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How the Permian Basin Became North America's Hottest Oilfield | WSJ - YouTube
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- [Narrator] This is a map
of known sediment basins
[4]
in the United States.
[5]
Many of these regions hold deposits
[8]
of natural gas and crude oil.
[10]
Now, this map compares how much
crude oil each basin holds.
[15]
Of the many formations
scattered across the country,
[18]
one reigns supreme.
[19]
- With our new estimates
of the Permian Basin,
[23]
that resource estimate is on par with
[26]
what it's been estimated
in the Middle East.
[29]
- [Narrator] The first
oil well was drilled
[31]
in the Permian Basin
of Texas and New Mexico
[33]
roughly a century ago, and
now the Basin produces more
[37]
than four million barrels of
crude oil on a daily basis.
[41]
Surging Permian production
has helped to make the US
[44]
the top oil producer in the world.
[47]
That growth hasn't come
without challenges.
[51]
Let's unravel how this strip of desert
[53]
propelled America's ascent
to crude oil superpower.
[57]
The Permian Basin's first
commercial operations began
[60]
at Mitchell County in Big Lake, Texas.
[64]
The region's resources
soon proved critical.
[67]
Data collected in the 20th century
[69]
show wells in the Permian yielding
[71]
10 to 22% of national
crude oil production.
[75]
That oil was key in moments
of international conflict.
[78]
Crude was a key commodity in World War II.
[81]
Refined fuels stemming from the Gulf Coast
[83]
powered engines and
aided in the manufacture
[86]
of everything from roads
to uniforms and bombs,
[89]
and during the global oil crisis of 1973,
[92]
oil from the Permian
helped stabilize US markets
[95]
as OPEC nations cut supply in an embargo.
[100]
For years, there was steady
growth in the region,
[102]
but following the 1970s energy
crisis, oil prices dropped
[106]
and drilling became far less profitable.
[109]
Production dwindled.
[111]
Meanwhile, new extraction
methods developed incrementally.
[115]
Hydraulic fracturing,
also known as fracking,
[118]
was invented in the late 1940s,
[120]
but decades would pass
before it was used widely.
[123]
In the modern version of
this process, producers drill
[126]
through several layers
of the Earth's crust.
[128]
Then, they blast a mixture
of water, sand and chemicals
[131]
through the rock at a high pressure.
[134]
This fractures the rock and
unlocks oil from the crust.
[137]
For many years, producers used fracking
[140]
to maximize production from
conventional resources,
[143]
large reservoirs of crude oil
[145]
that were easy to draw to the surface.
[147]
But, a breakthrough in
the nearby Barnett Shale
[150]
unlocked vast new reserves
in shale rock formations.
[153]
In 1998, an engineer at Mitchell Energy
[156]
used a dramatically higher ratio of water
[158]
to chemicals and sand to
blast through sediment.
[161]
The new method made it
possible to extract resources
[164]
that weren't previously
commercially viable.
[167]
While fracking helped producers
recover every drop possible,
[170]
new drilling technologies
expanded their reach
[173]
especially horizontal drilling.
[174]
It became common in the
Permian in the 2000s.
[178]
The advent of horizontal drilling meant
[180]
that producers could
target multiple formations
[182]
from a single site at the surface.
[184]
These wells can sometimes
stretch for miles.
[187]
Fracking and horizontal drilling
are particularly effective
[190]
for the Basin's geology.
[192]
The Permian's Western
subbasin, the Delaware,
[195]
has more depth than other
parts according to the USGS.
[199]
- Because they are so
thick, industry is able
[203]
to put in multiple wells
within that stack of units
[206]
and drill multiple
horizons to produce oil,
[210]
and that is really what's
unique about that area.
[214]
- [Narrator] The Permian
has significant deposits
[216]
of shale rock, and the
combination of fracking
[218]
and horizontal drilling in the 2000s
[220]
made the tight oil in shale recoverable.
[224]
This combination set the
stage for the shale revolution
[227]
which picked up steam in the 2010s.
[230]
This put the Basin at the center
[231]
of a crude oil renaissance in America.
[234]
The national production rate,
[235]
which had dwindled for
decades, mounted a turnaround.
[239]
Since the mid-aughts, the
national crude production rate
[242]
has mostly climbed upward on
the strength of the Permian
[244]
save for a short decline
that began in 2015.
[248]
The year prior, US crude
prices plunged 50%.
[252]
Many producers in the Basin
scaled back production
[255]
to prevent further losses, but
the producers that survived
[258]
were in position to drive
the Permian to new heights.
[262]
Moving ahead to 2018, the
United States surpassed
[265]
Saudi Arabia and Russia to
become the world's leading
[268]
oil producer, but this production
brought new challenges.
[273]
First is the issue of well placement.
[276]
Here's an oil field outside
of Odessa, Texas in 2003.
[279]
By 2018, these fields were
brimming with well pads.
[283]
That can put a damper on production rates.
[286]
- Producers in recent years
have tried to space wells
[291]
more closely together to maximize
the amount of oil and gas
[296]
that they are able to
get out of their acreage.
[299]
They found, in some instances, that
[302]
that hurts the output of individual wells.
[306]
Producers are kind of
going back and increasing
[310]
the distance between the
wells that they drill.
[313]
The result is that they
have fewer overall locations
[317]
to drill the acreage that they have.
[321]
- [Narrator] And the
problems don't end there.
[323]
The pipelines that run through the Permian
[325]
have had a capacity issue.
[327]
In recent years, oil
production in the Permian
[329]
has increased faster
than pipeline capacity
[332]
leading to bottlenecks
and discounted prices,
[334]
and when capacity isn't sufficient,
[336]
producers are instead left
to transport resources
[339]
by rail or truck, or they
have to slow down production.
[343]
New pipelines are scheduled
to come on line in late 2019
[346]
which could help
alleviate price discounts.
[348]
But, the energy producers
in the Permian can't escape
[352]
their fraught connection to
the climate and environment.
[356]
Consider the issue of flaring.
[358]
The natural gas flowing from the Permian
[360]
is mostly a byproduct.
[362]
When producers drill for oil,
[364]
they also unearth natural
gas which is less profitable.
[367]
Facing limited profitability
and pipeline capacity issues,
[371]
many drillers choose to
burn their fuel onsite.
[374]
Flaring in the Permian
is at all-time highs
[376]
according to Rystad Energy.
[378]
- That's a concern, first of all,
[380]
because it's a colossal waste of energy,
[382]
but more so, they can cause
local air quality issues
[386]
if they're not burning properly,
[387]
and we're releasing a
bunch of greenhouse gas
[390]
into the air as carbon
dioxide that we're wasting,
[393]
so flaring benefits nobody.
[394]
The only thing that it's better than is
[396]
releasing the methane
into the air directly.
[400]
- [Narrator] The string of
boom towns and man camps
[402]
along the Permian Basin represent
[404]
the heartbeat of American energy.
[406]
All eyes are on the
region as the US fights
[409]
to maintain its position
atop global oil markets.
[412]
(orchestral music)
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