In the global energy landscape, the Permian Basin in the United States, with its abundant oil reserves and strong production capacity, has become a key driving force for the US economy and an important guarantee for the country's oil security.
The Permian Basin, also known as the West Texas Basin, is located in the western part of Texas and the southeastern part of New Mexico in the United States. It is a large sedimentary basin that is renowned for its abundant oil production. The basin was formed during the Permian and Triassic periods and was once a sea basin connected to a vast delta, covering three interconnected but distinct subsidence zones: Midland, Delaware, and Marfa, with a total area of approximately 190,000 square kilometers, comparable to that of Hebei Province in China.
Oil was first discovered in the Permian Basin in 1920, and three years later, the Santa Rita No. 1 well gushed industrial oil, marking the beginning of the basin's oil boom. In the 1970s, the basin's oil production reached its peak, with an annual output of 740 million barrels (about 100 million tons), nearly twice that of the Daqing Oilfield at its peak. However, after the 1970s, U.S. oil production peaked and declined year by year, and the Permian Basin was not immune to this trend. At the same time, oil discoveries in the Middle East continued to increase, and the center of world oil production shifted from the Americas to the Middle East, making the relationship between Western countries and the Middle East increasingly complex.
After 2005, the shale revolution brought new vitality to the U.S. oil industry, and the Permian Basin also took advantage of this opportunity to rapidly increase its oil production to the peak level of the 1970s. Since 2007, the basin's oil production has continued to increase, reaching 1.59 million barrels per day before the oil price crash in June 2014. The majority of the increase in U.S. oil drilling operations has been concentrated in the Permian Basin. In March 2017, the basin set a record of over 500 new drilling permits issued in a single month, with the number of new monthly drilling permits increasing by 280% from December 2015 to March 2017. The recovery of North American oil production mainly relies on the Permian Basin, and its current oil production has returned to its peak level.
In recent years, the Permian Basin has become the core engine driving the growth of oil production in the United States. In 2010, the daily oil production of the Permian Basin was approximately 1 million barrels, while the daily oil production of the United States was less than 6 million barrels. However, in the following years, the oil production of the Permian Basin increased significantly, becoming a key driver of the growth in U.S. oil production.
According to research by Rystad Energy, the growth rate of oil production in the Permian Basin of the United States will exceed that of Iraq in the next two years. It is expected that the daily oil production of the Permian Basin (including both conventional and unconventional) will increase by nearly 1 million barrels this year, rising from 4.7 million barrels to 5.6 million barrels, and will further climb to 6.5 million barrels in 2023. Meanwhile, Iraq's daily oil production is expected to increase by about 600,000 barrels this year and by 400,000 barrels in 2023. Since 2020, the annual oil production of the Permian Basin has exceeded that of Iraq, and the gap between the two is expected to widen in the next two years. In 2022, the oil production of the Permian Basin will exceed the combined production of Norway and Brazil (approximately 4.8 million barrels per day). By 2023, the Permian Basin is expected to account for about half of the U.S. oil production (13.2 million barrels per day).
Around 2005, the emergence of shale oil and the application of hydraulic fracturing technology significantly reduced the cost of oil extraction in the Permian Basin. Scott Sheffield, the president of Pioneer Natural Resources, once said, "The United States has the world's lowest-cost oil reserves!" Even when the oil price dropped to around $25 per barrel, American oil producers could still make profits, while previously the production cost of oil in the United States was around $36 per barrel. This gave the United States the confidence to compete with Saudi Arabia and Russia in the oil field.
The cost of oil extraction in Russia is $17 per barrel, and that in Saudi Arabia is the lowest in the world, less than $3 per barrel. The main reason for the low cost of oil extraction in the Permian Basin is the rich oil content in the region, easy extraction, and continuous progress in extraction technology. The main oil-producing layers in the basin are numerous, thick, and have high oil content. Vertically, there are more than 10 target layers such as Spraberry, Wolfcamp, and BoneSpring, and the Wolfcamp layer alone contains multiple oil-producing layers such as Wolfcamp A, Wolfcamp B, Wolfcamp C, and Wolfcamp D. In terms of thickness, the oil-producing layers in the Permian Basin reach 1,300 to 1,800 feet, while those in the Bakken and Eagle Ford oil fields are about 10 to 120 feet and 150 to 300 feet, respectively.
The potential exploitable oil layers in the Permian Basin are 47,000 miles, with a technical recoverable crude oil reserve of 24.6 billion barrels, 79 trillion cubic feet of natural gas, and 6.3 billion barrels of NGL. Among them, the Spraberry and Wolfcamp layers have the largest technical recoverable reserves. In May 2017, exploration showed that the recoverable reserves in the Permian Basin reached 4.2 billion barrels of crude oil and 310 million tons of natural gas. According to a report by the U.S. Geological Survey in November 2016, the technical recoverable resources of the Wolfcamp shale layer in the Midland sub-basin of the Permian Basin alone reached 20 billion barrels of crude oil, 1.6 trillion cubic feet of natural gas, and 1.6 billion barrels of natural gas condensate. According to estimates by Wood Mackenzie and PXD, the remaining recoverable quantity in the Permian Basin is as high as 150 billion barrels. A shale oil industry expert said that it will be at least 25 years before the oil wells in the Permian Basin of the United States start to deplete.
In 2005, the shale oil and gas revolution and the emergence of horizontal fracturing technology rejuvenated the Permian Basin, enabling the extraction of oil previously trapped in shale and significantly reducing the cost of extraction. As a result, crude oil production soared once again. With the increase in domestic crude oil production, the United States began to increase its oil exports, encroaching on the market share of other oil-exporting countries. By November 2018, the United States' oil production had reached 11.7 million barrels per day, surpassing Saudi Arabia's 10.63 million barrels per day and Russia's 11.41 million barrels per day, making it the world's largest oil producer. By 2019, the United States had surpassed Saudi Arabia to become the world's largest crude oil exporter, breaking free from its reliance on imported oil.
