This Week’s Peak Permian Prediction? Why “Peak Permian” is almost an oxymoron.

Guest “déjà vu all over again” by David Middleton

Midwest Capital Advisers

Will The Permian Peak This Year?

By Anes Alic – Jan 16, 2020

Ticker: Just a few years back, the U.S. shale industry was drowning in a sea of hubris, with pompous  experts making outrageous claims such as the Permian Shale is a near-infinite resource thanks to the basin’s explosive production growth in the latter half of the last decade.


To be fair, Mr. Waterous seems to have vested interests in the shale saga considering that his PE firm has been picking up distressed energy assets on the cheap.


Certainly not everyone shares Waterous’ “Peak Permian in 2020” view, with BloombergNEF analyst Tai Liu saying the shale oil pessimism is overdone. 

Indeed, the general consensus is that the US shale industry still has some room to run, with production in the current year expected to continue to rise, albeit at a slower pace.

Nevertheless, it’s also noteworthy that Waterous is hardly alone in his gloomy shale outlook.


Anes Alic is a veteran investigative journalist and writer whose work in everything from anti-terrorism and high-level politics, to industry, investing and IT has won him international accolades. He is the former director of ISA Intel global due diligence operations. He is based in the United States.

Oil Price Dot Com

The article was mostly a rehash of last week’s Peak Permian prediction; but at least included some contrary commentary.

Before reading the contrary commentary, I was all set to mercilessly ridicule this intrepid investigative journalist for this mindbogglingly idiotic comment:

Just a few years back, the U.S. shale industry was drowning in a sea of hubris, with pompous  experts making outrageous claims such as the Permian Shale is a near-infinite resource thanks to the basin’s explosive production growth in the latter half of the last decade.

Instead of mercilessly ridiculing the intrepid investigative journalist, I’ll just explain, at great length, why his comment was mindbogglingly idiotic

He is referring to a 2017 Mark Perry AEI blog post about a Forbes interview of Drilling Info’s Allen Gilmer. The “near-infinite resource” comment had nothing to to with “the basin’s explosive production growth in the latter half of the last decade.” At the time it was written, the Permian Basin was producing 2.5 million barrels of oil per day (bbl/d), up from 1 million bbl/d in 2011. As of January 2020, it’s producing over 4.8 million bbl/d. Most of the “explosive production growth” occurred after Mr. Gilmer described the Permian Basin as a “near infinite resource”… because that’s what it is.

“We should view the Permian Basin as a permanent resource,” he says, “The Permian is best viewed as a near infinite resource – we will never produce the last drop of economic oil from the Basin.”


According to EIA estimates, the Permian Basin is now producing more than 2.5 million barrels of oil per day (see top chart), which is an annual rate of nearly 1 billion barrels of oil. If Gilmer’s estimate is correct that the Permian Basin holds an additional half a trillion barrels of recoverable oil, that would be a 500-year supply of oil at the current production level, and at 2 trillion barrels, a 2,000 year supply! And if that’s an accurate forecast of Permian Basin reserves, Gilmer’s description of the Permian Basin as a “permanent, near infinite resource” makes perfect sense because the probability is pretty close to zero that we’ll be using fossil fuels even 100 years from now, much less 500 years or 2,000 years in the future.

Mark Perry, AEI

Investor sentiment has nothing to do with the vastness of the Permian Basin resource… Nor does it have anything to do with whether or not the growth of Permian Basin oil production slows, plateaus or even briefly declines in 2020. This is exclusively driven by oil prices, geology and technology. The geology and technology present no barriers to Permian Basin oil production rising to 9 million bbl/d over the next few years.

The only thing that can slow this down is a persistently low oil price.

This Texas area is expected to double oil output to 8 million barrels in just four years, boosting US exports
Patti Domm


“There’s a lot of shale capacity being prepared. There’s a lot of pipeline capacity. We’re going to triple pipelines going into the market from 3 to 9 million in three years, from last year to late 2021,” said Francisco Blanch, head of commodities and derivatives at Bank of America Merrill Lynch.


Citigroup energy analyst Eric Lee said Permian output at just under 4 million barrels a day is up about 1 million barrels from a year ago and should be a million more, or 5 million a day, a year from now, in early 2020. The Permian has benefited from consistent improvements in technology, which increasingly have been capable of extracting more oil from the shale formation.

“We’re happy to look out to 2023, when it gets to 8 million. … They figured out how to access it at very low break-evens, like $30/$40. … There are more layers below it. It’s hard to know what those are going to mean, break-even-wise,” said Lee. His estimates depend on the price of crude and world oil demand. Breakeven is the price a producer of a barrel of oil needs to recover expenses, or where a producer breaks even.



The Permian Basin is fracking YUGE!

  • The Permian Basin is often mistakenly referred to as an oil field. It is home to more than 7,000 oil fields.
  • The Permian Basin is compared to other “shale” oil plays, like the Eagle Ford. However, it is home to more than a dozen oil plays. These are often stacked. The Permian Basin is like a dozen Eagle Ford plays or a dozen Bakken plays stacked on top of one another.
  • The Permian Basin is actually a collection of three basins (Delaware, Midland and Val Verde) and several other major tectonic features. It is a Super Basin.
Figure 1. Major “shale” plays of the contiguous United States. (EIA)
Figure 2. Zoomed in on Texas.

The major plays of the Permian Basin are “stacked.” Finding stacked pay is like getting a pony for Christmas. Finding stacked plays is like getting a herd of Unicorn ponies for Christmas.

Figure 3. Schematic cross-section of the Permian Basin, click to enlarge. (SEG Wiki)

The three major tectonic features from west to east are:

  1. Delaware Basin
  2. Central Basin Platform
  3. Midland Basin
Figure 4. Major tectonic features of the Permian Basin, click to enlarge. (EIA)

Why “Peak Permian” is almost an oxymoron

As I mentioned earlier, the Permian Basin is akin to a dozen Eagle Fords or Bakkens. The Wolfcamp/Bone Spring play, by itself, is bigger than the Eagle Ford and Bakken/Three Forks combined… And the Permian Basin is still growing.

This is from the EIA’s 2018 proved reserves report, published in December 2019:

Figure 5. Crude oil production and proved reserves from selected shale plays. (EIA)
Zoomed in on Wolfcamp/Bone Spring, Bakken/Three Forks and Eagle Ford.

Year-end 2018:

Million Barrels
2018 Production 2018 Proved Reserves
Wolfcamp/Bone Spring                           922                                 11,096
Bakken/Three Forks                           458                                   5,862
Eagle Ford                           449                                   4,734
Bakken + Eagle Ford                           907                                 10,596

The Eagle Ford may have hit peak production in 2015, although production has somewhat recovered from the 2014-2016 price crash.

Figure 6. Eagle Ford oil production and rig productivity. (EIA)
Figure 7. Eagle Ford and Texas crude oil production at same scale. (EIA)

While it’s quite possible that higher oil prices might lead to Eagle Ford production exceeding its 2015 peak at some point in the future, let’s assume that 2015 was the Eagle Ford’s Hubbert peak. The Eagle Ford climbed from about 100,000 bbl/d to nearly 1.8 million bbl/d in just four years. The Permian Basin climbed from 1 million bbl/d to nearly 5 million bbl/d in nine years.

Figure 8. Permian Basin oil production and rig productivity. (EIA)
Figure 9. Permian Basin and Texas crude oil production at same scale. (EIA)
Million Barrels
2018 Proved Reserves
Permian Basin (approx.)                                16,816
Eagle Ford                                  4,734

The 2018 proved reserves of the Permian Basin were 3.5 times that of the Eagle Ford. Assuming a similar Hubbert-like curve for the Permian Basin, it should take about 14 years for the Permian to reach peak production. This is very much inline with reaching 8-9 million bbl/d over the next 5 years. Of course, this assumes that we don’t find something that we didn’t even know to look for yesterday and that there are no major technological breakthroughs. If the Permian Basin is actually 12 times the size of the Eagle Ford, Peak Permian won’t occur until about 2050… It might as well be an infinite resource. Peak oil is simply the maximum production rate achieved in a reservoir, field, play, basin, etc. It’s a real thing and it’s pretty well irrelevant.

Peak Permian is like the the truth in the X-Files. It’s “out there” somewhere.

There must be a pony in there somewhere!

The Pony Joke.

“Over lunch today I asked Ed Meese about one of Reagan’s favorite jokes. ‘The pony joke?’ Meese replied. ‘Sure I remember it. If I heard him tell it once, I heard him tell it a thousand times.’”

“The joke concerns twin boys of five or six. Worried that the boys had developed extreme personalities – one was a total pessimist, the other a total optimist – their parents took them to a psychiatrist.”

“First the psychiatrist treated the pessimist. Trying to brighten his outlook, the psychiatrist took him to a room piled to the ceiling with brand-new toys. But instead of yelping with delight, the little boy burst into tears. ‘What’s the matter?’ the psychiatrist asked, baffled. ‘Don’t you want to play with any of the toys?’ ‘Yes,’ the little boy bawled, ‘but if I did I’d only break them.’”

“Next the psychiatrist treated the optimist. Trying to dampen his out look, the psychiatrist took him to a room piled to the ceiling with horse manure. But instead of wrinkling his nose in disgust, the optimist emitted just the yelp of delight the psychiatrist had been hoping to hear from his brother, the pessimist. Then he clambered to the top of the pile, dropped to his knees, and began gleefully digging out scoop after scoop with his bare hands. ‘What do you think you’re doing?’ the psychiatrist asked, just as baffled by the optimist as he had been by the pessimist. ‘With all this manure,’ the little boy replied, beaming, ‘there must be a pony in here somewhere!’”

– excerpted from How Ronald Reagan Changed My Life by Peter Robinson

The Monday Morning Memo

The version of the joke I remember, or maybe just made up, is that little Johnny (if it isn’t Boudreaux & Thibodeaux, it’s always little Johnny) was an eternal optimist (destined to become a petroleum geologist). Despite the fact that he lost his father and his mother married a mean old SOB, he remained an eternal optimist. The mean old SOB stepfather, Joe Biden if I remember correctly, hated little Johnny’s eternal optimism… So one Christmas Eve, he dumped a YUGE pile of horst schist under the tree. The next morning, Joe was shocked to see little Johnny gleefully dive into the pile of horst schist as if he was digging for treasure. Joe said, “What the hell are you so happy about?” Johnny replied, “With all of this horst schist, there must be a pony in there somewhere!”

One of my favorite things to do is to tear apart old oil fields, looking for what the previous operators missed. Whenever, I have been assigned an old field that seemed to be on its last legs, I always say, “There must be a pony in there somewhere!” And there usually is.

About the author of this WUWT post

In case you don’t already know, or haven’t figured it out, I have been a geologist/geophysicist in the oil & gas industry since 1981.

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January 29, 2020 6:31 pm

One thing other than price can hurt production: a liberal president.

Martin C
Reply to  David Middleton
January 29, 2020 7:48 pm

David, I am curious about how ANWR , and estimates of its size, as compared to the Permian (and all other reserves). Is it still something to explore ?

. . or maybe not for another 50 years at this point . . .? Just curious.

And I think ALL of your post are wonderful ! Such good information to learn about.

Clyde Spencer
Reply to  David Middleton
January 29, 2020 8:17 pm

Many liberals have crowed about how well the petroleum industry did during Obama’s tenure. My remark is always that it did so despite Obama severely restricting drilling on public lands.

Jay Sport
Reply to  David Middleton
January 30, 2020 8:33 am


“His malfeasance was most evident where I work, the Gulf of Mexico.”

How so, if you do not mind me asking. Thanks.

tsk tsk
Reply to  David Middleton
January 29, 2020 9:11 pm

But they do have out sized control over pipelines, and the EPA has been used as a royal decree arbitrarily powerful regulatory body for years. LAG is right to worry. The next Barry may not be able to completely ban frac’ing, but xe can certainly put a huge damper on it.

Reply to  David Middleton
January 29, 2020 10:08 pm

“A president, liberal or otherwise, has no control over privately and state owned mineral leases… And his/her control over federal leases is constrained by law.”

I don’t agree, regulation can change everything, who controls the congress can change everything. Propaganda can change everything.

Sam Pyeatte
Reply to  David Middleton
January 30, 2020 4:48 pm

We will never run out of oil and natural gas. We will probably reach a time when we will not need oil and gas for fuel, but we will still use the hydrocarbon molecule for the chemical industry at least. Off planet sources of methane will someday be accessible.

nw sage
Reply to  LAG
January 29, 2020 7:17 pm

Only the law of Supply and Demand applies here. Oil will be produced until it cannot be delivered at a price which will pay the expenses of getting it out and delivered. Competition will insure that the most efficient ways of drilling/pumping are used. No more, no less.

Rod Evans
Reply to  nw sage
January 30, 2020 1:37 am

Do not be complacent!! The COGS (Constantly Offended Green Socialists) that ground the nuclear power industry into dust, based on nothing more than over hyped environmental concerns about waste, can apply the same strategy to grind the oil industry to dust. They will claim pollution of the air from fossil fuels must be stopped. Sound familiar?
Their play will be, no country has the right to impact other countries/regions with atmospheric pollution. The UN is seeking and becoming the quasi world power by applying its “care for all, allegiance to none” principle. That mindset is what the COGS or Marxists in old money, have developed and refined to advance their total control of all things.
The old rules of capitalism, based on supply and demand are being denigrated and denied, by the COGS, as the ultimate sensible arbiter of commerce. The Green New Deal wants all commerce that is simply based on demand, stopped.
I repeat, do not be complacent.

Reply to  nw sage
January 30, 2020 12:17 pm

nw sage

You seem to make sense, but reality is different than your economic theory

Overall, the U.S. shale oil and gas industry has not been a profitable industry.

While the production of new oil and gas may seem like a great success now, in time we may look back at the industry as a huge “malinvestment”, spurred on by unusually low interest rates and “easy” credit. › wiki › Malinvestment

The bankruptcies exploded in 2016, and are happening again.

As a subset of the entire US industry, the Permian area has done a huge amount of flaring natural gas, lacking pipeline capacity to move gas to where it is needed, and now the price of natural gas is so low, that even with new pipelines this year and next, lots of flaring will continue.

The US shale oil industry is becoming a financial disaster — the production of oil and gas MUST BE compared with the huge, and growing, losses to stockholders, bondholders and banks.

I had two articles on my climate science blog that cover the Permian natural gas flaring, and the financial problems of the entire industry, both of which are not properly covered in this article:

January 29, 2020 6:34 pm

I can remember when, because of the oil sands, Canadians were the blue eyed Arabs of the north. That sure changed. Now, eastern Canada gets a pile of oil from the ‘States. link

Joel O'Bryan
Reply to  David Middleton
January 29, 2020 8:27 pm

The Alberta Tar Sands operators willcontinue to innovate and find ways to reduce costs in ways we don’t imagine now to produce a cometitive product… just as the shale oil frackers did when the Saudis tried to put them out of business 5 years ago. Competition works when the government stays out of the way of picking winners and losers.

I think the Obama Maladmin thought the Saudis would succeed in putting the shale fracking out of business and simply stayed out of the way. The next Dem Executive Admin may not be as naive (read: stupid) as Obama.

Reply to  Joel O'Bryan
January 29, 2020 11:29 pm

You really can’t predict technological breakthroughs. It’s maybe the defining force of our current civilization. It’s certainly the thing that makes Malthus wrong.

Robert W Turner
Reply to  Joel O'Bryan
January 30, 2020 10:19 am

I’m beginning to think there may not be another Dem admin for a very long time, if at all.

Jay Sport
Reply to  Robert W Turner
January 30, 2020 12:53 pm

Robert W Turner

“I’m beginning to think there may not be another Dem admin for a very long time, if at all.”

I hope you are right, but fear that you are wrong.

Reply to  Robert W Turner
February 2, 2020 6:01 pm

As long as illegals can pour over the border three are very good chances of Democrats getting the in power.

Reply to  commieBob
January 29, 2020 10:23 pm

Interprovincial Pipeline( Now Enbridge) Line 9, from Sarnia to Montreal went into service in 1976, to let Refineries in Quebec (and Maritimes) have access to Canadian crude at the time when Trudeau Sr wanted a made in Canada oil price. Officially, the NEP (Trudeau Sr notorious National Energy Program) started in 1980, but the actual price meddling started earlier if I recall correctly.
Prior to 1976, Montreal refineries ran foreign crude (imported via Portland to Montreal P/L ). Originally Golden Eagle, then Ultramar, now Valero owned refinery at Levis (Quebec City) has only had crude delivered by vessel.

In 1974, Canada inaugurated its first system for pricing oil, with three objectives: to regulate prices of domestic crude oil through federal-provincial agreements, to subsidize imported oil so that consumers in eastern Canada would enjoy lower prices, and to control prices and quantities of crude oil and products in the export market

Sometime in mid-late 90’s, I don’t remember the exact year, Line 9 was reversed to send foreign Light crude imported to Montreal, via the Portland to Montreal Pipeline, on to Ontario refineries. This was substantially in response to declining availability of Canadian conventional Light crude and also because with dismantling of NEP, Canadian light crude also fed US Mid-continent refineries.

In 2015 the Line was reversed again (after long and ridiculous opposition from know nothing environmentalists. This, of all projects should have been a very simple decision). Logistics had changed substantially because of rise in Heavy Can crude, and Light US crude from Bakken. Also Pipeline Capacity as you know has been a big and ongoing problem to get the various crude grades from sources to refineries that can best utilize them. The pipeline capacity issues have resulted in huge discounts to producers for volumes caught behind the pipe (and high Refining Margins for Refiners who do have access to the discounted crude)
Valero complained and rightly so about delays to Line 9 reversal as they had arranged to charter ships to get crude from Montreal to Levis (Quebec City).

Quebec refineries, Suncor at Montreal, and Valero at Quebec City (Levis) still run relatively lighter slates I believe. Valero used to have a strategy to run what are referred to as high TAN (Total Acid Number) crudes. There are some crudes although quite Light and low Sulfur, that have elevated naphthenic acid levels (which is a corrosion issue). Such crudes tend to be discounted compared to other crudes of similar density.

Line 9B Reversal and Line 9 Capacity Expansion Project
On December 1, 2015, Enbridge reversed a 639 km-long section of Line 9 from North Westover to Montreal (Line 9B) in an eastward direction to allow for discounted western Canadian crude, which can be sourced from a number of locations in Alberta, Saskatchewan, Manitoba, and the Bakken region to access Quebec refining markets.

US Mid continent refineries used to import Foreign Light crude via the LOOP (Louisiana Offshore Oil Port) and up the Capline (to hub at Patoka Illinois).
Chicap P/L goes from there to near Chicago.

This Is It – Owners Commit to Capline Reversal, Diamond Expansion/Extension
Thursday, 08/15/2019
Well, it’s finally going to happen! Without major fanfare, Plains All American and Marathon Petroleum announced earlier this month that they have sanctioned the reversal of the 40-inch-diameter Capline crude oil pipeline
We’ve been blogging about a prospective Capline turnaround since 2012 (in Draggin’ the Capline), when we noted that crude oil flows on the 632-mile pipeline had been declining precipitously, and were down to only 14% of the line’s 1.2-MMb/d capacity. The reason, as we said in Livin’ on the Edge, was that Midwest refineries connected to the Patoka hub in southern Illinois had gained access to the increasing volumes of crude available from Western Canada and the Bakken — they simply didn’t need Capline’s northbound flows as much as they used to.

Capline reversal should be another positive step in debottlenecking the system

January 29, 2020 6:45 pm

Great article. It seems like the name “Permian” is most appropriate.

Joel O'Bryan
Reply to  David Middleton
January 29, 2020 8:33 pm

I just drove across that again last night. The gas flares sprinkled to the horizon were quite impressive set against that setting crescent moon.

O/T but relevant: there’s alway a really bad, very strong H2S smell at mile post 302 on I-10 past Ozona on the trip to Ft Stockton. Been there for at least 5 years. I always wonder how that producer gets away with that. So strong it has almost made me sick a time or two and I have strong stomach/nose. I just press the gas pedal down a little harder to get past that spot a bit quicker.

Reply to  Joel O'Bryan
January 29, 2020 10:58 pm

The local community probably supports the industry. In Alberta, here was the case of Wiebo Ludwig who made the case that he, his family, and their livestock, were being poisoned by sour gas wells. He was unsuccessful in getting the authorities to act in spite of, or maybe because of, his high profile complaints.

Ludwig was harassed by his neighbors and this led to the death of a trespasser.

Robert of Texas
Reply to  David Middleton
January 30, 2020 11:35 am

Can’t smell? H2S has a strong smell…or did I misunderstand your remark?

Reply to  Joel O'Bryan
January 30, 2020 4:26 am

… very strong H2S smell at mile post 302 on I-10 past Ozona on the trip to Ft Stockton. …

H2S is very toxic and is considered dangerous to life and health at levels above 100ppm, but the odor is noticeable at a few parts per billion. If that leak is really H2S it should be investigated immediately.

H2S oxidizes into sulfur dioxide (SO2), and has a different, pungent smell. But it is also toxic at levels above 100ppm.

SO2 can be easily remotely sensed by observing UV lines of reflected sunlight through spectrometers (same as used for observing ozone and NO2 levels).

H2S seems to be more difficult to observe by remote sensors. Some commercial H2S detectors operate by scrubbing out SO2 and then oxidizing the H2S to SO2, as a proxy.

Looking at satellite remote SO2 sensors ( you can see that SO2 levels in West Texas are relatively low compared to the whole Eastern USA, for example.,37.300,-96.328,4,i:gh

By comparison, SO2 levels in China and Russia are much higher. Chinese levels were typically in the hundreds of μg per cubic meter until this week. Looks like they have shut down a lot of their sulfur emitters, but still a lot worse than other Asian countries. [left-click to to bring up moveable ‘picker’ to show concentration at cursor]

The mining operations in Norilsk have sharply increased recently, and now SO2 emissions in Norilsk are above 1000 μg per cubic meter!!,69.238,89.436,6,i:gh

The worst SO2 emitter in NH appears to be the Thompson nickel mining in Manitoba, with readings up to 180 μg per cubic meter,56.977,-98.599,5,i:gh

So, overall, West Texas looks very tame in comparison, with SO2 readings less than 1 μg per cubic meter

[NOTE: “μg per cubic meter” is not the same measure as “ppm”. A cubic meter of air weighs about 1.3kg at sealevel, so roughly convert μg to ppm by dividing by 1000. (That would make Norilsk SO2 about 1 ppm or so. Unpleasant but not toxic.]

Reply to  Johanus
January 30, 2020 5:16 am

I forgot to include the link to Chinese SO2 emissions:,35.651,114.756,4,i:gh

Actually, now it looks almost “normal”, with readings above 100 μg per cubic meter. Did I misread earlier, or did the SO2 production suddenly ramp up again? Hmm.

Reply to  Johanus
January 30, 2020 5:15 pm

I’d use a trusty Draeger tube for H2S detection, it contains lead acetate that turns black from H2S.

I actually like the smell of ppb levels of H2S, it’s kind of sweet and after dinner the body emits a reminder. It get’s smelly very rapidly. It’s interesting that H2S can put animals into a state of suspended animation.

SO2 produces an asthmatic response in me. Wines preserved with sulfites make me sneeze.

Reply to  Joel O'Bryan
January 30, 2020 7:23 am

Probably SO2 you smell.

Reply to  Joel O'Bryan
January 30, 2020 10:20 am

… at mile post 302 on I-10 …

I was curious, what could be at that milepost? So, using Google Maps Street View, I ‘drove’ down I-10 from Ozona to that milepost. Take a look, on a computer (I don’t think SV works on a phone):,+Texas+76943/Fort+Stockton,+TX+79735/@30.8884575,-102.2083363,2832m/data=!3m1!1e3!4m14!4m13!1m5!1m1!1s0x86f713c2d3002219:0x47d0019c6ac71610!2m2!1d-101.2013819!2d30.7022249!1m5!1m1!1s0x86f07c20e88d6ac5:0x8b89ea870c3ff014!2m2!1d-102.8793222!2d30.8940431!3e0

Looks like a small network of a dozen or so drilling pads joined by dirt roads. Some vehicles parked there (map dated 2020), so apparently not abandoned.

Do you think some ‘Permian’ sulfur gas might be coming from there?

Reply to  Johanus
January 31, 2020 3:33 am

“Do you think some ‘Permian’ sulfur gas might be coming from there?”

Answering my own question. I think I found the source of the H2S. Located at the edge of the I-10 roadway, you can see rusty pump jack and storage containers a few meters away from the mile post 302 sign.,-102.1812506,3a,52.8y,328.95h,95.68t/data=!3m6!1e1!3m4!1s9mtIWbXW4eROm8F0j4G_Cg!2e0!7i16384!8i8192

What is the tall dark brown cylinder with a chimney pipe? Looks like some kind of “cooker”.

January 29, 2020 7:27 pm

“Peak oil” has always been about stop using it either because it was bad for you or reliance on it was bad because the advantages will end tomorrow and then will we be. Wrong on all accounts.

Vangel Vesovski
January 29, 2020 7:32 pm

Sorry but the economics of shale does not work. There is clearly lots of oil around in shale. The problem is that shale oil has a similar problem to solar energy. The energy is too diffuse and the gathering process is not economic. The shale sector has been drowning in an ocean of capital destruction. To play the hype game the production levels had to go up. And they did. But the product cost more to extract than it sold for after accounting for the royalty payments.

There is just no there there. But as long as the Fed keeps printing and banks are willing to lend to companies that will never repay them, the fantasy can continue. Hell, I love fantasy and look forward to finding that Unicorn for the kids.

Reply to  Vangel Vesovski
January 29, 2020 8:31 pm

Those fake shrinking dollars the Fed prints bring oil to the surface to be refined into amazing useful fuels and products. The extraction process is actually becoming more efficient and a single pad can handle numerous wells. It is not anywhere like diffuse solar energy. The problem with the economics is not value created but rather supply exceeding demand leading to falling prices, and that problem is self correcting.

The Fed, now that is a different issue.

Reply to  Vangel Vesovski
January 30, 2020 4:53 am

Shale has certainly destroyed a mountain of capital while ensuring the price of oil would stay low. Just look at EXXONMOBIL. They spent $3B in the third quarter in the US upstream. The vast majority of that money was spent operating 55 rigs in the Permian. They earned $37M in their US upstream operations in the third quarter. How’s that for a rate of return ? I’m guessing when they report tomorrow it will be more of the same for the fourth quarter.

Paul Penrose
Reply to  Marc
January 30, 2020 10:36 am

So, are you going to put your money where your mouth is and buy big puts against Exxon? Yeah, I thought not.

Reply to  Marc
January 30, 2020 11:51 am

You are simply seeing the lag between capital investment and production, with price moderating that relationship. Until recently, the shale industry has been awash in DUCs (drilled, but uncompleted wells). This is sunk capital and latent production awaiting either a price uptick or completion of collection pipelines to put into actual production. Similar situation for many many undersea wells that have been tapped and capped awaiting their turn to be put into production. These represent hundreds of $billions of CAPEX spent between 2003 and 2014 when crude prices ramped up and then collapsed. This happened before in the 1990s when oil magically appeared to flow year after year from mysteriously growing reserves without new capital investment. We were simply reaping the benefits of a surge of capital investment made during the oil price spike between 1980 and 1986. ROI is still as high as ever when production is properly correlated to CAPEX — about 40 barrels of oil per foot drilled since EIA has been keeping records, and that was before the tight oil revolution really took hold. Need to clear out all the DUCs before we can properly compute an updated ROI for the tight oil & gas era.

Reply to  Marc
February 2, 2020 6:12 pm

The biggest destroyer of capital besides the government is Las Vegas.

Reply to  Vangel Vesovski
January 30, 2020 7:39 am

According to you, oil companies go out of their way to lose money, and that they know ahead of time they are going to lose money.

Reply to  Vangel Vesovski
January 30, 2020 8:44 am

Sorry but the economics of shale does not work.

… for the same reason that bumblebees can’t fly. bad assumptions

Larry in Texas
January 29, 2020 7:32 pm

Wow, David, living in Texas I am excited to see this enlightening information. Although I knew what we amateurs or non-experts call the Permian Basin had come back strong, I did not realize production had reached these levels so quickly. I can only hope Texas remains awash in oil and gas, because it is so good for Texas’ economy, which translates to the U.S. economy. As long as AOC and her Democratic ilk don’t shut it down.

Tom Abbott
Reply to  David Middleton
January 30, 2020 9:17 am

A new Texan and former Californian said this morning on Fox tv that he thought most of those people leaving California for Texas were conservatives fed up with what is going on in California.

Joe B
Reply to  Larry in Texas
January 30, 2020 3:27 am

Permian production will rise for years to come as the buildout for VLCC carriers (Very Large Crude Carriers – 2 million barrel capacity) continues apace.
Currently, there is only one – LOOP – off Loueezzeeanah.
Within 3 years – or less – there should be 2 more off Texas.

Big boost is also coming from the IMO 2020 regs as it has become apparent that US LTO provides optimal feedstock for globally compatible Very Low Sulphur Fuel Oil.
~2 million bbld global demand that could double.

Clyde Spencer
January 29, 2020 8:05 pm

“… getting [a] herd of Unicorn ponies …”

Clyde Spencer
January 29, 2020 8:06 pm

” Finding stacked p[l]ay…”

James F. Evans
January 29, 2020 9:06 pm

Stacked plays or multiple geologic horizons suggest great pressure to drive oil through multiple rock formations.

Decayed algae and plants?

Or geophysical chemical reactions from abundant constituent elements in the earth’s crust?

When will the total amount of oil in these basins cause the idea that decayed plants & algae account for the oil be falsified?

Or, can it ever be falsified?

James F. Evans
Reply to  David Middleton
January 30, 2020 7:28 am

Of course, that’s not responsive.

And, the question still stands. Science is never settled.

David Middleton; ” ‘near infinite resource’… because that’s what it is”

OK, I take that to mean more in an economic sense than a geophysical sense (although, as Mr. Middleton points out in excellent and great detail the total amounts of oil & gas are truly huge.)

I welcome all the evidence demonstrating how vast this basin of hydrocarbons is.

Mr. Middleton subscribes to the idea that decayed algae & plants are the origin for this vast amount of oil & gas. But other geologists have a different interpretation of the scientific evidence.

Hydrothermal Hydrocarbons, Stanley B. Keith and Monte M. Swan, AAPG, Online Journal for E&P Geoscientists

“We suggest a third possibility–the generation of methane and heavier hydrocarbons through reactions that occur during cooling, fractionation, and deposition of dolomitic carbonates, metal-rich black shales, and other minerals from hydrothermal metagenic fluids. These fluids are proposed to be the product of serpentinization of carbon-rich peridotites under hydrogen-rich, reduced conditions. ”

Hydrothermal Hydrocarbons, Stanley B. Keith and Monte M. Swan

There is a link for an excellent schematic at the bottom of the published paper by Keith and Swan

Diagenesis & catagenesis as part of converting algae & plants into oil is an assumption without scientific confirmation. No chemical pathway has ever been established in a laboratory nor has anybody put forth a possible chemical pathway.

David Middleton, what would falsify the hypothesis you subscribe to?

Or Is your position simply that your hypothesis cannot be falsified?

James F. Evans
Reply to  James F. Evans
January 30, 2020 10:41 am

There is a vast system of faults or fractures below the Permian Basin in the earth’s crust:

Wrench Faulting in Selected Areas of Permian Basin, G. Pat Bolden (1984)

“Landsat and NASA High Altitude Special Mission Aircraft imagery have made it possible to define at least six separate lineament trends between the Amarillo-Wichita uplift (N62°W) and the Texas lineament (N54°W) that are 200 to 330 mi (320 to 530 km) long and oriented N54°W to N62°W. These long lineaments are thought to be P shears and are left-lateral wrench faults by definition.”

The Houston Geological Society hosted a presentation and a published paper:

Cracks of the World: Global Strike-Slip Fault Systems and Giant Resource Accumulations, Keith, Rasmussen, Swan, Laux (2003)

“Evidence is mounting that the Earth is encircled by subtle necklaces of interconnecting, generally latitude-parallel faults. Many major mineral and energy resource accumulations are located within or near the deeply penetrating fractures of these “cracks of the world.”

Cracks of the World: Global Strike-Slip Fault Systems and Giant Resource Accumulations

Many geologists subscribe to Uniformitarianism,”the present is the key to the past” and that geological events occur at the same rate now as they have always done…”

Nowhere, today, has there been observed, a lagoon, or ocean basin, or sea basin where dead & decayed algae has been found to pool at the bottom in a pre-diagenetic state, a decayed detritus of algae slime many feet thick. In fact, it’s known that over 99% of dead algae is dissipated without any buildup.

Again, what makes more sense: decayed algae & plants (dead fish?) as the origin of oil & gas or abundant constituent elements combined via geophysical chemical reactions in the earth’s crust?

Reply to  James F. Evans
January 30, 2020 10:59 am

“Nowhere, today, has there been observed, a lagoon, or ocean basin, or sea basin where dead & decayed algae has been found to pool at the bottom in a pre-diagenetic state”

The Black Sea is a good example of just that.

However it does require anoxic conditions, which is quite rare in the present icehouse climate with vigorous thermohaline circulation. It is only possible in isolated stagnant basins, like the Black Sea or parts of the Baltic.

Robert of Texas
Reply to  James F. Evans
January 30, 2020 11:31 am

I find it fascinating that you subscribe (apparently completely) to a non-biotic hypothesis for fossil fuel (err, oil and coal since from your perspective it isn’t fossil fuel).

If I take the geophysical perspective, I would expect most oils and gases to be found near volcanic active areas such a ancient calderas – take Yellowstone for example. Oil and gas should correspond highly to areas where metals are mined. Shale should also be found primarily in these areas unrelated to ancient sea beds.

Instead, shale is mainly found where evidence indicates ancient shallow seabeds once existed. Oil and gas is found mostly in these areas as well. This is why Oklahoma and Texas have so much oil, while Colorado has much less.

That is not to say there is no oil or gas (primarily gas in the form of Methane) produced by other processes, I think it is reasonable to believe some is in area like undersea volcanic vents, but the preponderance of mined oil and gas is all related to ancient sea beds (I am including the marshlands along coasts with these).

If shale were produced using geophysical processes only, why do most shale contain fossils? Why is it often found with mud stone, clay, limestone, and sand layers of rock – all clearly formed as a result of water deposition (except for fossilized dunes).

Clearly geologists are being wildly successful with the bio-genesis theory of oil. Clearly rejecting this theory has not led to more significant discoveries and reserves. How much more proof do you need?

Reply to  Robert of Texas
January 30, 2020 1:10 pm

Volcanic formations are where one would expect to find deep hydrocarbons emerging as CO2 and H2O because they were oxidized on the way up due to high heat penetrating nearer the surface and low pressure penetrating deeper and abundant contact with oxygen-rich Fe2O3 and carbonate rock formations via the melt-filed labrynthian ductwork. This is indeed the case, with only about 2% of typical volcanic gases being methane, and the bulk being CO2 and H2O.

Non-volcanic surface and sea floor areas above fault lines in impervious granitic strata is where one would expect to find methane and crude oil seeping up to the surface intact from the depths, unoxidized, because a standard geotherm pressure/temp curve is maintained which preserves the chemical composition of short and long-chain hydrocarbons, and there is less exposure to oxygen-rich minerals via narrow fissures on the way up. This is also indeed the case, with methane and oil seeps most easily observed on the seabed, where there is less distance to travel upward, where the geotherm is steeper, and where this is less entrapping geology overhead to catch the migrating hydrocarbons in reservoirs on their way to the surface.

The Deep Carbon Observatory just published their 10-yr anniversary summary of research on hydrocarbons and life kilometers below the surface, and it is now accepted scientific opinion based on direct observation that a good deal of methane is abiogenically produced by deep earth serpentinization chemistry, and this would make it a vast and renewable resource. There is still much opposition to the idea that longer chain hydrocarbons and crude oil could be of abiogenic origin, but those chemical mechanisms have been demonstrated in laboratories. Reasonable estimates of the mass of archaea and bacteria living in porous strata at 1 to 6 km below the surface and feeding on these upwelling hydrocarbons is that it roughly 300 times the mass of all humans.

James F. Evans
Reply to  Robert of Texas
January 30, 2020 1:16 pm

Mr Middleton, “Where do you think chalk formations came from?

A buildup of fossils. But is there any evidence that hydrocarbons were expelled or even formed in the first place? Chalk doesn’t have any hydrocarbon traces.

And, chalk formations are limited geographically.

Any chalk strata in the Permian Basin?

James F. Evans
Reply to  Robert of Texas
January 30, 2020 2:48 pm

Thank you, Mr. Middleton, excellent exhibition of chalk and chalk in Texas.

Patrick MJD
January 29, 2020 10:05 pm

I knew I should have stuck with geology. Really interesting David, thanks.

J Mac
January 29, 2020 10:57 pm

Really interesting information – Thanks, David!
I had no idea the Permian Basin was that big and that deep of a petroleum layer cake!

2012 Barackward Obama: “We cannot drill our way to lower gas prices.”
Frack that! Where is that weasel Obama? He doesn’t know oil and gas drilling from a hole in the ground!

Rod Evans
Reply to  J Mac
January 30, 2020 1:55 am

He is currently building a shrine to the Sea God King Canute,on a beach in Martha’s Vineyard. He has done that to ensure all bases are covered, as he does a bit of relaxing on a recliner looking out to sea from his own private beach, overlooked by his own mansion. He will reflect on his knowingly false claim, that the oceans will rise threatening coastal homes due to man made climate change.
His personal actions, speak a much finer truth than his past words…

Reply to  Rod Evans
January 30, 2020 3:32 am

Obama the Constitutional scholar had a lot of bad ideas based on false information in his head. He never did release his college transcripts so that we could see his brilliance on a score card.

Just asking him to do that was considered bad form.

John Lindberg
Reply to  Troe
January 30, 2020 5:55 am

Well. There’s this. Yeah, THAT Michael Cohen.

Paul Penrose
Reply to  Troe
January 30, 2020 10:47 am

Anybody using my college transcripts to predict my suitability for future employment would be quite shocked to see how accomplished I am today. There really isn’t good correlation between good grades in college (and/or the accumulation of degrees) and vocational accomplishment. Pay levels are a different matter; there’s definitely a thumb on the scale there (HR, having little ability to judge a person’s potential, uses college degrees/transcripts as a poor proxy – which are particularly poor when they are decades old).

Ron Long
January 30, 2020 2:20 am

Great article about Permian Basin and fracking. My MS thesis was in the Permian (slightly into Triassic) volcanic island arc complex along the western margin of the Permian Basin complex. Although my thesis was on the Idaho side of Hells Canyon, I have seen identical remnants of this primitive (trondjhemite, spilite, and keratophyre) island arc complex from Alaska, Idaho, Oregon, Nevada, northern Chile, and southern Argentina, always with copper-silver mineralization. As the volcanic islands grew larger the volcanism became more felsic and base-metal massive sulfide deposits developed locally. So there was this large volcanic island arc complex bordering the entire west side of the oil/gas accumulating Permian basin complex. I wonder if they are related processes?

Peter Taylor
January 30, 2020 5:02 am

What am I missing here – proven reserves divided by annual production equals about twelve years. Or?
And 22 thousand million barrels proven reserves is about 9 months annual global consumption, or?

Reply to  Peter Taylor
January 30, 2020 10:51 am

Read up on “proven reserves” vs. “recoverable reserves”

Reply to  Peter Taylor
January 30, 2020 6:14 pm

Proved reserves depend on price as the reflect economically recoverable resources. If the price goes down, the reserves go down. If the price goes up, the reserves go up. If technology improves and reduces cost of production, reserves go up even though no new oil is discovered. the vast oil fields of Kern County CA have been producing oil since 1899 and have so far produced 300% of their initial recoverable resources.

January 30, 2020 7:20 am

The Permian Basin and other fossil fuel sources are actually infinite in a practical sense, since the amount of carbon used by humans from these sources is insignificant compared to the total amount of carbon contained in the earth. And these carbon sources are continuously being replenished by the shallow carbon cycle and the deep carbon cycle. That’s why carbon-based fossil fuels are the ultimate renewable resource.

Don B
January 30, 2020 9:17 am

David, please keep writing these articles. The general media can not compete with this level of information.

January 30, 2020 11:21 am

The peak oil argument is made by disingenuously looking exclusively at production curves, as if supply of any commodity exists in a vacuum, and ignoring the interplay of demand, price, and capital investment. Demand leads, Price follows, then Capital Investment correlated to price, then Supply in response to Capital Investment. Then the market finds a new Price which feeds back around again to Demand. There is always an accordion effect due to lags between each of the 4 phases of this cycle that creates over-corrections and endless oscillations.

The metric to watch to determine scarcity is not raw production, but how supply (i.e., production + reserves) responds to capital investment, and to account for the appropriate lag time in responsiveness when measuring the correlation. The tight oil and gas revolution dramatically reduced the capital cost of producing hydrocarbons directly from the most abundant geological repository — the source rock itself. It shattered the 150-yr old paradigm of having to search for geologically rare shallow reservoirs trapping migrated hydrocarbons. There is simultaneously a deepwater production revolution in progress following the discovery of pre-salt oil in the 1990s, that similarly shattered the paradigm that no oil should be found that deep based on the cooking temperatures of oil according to biogenic theory. Both of these revolutions have opened up the likelihood of finding economically recoverable hydrocarbons in manifold new and unprospected locations around the world, as well as making known resources more recoverable.

A third revolution in production may emerge in the next decade or two in the economic recovery of methane from seabed and arctic clathrate ice formations.

The bottom line is this: As long as supply remains responsive to capital investment, there is no ultimate scarcity.

Reply to  David Middleton
January 30, 2020 7:02 pm

“The Norphlet play in the deepwater of the Gulf of Mexico is oil because the temperatures remained in the oil window since the Jurassic Period. The Norphlet play in the shallow waters of Mobile Bay is gas because the temperatures rose above the oil window during the Cretaceous and cooked the oil.”

I respect your real-world drilling experience. But you have to admit that making bold statements millions of years in arrears about disparate underground climate during the Jurassic and Cretaceous eras is an extremely weak post hoc postulation to conveniently explain unexpected deep oil discoveries that didn’t fit the predictions of a century of accepted theory. Why did it fall to independent Anadarko to discover oil where classic petroleum theory said it shouldn’t exist? Because science and industry are just as conservative and overconfident in their long-held beliefs as each individual human is.

Overburden as limiting factor to oil at depth is also a misapplied argument. Porosity and “reservoir quality rocks” can exist at any depth where temperature is not near the rock melting point. Pores and intergranular spaces are not vacuums, but are filled with incompressible fluids. The pressures of fluids in the cavities increases the same as the pressures on the solids, so there is broad equilibrium, regardless of depth or overburden. Of course, uniformity is not perfect, and there are vertical pressure discontinuities created by impervious caprock layers that can dam up some of the upwelling pressure fluids, and provide a lower than equilibrium pressure zone for some distance above. This pattern can repeat many times in depth, as we see in the Permian Basin, with each layer having its own treasures.

If crude oil is biologically-reworked ancient abiogenic hydrocarbons rather than geologically-reworked ancient biological organisms, we still would not expect to find it at temps much higher than extremophile archaea and bacteria can live. We currently know of species that can multiply at 125C, and theorize that their might be species that can do so at 150C. So the oil window in terms of temperature, rather than depth, continues to be valid in abiogenic theory if the method of oligomerization of abiogenic methane into longer molecules is biological, which is the most likely case. Non-biological methods of oligomerization in meaningful quantities remain purely speculative.

Reply to  Ike Kiefer
January 30, 2020 6:04 pm

I’ve labored over Hubbert’s 1956 paper and reproduced his math. He was not disingenous, but he did focus exclusively on production data, and his key mathematical assumption was that the cost of extraction increases linearly with total amount produced. That is the math that produces a Hubbert Curve (i.e., a symmetric sigmoid). It is the following generations of Hubbert apologists who have been disingenuous to admit where his predictions fell short and how technology continues to make stepwise reductions in the cost of production and increases in the accessibility of the Earth’s much larger endowment of absolute and economically recoverable resources than contemplated by Hubbert. I wrote a paper on why the real curve for fossil fuels and other super-fungible resources governed by a multitude of depended variables is a classic sigmoid, which reflects a natural plateau at the carrying capacity. I believe that plateau will be reached at about 160 million bbl/day circa the year 2100. We will not run out of oil any more than we will run out of stone.

January 30, 2020 12:01 pm

I thought the “pessimist” was a more exact mirror of the “optimist.” Given an actual pony, the pessimist asks: who’s going to clean up all the horse, er, schist?

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