Tags: Permian Basin | oil boom | fracking | Bakken Formation

Oil Boom May Just Be Starting in New Mexico's Permian Basin

By    |   Monday, 28 July 2014 06:15 PM

Oil production in New Mexico keeps on booming. Don't expect it to go bust anytime soon.

In fact, some energy experts say the peak still hasn't been reached.

"I think the forecast is great," said Parker Hallam, president and CEO of Crude Energy in Dallas. "I'm excited."

The Permian Basin, located in eastern New Mexico and West Texas, recently has become one of the world's biggest sources for crude oil.

The Bakken Formation in North Dakota, the Eagle Ford "play" in South Texas, and the Permian Basin are each producing more than 1 million barrels of oil per day, with the Permian leading the pack at 1.6 million barrels a day.

Domestic production has grown so large that last month, the International Energy Agency announced the United States has surpassed Russia and even Saudi Arabia in oil production.

A report from the commodities division of Bank of America says daily output in the United States exceeded 11 million barrels in the first quarter of this year.

In New Mexico, field production has doubled in the past three years and is on the verge of surpassing 10 million barrels a month, according to figures from the U.S. Energy Information Administration.

And according to Bernstein Research, the Permian Basin can expect to see a 21 percent increase in spending growth this year.

"I think in the next 10 years, we can expect to see 3 to 3½ million [barrels a day from the Permian Basin]," Hallam told New Mexico Watchdog in a telephone interview. "We could see even more than that."

The reason?

Horizontal drilling, using hydraulic fracturing, commonly called "fracking."

In the past, drillers in the Permian Basin relied on drilling vertically — straight down to get to the crude oil. Horizontal drilling was used more widely in places such as the Bakken and Eagle Ford, but now, the Permian is getting into the game.

In addition, the geology of the Permian Basin makes it a prime source for oil extraction.

Zones in the Permian Basin such as the Wolfcamp, Strawn, Fusselman, Cline, Mississippian, and Atoka possess multiple layers of rock that are sometimes stacked on top of each other, making the area ideal for drilling.

"You may luck into something else because of these stacked formations," said Raye Miller, the president of Regeneration Energy in Artesia, N.M. "That has significantly enhanced the recovery … It is now economical to drill and compete."

All that has led to plenty of action in eastern New Mexico towns like Hobbs and Artesia.