Nearly one third of the United States’ crude already comes from the Permian, making it the largest shale-oil producing region in the country. While numerous studies have been conducted on the Permian’s half-dozen sub-basins and their many overlapping formations, this represents the first comprehensives USGS assessment of continuous resources in Wolfcamp and Bone Spring within the Delaware Basin.
And the findings are truly incredible.
The USGS estimates that over 46 billion barrels of oil, 280 trillion cubic feet of gas, and 20 billion barrels of natural gas liquids are trapped in these low-permeability shale formations. To better understand just how staggering these numbers are, think about this: at the end of 2017, total U.S. proven reserves of crude oil hovered around 40 billion barrels. For natural gas, figures stood around 465 trillion cubic feet (tcf). The new upward revision of Permian resources represents a more than 100% and 65% increase in U.S. oil and gas reserves, respectively, if they can be extracted economically.
It is important to note that the recent USGS survey includes estimates for unproven reserves (estimated resources based on geologic knowledge and theory) and technically recoverable reserves (resources available using current technology and industry practices). While reasonable conclusions can be drawn about the extent of resources in these basins, the approximations do not address future economic profitability. The future prices of hydrocarbons and their economic viability may vary due to environmental regulation, technology, specific geology, and cost of production. But don’t let that detract from the scale of this find.
Still not impressed?
At $50 dollars per barrel (where West Texas Intermediate (WTI) is currently trading following a 35% price drop since October) the Wolfcamp Shale and Bone Spring Formation would be worth a whopping $2.3 trillion. As for natural gas, 280 trillion cubic feet will fetch you $1.1 trillion at today’s prices of $3.75 per million Btu (mmbtu). It won’t solve the national debt problem – which is now nearly $22 trillion – but windfall taxes for the companies operating in these basins (not including the taxes along every step of the oil and gas value chain) would be a boon for state, local, and the national economy. Tax revenues from this mass reserve could help fund our schools, social security, critical infrastructure, and national defense. This is very literally buried treasure.
But unlike your typical buried treasure, the hard part isn’t just finding this stuff, it’s moving it.