Wall Street Journal
Second Life for an Old Oil Field

Tuesday, November 19, 2013

Texas' Permian Basin, Where Output Peaked in '70s, Now a Hot Site for Horizontal Drilling

One of Texas' oldest oil fields, in decline for decades, has become one of the hottest places in the country to drill for crude, as energy companies create clusters of wells with layers of horizontal branches.

The Permian Basin—86,000 square miles centered on Midland, Texas—has been pumping oil since the 1920s, though production peaked at about 2 million barrels a day in the early 1970s. For decades, geologists have known that oil could be found in different layers of rock piled up like a stack of geologic pancakes.

But now drillers are starting to tap those layers simultaneously from a single site—and are committing billions of dollars to do so.

Permian oil has grown more modestly, from about 850,000 barrels a day in 2008 to 1.3 million barrels this year. But analysts expect the daily rate will rise more—to as much as 1.9 million barrels per day by 2018 according to Bentek Energy, an energy-market analysis company.

Spending in the Permian Basin has already more than tripled since 2008, from about $6 billion to $18 billion in 2012, according to research firm Wood Mackenzie, and is expected to top $19.8 billion by the end of 2013.

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