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Debating The Permanence Of The Permian Shale Boom

One thing you learn very quickly when studying the nature and history of the oil and natural gas industry is that nothing related to it is permanent. Reservoirs deplete, technologies inexorably advance, means of financing projects come and go, and hot play areas go cold when the next one heats up.

While many in recent years have tried to characterize the production of oil and gas from shale formations, with its repeating processes and low frequency of dry holes, as essentially a “manufacturing” process, it really is not at all similar to the making of textiles, steel and plastics.

All of which is sort of a long way around to getting to a headline that ran in Monday’s Arab News:  “The Big Question for U.S. Shale:  Is it Permanent or Just Permania?”  Given that nothing in oil and gas is ever permanent, the obvious answer to the question is that the current situation related to U.S. oil and gas development is a great, big case of “Permania.”

The real question, as borne out by the discussions atlast week’s CERAWeek conference in Houston, is just how justified the current case of rampant “Permania” happens to be, and more importantly, how long it will last.  If you ask Tim Dove, CEO at the largest Permian Basin producer, Pioneer Natural Resources, it is very justified indeed.  So justified, in fact, that Dove announced just a few weeks ago that his company would be divesting 100 percent of its non-Permian Basin assets soon, and betting its entire future on maximizing the potential from its more than 700,000 acres of leasehold in the massive Permian region.

“What we’re staring at beneath our feet cannot be replicated anywhere else in the United States. That’s a given,” Dove told the IHS Markit-sponsored conference last week, “We have a golden goose right before us.”

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