Regardless of the reason, DUC wells generally turn into completed wells. And the inventory of DUC wells suggests that Permian Basin production still has a lot of room to run. At the end of 2013, there were 636 DUC wells in the Permian Basin (when oil production there was 1.4 million BPD). By the end of 2018, with Permian Basin production at 3.8 million BPD, the number of DUC wells had soared to 4,039.
Oil producers have drilled an average of 5,316 wells per year in the Permian over the past five years, but have only completed an average of 4,620 wells per year. If all drilling suddenly ceased in the Permian, there is nearly a year’s worth of drilled inventory that still needs to be completed. That’s a lot of oil waiting to be extracted.
An Enormous Resource
The final piece of the puzzle is the amount of oil that remains to be extracted. In just the Texas part of the Permian, ~30 billion barrels of crude and ~75 trillion cubic feet (Tcf) of natural gas have already been extracted. But a new assessment by the U.S. Geological Survey (USGS) has suggested that there’s still a lot to be extracted.
In 2016, the USGS had estimated that the Wolfcamp shale in the Midland Basin portion of the Texas Permian Basin contains a mean of 20 billion barrels of oil, 16 Tcf of associated natural gas, and 1.6 billion barrels of natural gas liquids (NGLs). This estimate was for undiscovered, technically recoverable resources, and was the largest estimated continuous oil accumulation that USGS had ever assessed in the U.S.
In its most recent report, the USGS has included the Wolfcamp shale and Bone Spring Formation of the Delaware Basin portion of the Permian Basin for the first time, and the estimates are eye-popping. The new estimated mean of undiscovered, technically recoverable resources in the Permian basin are 46.3 billion barrels of oil, 281 Tcf of natural gas (17.5 times higher than the 2016 estimate!), and 19.9 billion barrels of NGLs.
It is important to note that these estimates are of technically recoverable resources, as opposed to proved reserves. The difference is that the latter must be economically recoverable at prevailing prices. That may not be the case for a good portion of these resources, but that can change if oil and natural gas prices rise.
Nevertheless, it’s hard to escape the possibility that 1). Given the three million BPD of crude oil production added in the past decade; 2). The huge inventory of DUC wells; and 3). The enormous size of the resource — it isn’t crazy to think that in a few years the Permian could be out-producing Saudi Arabia’s massive Ghawar oilfield. It would have been crazier in 2007 to suggest that the Permian would be closing in on four million BPD at the end of 2018.
So, never say never — although oil prices and available logistics will have a big impact on how it all pans out.