The Permian Basin in West Texas is the most active hydrocarbon-producing area in North America, and, even in a low-price environment, it remains among the most favorable areas on the continent to drill of oil, natural gas liquids (NGL) and natural gas, according to a recent report issued by Bentek Energy, a unit of Platts.
In the last three years, oil production in the Permian, which straddles Texas and New Mexico, has jumped 50%, while natural gas production has climbed 30% and NGL output has increased 61%, the report states. Horizontal drilling, new exploration and production techniques, and a multitude of unconventional producing formations have led to a Permian renaissance.
The Permian also is showing greater resilience during the recent drop in drilling in response to falling crude oil, NGL, and natural gas prices. Permian rig count declines have been mainly vertical rigs, rather than horizontal rigs.
"Unlike other US producing basins, the Permian Basin is less exposed to adverse market conditions because of its more favorable production economics as well as its close proximity to major markets," said Ross Wyeno, senior energy analyst at Bentek Energy.
"Bentek currently expects Permian oil production to increase 40% over the next five years," Wyeno said. "However, the Permian is not immune to adverse market conditions. If crude prices fall to less than $40 per barrel for a sustained period, Permian production would be at risk."