Tag Archives: Formation of the Permian Basin

New Opportunities in Oil: What’s Happening in Eagle Ford?

Late last year, we spent some time discussing the Permian Basin in Texas — specifically the Delaware Basin and the incredible rebound in oil and natural gas production it’s seen over the past few years. This month, we’re digging into the Eagle Ford Shale, the South Texas sibling of West Texas’ Permian.


Formation of the Eagle Ford Shale

Like the Permian Basin — which covers around 75,000 square miles of southeast New Mexico and western Texas — the Eagle Ford Shale was once submerged in the Tobosa Basin, the sea between the Laurasia and Gondwana supercontinents.

As the continents neared each other and the land rose, the area of the Permian remained submerged, thanks to the Hovey Channel, which kept the area connected to the ocean. As the Permian formed around 300 and 250 million years ago, the area that would become the Eagle Ford was still high and dry. It wasn’t until 153 million years later that the Eagle Ford Shale would begin to form.

Why the Recent Rebound?

The Eagle Ford Shale has a unique history, much different than that of its neighboring Permian basins. Those basins, the Delaware Basin, in particular, were impacted by three primary factors: availability, economic policy, and technology.

The United States’ embargo on Arab oil in the 1970s and corresponding crude oil export ban led to a considerable surplus of oil and a drop in crude prices — an inhospitable environment for large drilling operations. More recently, slowly rising oil costs, Congress’ 2015 vote to end the export ban, and advancements in horizontal drilling technology have led to a significant boom in Delaware Basin drilling, particularly for deposits that were unreachable until recently.

In the Eagle Ford, the situation has been somewhat reversed. In 2010, when drilling in the Permian was way down, the Eagle Ford Shale was among the most active drill sites in the United States. And as drilling in the Permian rose, drilling in the Eagle Ford slowed; by the last quarter of last year, there were 25 active Eagle Ford drilling operations.

Land, Oil, & Economics

Economics are the main cause of this contrast. The horizontal drilling opportunities present in the Permian are absent in the Eagle Ford. The ability of a single Permian well to tap multiple oil or gas formations reduces the break-even point for drilling to $30/bbl or less, while the Eagle Ford break-even, due to its lack of horizontally accessible formations, remains at about $50/bbl.

Land leases and production obligations also play a part. Eagle Shale drillers are operating the fewest number of drills required in order to maintain drilling obligations, allowing them to retain their leases and preventing other organizations from taking their own leases and starting wells. Simply put, drillers in this area are sitting tight on their Eagle Ford Shale assets while actively pursuing Permian Basin assets, which, at this moment, are more profitable.

This trend is already starting to reverse, however. While Delaware Basin drilling in the Permian remains strong, more wells are being reactivated in the Eagle Ford Shale. From its low point in fall of last year, the number of active Eagle Ford wells has increased by over 100%. While slow, with only a small handful of rigs coming online every week, the trend is distinct and holding steady.

A major driver of this rebound in the Eagle Ford is also a driver of the Permian rebound: the ever-present threat of peak oil. Though estimates of when we will hit peak oil vary tremendously, it is becoming increasingly clear that we’ll peak sometime in the next generation or two. The inevitability of peak oil — as well as constantly increasing pressure to move toward environmentally friendly and renewable energy sources — drives both an increase in oil drilling and an increase in natural gas drilling.

Southwest Process Controls

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New Opportunities in Oil: The Delaware Basin Bounces Back

The Mid-Continent oil field — stretching from northern Kansas, just shy of Nebraska, south to the bottom of Texas, and from New Mexico to as far east as Arkansas, Louisiana, and Mississippi — was the world’s known largest oil reserve prior to the discovery of Middle Eastern oil.

A complex network of hundreds of fields and pools, the Mid-Continent oil field was first tapped into in 1892 by the famous Norman No. 1 well, spurring the American oil boom of the early 20th century. By the 1950s, much of the Mid-Continent oil field had been depleted.

Formation of the Permian Basin

However, one section of this field, the Permian Basin — named for the Permian geologic time period, 299 million to 251 million years ago — has not only remained productive but has even seen an increase in drilling activity in recent years.

The Permian Basin was originally submerged, part of the marine Tobosa Basin separating the supercontinents Laurasia and Gondwana. Over many years, deposited sediments formed a depression here. Around 323 to 299 million years ago, when the supercontinents Laurasia and Gondwana collided, forming Pangea, faulting and erosion resulted in various sub-basins. As sediment filled these sub-basins, the Permian Basin slowly took shape.

Today the Permian Basin extends across roughly 75,000 square miles of southeastern New Mexico and western Texas. It is made up of three main basins: the Delaware, Midland, and Central basins.

Thanks to the Hovey Channel, which supplied seawater to the Delaware Basin, the Delaware remained submerged well into the Guadalupian period, unlike the Midland Basin, which had been almost completely filled with sediment by the middle of Permian period. As a consequence, the Delaware is deeper and, over the epochs, was able to accumulate more algal, coral, and zooplankton organic material — the foundation of crude oil.

Why the Rebound?

Despite an overall depletion of the Mid-Continent oil field, there has been a notable increase in drilling activity in the Permian over the past 5-10 years, particularly in the Delaware Basin. But why the upsurge and why now? The answer lays in three interconnected factors — technology, economic policy, and availability.

While technologies for slanted and horizontal drilling — directional drilling methods that allow access to previously difficult or impossible-to-reach reservoirs — have existed since the 1930s, they weren’t very reliable or cost effective until the 1970s.

The 1970s, of course, also saw the Arab oil embargo shake the U.S. economy, leading to the crude oil export ban. Intended to reduce the country’s dependence on foreign oil, the ban lead to a glut of domestic crude oil saturating a market of limited demand, leading to great drops in crude prices and subsequent reductions in drilling and extraction.

In mid-December of 2015, Congress voted to end the ban on exporting crude oil. This, plus the availability of new, sophisticated horizontal drilling technologies, is driving the resurgence of Permian Basin drilling. Besides newly opened markets and the ability to reach previously untapped, difficult-to-access reserves, the prospect of peak oil is also increasing drilling in the area.

While experts’ opinions vary on the exact timing of peak oil, it’s now widely accepted that oil production will decline by 2050, leading to a decline in extraction and production. As peak oil nears, there has been a corresponding increase in drilling for natural gas, which is still found in relative abundance in the Permian’s Delaware Basin.

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