New Mexico HZ Tight oil Annual Decline Rates
A few of us interested in tight oil stuff have been expecting late life decline rates to begin accelerating in the Permian Basin and this post might suggest we're getting close to that actually occurring.
Lea and Eddy Counties in New Mexico have been carpet bombed the past 18 months with new wells; both counties have led the entire Permian with rig counts and new drilling permits; so intense has the drilling been in New Mexico that if we back out Lea and Eddy County production from the Permian, Texas HZ Permian production declined in 2021.
But everything comes with a price, a "cost", and when we look at New Mexico decline rates they appear to be accelerating ever so slightly the past several years, please see chart above. Using shaleprofile.com's analytical tools, its quite easy to investigate why this is occurring and who the guilty party is. Well, its not Lea County...
Eddy County Annual Decline Rates
Its actually Eddy County, where associated gas from tight oil wells is mucho abundant and gassy oil wells are turning into oily gas wells. In this part of the Delaware Basin, after year seven, decline rates are definitely accelerating.
Above, initial GOR has more than doubled in Eddy County and in 2021 it jumped on an elevator to the fourth floor unmentionables department.
We know the Delaware Basin is gassy and engineers depending on this county for a living will say, no la hace. But the rate of GOR increases and now, initial GOR, is affecting well productivity (oil) in core areas and it's a big deal, alrighty. The Delaware supposedly has 40G BO of recoverable oil in it left to go and tens of thousands of drillable locations. I don't think so.
Conoco Phillips and Mewbourne are still drilling some good wells in Eddy County; Oxy, EOG and Devon, not so much. Their (oil) well productivity in the county sucks. As does Exxon's. Eddy County is Exxon's 'hood, by the way; it paid over six large for the BOPCO shit and whoa Nellie; its been downhill, or uphill, whatever, ever since...
If we look at Exxon's oil well productivity in Eddy County in 2021 on a BO per 1,000 feet of normalized lateral length metric, and corresponding EUR's (above, chart), its wells are definitely going downhill, pretty much into the toilet. Last year's wells were the worse (oil) since Exxon bought this stuff in Eddy County in 2017 and declared it was going to blow the doors off the Permian Basin with 6 billion BOE tight oil production, 3.4 billion BOE from the Delaware Basin alone.
To be fair, Exxon is likely to meet its self proclaimed goals as much gas as it now makes, on a 6:1 equivalency ratio. When it said it was going to increase its Permian "production" 25% in 2022 it said, and meant, big time, on a BOE basis. A corporation interested in talking itself up loves that BOE bunk. Exxon produces enough associated gas in Eddy County alone it could single handedly keep the lights on it Europe for decades. We just need to get all this gas to those folks across the pond and moar money into the hands of the tight oil, shit, there I go again, tight gas industry in the Permian Basin.
Which brings me to my grand plan about building the Permian Canal. I could have run for Texas Railroad Commissioner this year, kept my clothes on, not taken any kickbacks on water pits or shot any AR-15's into tree stumps and won hands down on this plan alone. Its brilliant:
The great State of Texas makes the Permian tight oil sector build a very wide, deep water canal from Port Aransas to north of Fort Stockton so LNG tankers can go back and forth exporting associated natural gas from the Delaware Basin. We fill the whole sumbitch up with produced water out of Pecos and Reeves County (am I smart, or what?!), save one lane of the proposed Permian Canal for tight oil exports (which won't last much longer anyway), the rest is for LNG exports from the Delaware Basin tight oil play. Oops, I meant to say tight gas play; sorry. Think of the jobs it will create... so the fanatics at the IPAA and Energy Strong, who never met an unprofitable, exported, tight oil barrel, or exported, frozen MCF of gas they didn't like, will be all over this idea. Let the lobbying commence.
Russia might not like the Delaware Basin taking its gas market in Europe much, but f@%k 'em. The APP Basin LNG boys might get pissed off about this Permian Canal plan but hey, when it comes to exporting the last of America's hydrocarbon resources, its all about the Benjamins, baby, and its every company for themselves. They'll get over it...or they can just dig their own ship ditch. If New York doesn't like pipelines, how about LNG barge canals?!
But I guess that's not a good idea either because that means keeping American hydrocarbons in America, and nobody likes that dumb idea; in the US...we're on a mission from God.
Yes sir, the Permian Canal is about progress ! Its about draining America...first !! The North Fort Stockton LNG terminal will become the biggest in the world.
An LNG tanker bound for the Fort Stockton Terminal passes thru the Permian Canal just west of Rocksprings; 2026. The control tower on the right is to manage heavy traffic and monitor the flow of produced water to the Gulf of Mexico.
I sorta think this idea is funny, or stupid, mostly both, but then again exporting the last of America's hydrocarbon resources, extracted on credit/debt, is beyond stupid and makes me want to go apologize to my children, now, and just get it over with... before I eat the dirt sandwich and its too late.
Exxon, however, will NOT think this canal thing is funny OR dumb... it will be all over this brilliant idea like white on rice, as will every Delaware Basin HZ player's seeking a market for associated gas and needing to get rid of some produced water at the same time. Exxon will likely want to take credit for this idea, but y'all just remember, it came from Oily Stuff first.
If they can build the Suez Canal in the Middle East, by God we can build the Permian Canal in West Texas.
Once again, thanks to shaleprofile.com for all the really good data and the tools to use it with. Don't blame them for the dumb (but factual) stuff I come up using their services.