the area assessed in the 2018 USGS study. Left, a map of 19,000 HZ wells overlain on the actual published 2018 USGS assessment boundary.

The biggest, most active operator in the largest productive county in the entire Permian Basin, Lea County, New Mexico, is EOG and its well quality is now deteriorating significantly.

The Delaware will now begin to struggle to maintain 2.3 MM BOPD (Novi, EIA, Welldatabase), or about 840 MM BO per year. If it can do that for another 10 years, which it will NOT, then the actual ultimate resource recovery would be something in the order of 16-18 billion barrels, less than half of what the USGS estimated.

And let us not overlook that the O in BOPD is used very loosely because much of what is produced in the Delaware Basin does not even meet the definition of oil. it is so light. And getting lighter.

Americans are terribly misled about their oil future and the security they feel about tight oil abundance from the Permian Basin is misplaced.


A note from Mike: these little research projects don't take a lot of time and they help me understand better where my country is headed with regard to hydrocarbons. I share them with you because I think they are important and an alternative way of looking at an impending problem that our nation, and the world, faces. I am a problem solver. I worry because I care. Our domestic and foreign energy policies, using US tight oil and tight gas, are horribly misaligned.

A lot of data these days is misrepresented and, I don't believe, reliable. The EIA, for instance. Rystad, another example, creates different definitions for reserves, productivity measures, accounting practices, etc. all the time; stuff I've never even heard before. I use Novi now because it's free and I trust in that data more than anybody else's; I know it comes directly from State regulatory agencies. I am not married to Novi at all and a lot of it I will not use. It turns out when I wish to make a point Novi has an image that helps me prove my point.

I have lots of critics, all of whom are IN the tight oil and gas business and don't like me raining on their parade. I think my industry owes the truth to the American public and that is all I am trying to accomplish. I care about oilfield jobs, of course, but more about careers. We appear to be a on a mission to drain America dry as fast as possible and soon will have neither jobs nor careers.

It helps, I believe, to have had many decades of experience with the decline and depletion of wells, fields, plays and trends and to understand economics and to trust in one's instincts. So when I look at this sub-basin in the Permian, from the bottom, up, it is clear to me it's getting gassy and is not going to deliver the liquids production our nation needs and the USGS estimated. Oil quality in the Delaware is already ultra light and getting lighter.

Some say you can't analyze the forest (Permian Basin) by looking at trees (EOG in Lea) and only top, down methodology is relevant. In other words, one has to use ultimate resource recovery estimates made by people who think they can see down there in the dark, pick a median probability factor for recovery of that imaginary oil... and because it's there, supposedly, it will come out of the ground at the right price. That's one way of doing it, for sure.

But I am just a dumb ass roughneck from Flatonia and I like to work from the bottom, up, so I can see where I am going. What is happening in core areas of core, productive counties, by the people drilling the most wells in those cores, like EOG in Lea County is the key to understanding the future.

Thank you for reading Oily Stuff,

Mike Shellman

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