WSJ: How the Permian Basin Became North America’s Hottest Oilfield

6/27/2019 11:06AM     

How the Permian Basin Became North America’s Hottest Oilfield

The U.S. has more than doubled its crude output over the last decade. Much of the growth is due to the Permian Basin of West Texas and New Mexico. WSJ traces the hotspot of North America’s crude oil boom, with a look at challenges that producers in the region face.

King Coal Was a Merry Ole Soul, But No Longer: Natural Gas Now Is the #1 U.S. Electricity Generator

The June 24th Energy Information Agency (EIA) Electricity Monthly Update shows that in April Natural Gas was the number one U.S. source of electricity generated as measured by megawatts of output.  It moved ahead of coals in the standings by generating 31.46% of all electricity generated.

The technological revolution in the oil and gas industry has notched up another new first.  

Over the last few years, the U.S. exported more petroleum products than it imported for the first time in 52 years.  Then it became the world's largest petroleum exporter and finally the world's largest oil producer.

The technological revolution.  

Often the amazing technological revolution that has transformed both America's and the world's energy picture is referred to as the Shale Gas Revolution.  This is increasingly a misnomer.  The same innovations have been applied to the Mississippian Limestone formation here in Kansas and the Permian Basin in Texas, to mention but two examples.  The former has been producing oil since 1915, but the revolution has revitalized recovery from a field thought to be largely played out.  The Permian Basis was first developed in the 1930s.  The new techniques are recovering oil as deep as 10,000 feet from strata of various rock types.  The revolution combines computer technology that I can only describe as three dimensional GPS with engineering that allows horizontal drilling a mile or more sideways miles beneath the surface of the earth and with hydraulic fracturing, a technique first used here in Kansas 67 years ago.  Yet few say "high tech" when they talk about about oil and gas.

This could only have happened here in the U.S. where individuals own the mineral rights, where the rule of law still generally prevails, where independent petroleum companies flourish, and where immigration was once encouraged.

A sobering thought:  

If the various immigration laws of the last ninety five years had prevailed before 1920, the revolution's father, George Mitchell, would have been born in bankrupt Greece not Galveston and would not have studied geology at Texas A&M. The Economist put it well: "Few businesspeople have done as much to change the world as George Mitchell." 

What might not have been!

Will This Movie on Fracing Light Your Fire?

Ann McElhinney and Phelim McAleer have directed a new documentary about hydraulic fracturing that gives a very different picture from that portrayed in the Acadamy Award nominated documentary, "Gasland."  McElhinney is a bit of a fiery journalist, perhaps because of the attempt to muzzle the Irish pair (see below.)  Telling an Irishman or Irishwoman to shut up is hazardous.  Here are some things she has to say about what they found in researching "FrackNation: A Journalist's Search for the Fracking Truth:"




She is certainly right that the first hydraulic fracturing was done here in Kansas in 1947.  It was in the Hugoton field in southwest Kansas.  I doubt that that conventional well was in a shale formation since the field is "mostly Permian limestone and dolomite."

Video journalist Phelim McAleer questioned Josh Fox, the producer of the anti-hydraulic fracturing documentary "Gasland," about why he failed to disclose that methane has been present in Colorado water for decades and thus flammable at the tap:



In the New York Post, McAleer wrote last spring, "One of the most dramatic images in 'Gasland' is footage of a resident lighting his tap water with flames shooting out of the faucet.

"As a journalist, I wanted to learn more, so I went to a Q&A with Gasland director Josh Fox. As I questioned him, Fox eventually admitted that he knew people could light their tap water in these areas decades before fracking came on the scene.

"But he did not include the fact in his documentary because, he said, 'It was not relevant.'"

He then went on to tell of Fox's attempts to get the above video removed from YouTube and other internet sites.

Unlike "Gasland" and "Promised Land," Matt Damon's anti-fracing movie FrackNation is not financed by big Hollywood money.   It took a much more democratic route to finance itself.  Christopher Toto tells us "FrackNation, like many independent films of late, went the Kickstarter route to help bring its story to the masses."

According to the director's statement, "'FrackNation' was funded through the crowdsourcing website Kickstarter. The filmmakers raised $212,265 from 3,305 backers on Kickstarter on April 6, 2012. It was one of the most successful documentary campaigns in the history of Kickstarter."

John R. Hays, Jr., an eminent Texas attorney with an extensive practice in the oil and gas industry, tells me that the proper way to shorten "hydraulic fracturing" is "fracing" not "fracking," given industry practice.  I am afraid the industry is losing the spelling war: it is not the geologists and the petroleum engineers who are winning.

U.S. Energy Production on the Rise

7/6/2011: Markets Hub interviews WSJ's Heard on the Street columnist, Liam Denning that energy production in America is on the rise, which is positively affecting the U.S. chemical industry. Natural gas is the good news:

The Government Shuts Down Wind Mills and Shell Takes a FL*NG at Sea

The Wind May Blow, But the Power Does Not Flow

Pipelines and/or transmission are the choke point of energy policy. Getting energy from there to here is a big problem. Wind energy is useless if there is no transmission to get it to market. This summer, the Bonneville Power Authority is periodically disconnecting wind power from its grid. (See "Tilting at Windmills" in the Economist.)  Why?  There is so much excess melt water that the Authority is giving away hydro power for free and even paying utilities the cost of getting that power from there to them.  Unfortunately there is not enough transmission to fully share the Pacific Northwest's bounty with the rest of America.  Hence the idle windmills.    Ludwig von Mises's ghost must be experiencing schadenfreude as it mutters "another triumph for socialist planning!"

Getting Natural Gas from There to Here

Natural Gas coming out of the ground does little good unless it can be captured and transported to markets. So what do you do if you find natural gas way out at sea? Your project is in deep water economically and financially (pun intended) and will thus be dead in the water because you can not get the gas to market.  (Sorry.)

John R. Hays, Jr. is fond of reminding me how high tech the oil and gas industry is.  Shell now gives us more evidence of just high tech it is.  Six hundred engineers from around the world have worked on the world's first floating liquefied natural gas facility (FLNG).  Watch the video below to learn about the development phase of the Prelude FLNG Project to define, design and evaluate plans for the facility.  They built a scale model of the FLNG facility and tested it in tanks in artificial marine conditions to see if it would withstand wind and high waves.  The plan is to capture gas from a field far off of Broome, Western Australia, liquify it at sea, and ship the liquified natural gas (LNG) to markets.

The Future of Natural Gas

Oil prices make headlines; Solar and wind power are sexy, yet natural gas is the real news.

While U.S. oil production has been declining since the 1970s and the peak of world oil production is continually predicted, natural gas looks like the rabbit we are pulling out of the hat.  And the future is paved with shale.

It took companies like Mitchell Energy twenty years to figure out how to extract natural gas from the Barnett shale formation in Texas.  The technology having been mastered, we now realize that there is an abundance of gas in shale formations around the country and the globe.

Interestingly enough the home of the Whiskey Rebellion and the first U.S. oil rig, Pennsylvania, is home to one of the biggest.  The Marcellus shale formation in western Pennsylvania, west Virginia and western New York has been estimated as having natural gas equivalent to the nation's energy needs for twenty years.

Chevron's 4.3 billion Shale Bet

As iStockAnalyst put it, [C]onsider this number: 4.3 billion.That is what Chevron offered to pay for Atlas Energy.  As Bill Wince of Chesapeake Energy points out the big integrated oil companies are used to dealing with huge fields and negotiating with governments. Unlike America, in many countries the state not the landowner owns the mineral rights.   The independents can field an army of land men who track down tittles and negotiate drilling rights.  The Chevrons of the world have decided if they do not have a distinctive competence, they can always buy it. 


Platts tells us, "Chevron's first deal in a US gas shale play dovetails nicely with the
company's plans to increase its proportion of gas production from 31% of total
output currently to 41% in the next seven years," according to Atlas' Indian joint venture partner, Reliance Industries, CEO John Watson who spoke at a Bank of America
Merrill Lynch's Global Energy Conference.

This is Not the Last Big Buy

Platts further reported, "Watson said he expects Chevron's Marcellus Shale production to grow from Atlas' 63,300 Mcf/d to more than 500,000 Mcf/d in the next decade and that, combined with the play's proximity to premium markets in the northeastern US made it fit into Chevron's plans.


"The cost per well in the Marcellus Shale are about half that in other
major shale plays such as the Louisiana's Haynesville and Texas' Eagle Ford
because vertical drilling distances in Appalachia are about half those in
rival plays.


"Atlas wasn't the first shale producer Chevron looked at and it probably
won't be the last, Watson said."

Heard on the Street: IEA's Energy Outlook Forecast 11/9/2010 5:42:06 PM
Forecasting the next quarter is perilous.  Forecasting the next 26 years is both easier and riskier.  Few will remember your forecast after the twenty six years pass and the fundamentals assert themselves over the long run.  Still, you have no idea where in the crazy commodity cycle you will be nor what the value of a dollar will be.

The International Energy Agency's 26-year forecast for the energy industry

The Wall Street Journal's Heard on the Street columnist, Liam Denning, talks to the Journal's Lee Hawkins:




Lee Hawkins and Liam Denning also discuss Chevron's "We Agree" Campaign.