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Ghawar, Wise guys, & the End Game
By 2020, the Permian Basin should be fully de-bottlenecked as a result of pipelines currently under construction. Three of the big pipelines being built (by Gray Oak, Epic, and Plains All American) will add 2 million barrels of capacity by the first quarter of next year and projections are for Permian pipeline capacity to increase to 8 million bopd by the end of 2021. It will be interesting to see what happens to all those Drilled but Uncompleted wells when the pipeline bottleneck is resolved. Will there be a horsepower bottleneck? Per the Energy Information Administration (EIA), crude production from the Permian Basin in April averaged 4.1 million bopd, and some very optimistic forecasts have production volumes eclipsing 8 million bopd by 2023. Time will tell if this holds true; I think it is impressive that such large volumes are even being discussed as possible. Per Hubbert’s Peak Theory, U.S. oil production was supposed to peak around 8 million bopd in the late 1960’s, declining thereafter. Now, we are talking about the Permian Basin exceeding Hubbert’s peak projection singlehandedly. It is remarkable to see what technological innovations, ingenuity, access to capital, reasonable oil prices, among other things, have done for our industry. In addition, some of the mergers and acquisitions that have taken place or that are in the works like Chevron (or maybe Occidental) acquiring Anadarko Petroleum will hopefully increase synergies, further driving down breakeven costs and increasing production. It sure is an exciting time to be here in the Permian Basin!
Another behemoth that has been in the news lately is the Ghawar Field. In April, Saudi Aramco released a detailed financial prospectus that revealed Ghawar production figures for the first time since 1981. The Field was discovered in 1948, and has contributed half of every barrel produced in the Kingdom of Saudi Arabia. The prospectus shows that the current maximum output of the Field is 3.8 million bopd. Though massive, this number has drawn scrutiny because it falls short of the 5+ million bopd that many in the industry assumed it produced. So, on the one hand, the Permian Basin now produces more oil than Ghawar. That is an eye catching headline. But we need to know a few things about Ghawar for a proper appreciation of its prodigiousness. Ghawar has a thick carbonate reservoir with high porosity (average of 19%) and permeability (average of 617 Millidarcies) that covers an area of 3,300 square miles. In other words, it is an Operator’s dream, and a Frac Service company’s nightmare. In comparison, the Permian Basin covers an area of 86,000 square miles, and has a mix of source rock and conventional reservoirs. The Permian Basin is an incredible gift that our industry has been able to unlock this decade, but it is fascinating to wonder what the activity level here would be like if we had Ghawar type rock. In addition to Ghawar, Saudi Arabia has four other giant fields (zuluf, Shaybah, Safaniyah, and Khurais) that produce a combined 4.58 million bopd. Add it up, and that is a total of 8.38 million bopd from only five fields. I sure do hope the folks over there thank the good Lord every day for both the beautiful subsurface conditions, and the internal combustion engine.
Last month, I talked about the impact of some young wunderkinds in our industry. Well, it is only fitting that my last Chairman’s Corner highlights the old wise guys in our industry. On a frac job a few weeks ago, a leak in the frac string required that we flush the stage, and kill the pumps. Thankfully, we had a rig over the well, so we could immediately pull the frac string. The next eight hours were invaluable - I probably learned more in that time than I had in a while. Our two Field Superintendents swung into action directing all the vendors on location on what steps to take next. Usually, on these frac jobs, they hang back and let me run the show. But on this day, they reminded me why we should always revere our elders. They were so calm, and calculated, and remained at least two steps ahead of me all the way. Long story short, we got the packer unstuck (due to frac sand that was on the backside), and pulled out of the hole with everything. A few hours later, we were back in the hole, and pumped the job right as the sun was setting. Sometimes, I think of my two Field Superintendents as defensive football players with one of them playing Cornerback, and the other, playing Safety. When I make questionable decisions, the Cornerback intercepts it before it really causes us issues. If he happens to drop the ball, the Safety is there to make the diving grab. Thankfully, they do it graciously while also teaching me a better way. The same is true for the old wise guys on the SPE Permian Basin Section Board who I have been so privileged to work with this past year. They encourage the ideas of we younglings on the board, but also rein us in when we are veering of course or getting too far ahead of ourselves. They have entrusted us with tremendous responsibility, but have been so gracious in guiding us along the way. We have an outstanding crop of board members, and I am excited for what the 2019-2020 section year has in store for us under the leadership of our incoming Chairman, Alana Low.
I have gone a little long in this my final Chairman’s Corner, but bear with me as I wrap up. Our section has had a great year! In March, I discussed the State of our Section as being strong. High attendance at Section meetings and study group meetings (four meetings exceeded 120 members) indicated strong interest in our topic offerings. Our members, especially the young professionals (YP’s), were successfully engaged in a variety of monthly volunteer and community service activities. Also, our SPE Texas Tech Student chapter distinguished themselves throughout the year with their service, reliability, and professionalism. It was wonderful seeing so many familiar faces, and new ones at our awards banquet on April 25th. The banquet was the culmination of all the hard work put in by so many people throughout the year. Several of our colleagues received awards for their technical and service excellence. In addition, our section awarded 20 scholarships totaling $102,000 (up 11% from last year) to some outstanding and well deserving students. This was made possible by the donations of individuals, and the record breaking success of our golf and clay shoot tournaments in the fall and spring respectively. In addition, the CO2 conference committee contributed $22,600 to our scholarship fund. I thank and salute everyone who played a role in helping our section reach such great height this year!
Our last section event of the section year will be a joint event with the International Society of Automation (ISA) at the Occidental Petroleum auditorium here in Midland on June 5th. Stay tuned for more information on this via email. Also, our YP’s are plowing ahead with several meetings over the next couple of months. Below is a summary:
o SPE-YP Mission Agape Outreach program (5/18) – See details here:
o SPE-YP Meeting (5/21) – Travis Latz presenting on “Recompletion Technology in Unconventional Wells: Expandable Liners” Pease RSVP here:
o SPE-YP Happy Hour (6/29) – at Ranchland Hills Golf Club. More details to come.
Finally, I thank the wonderful board members that I served with these last 12 months. They made my job easy because they excelled so well at theirs. I also thank my supervisor at work. He allowed me commit enough time to this role, and afforded me tremendous flexibility in attending events. On a personal note, in the next few weeks, my wife and I plan to watch the Avengers: Endgame. I like to believe that the masterminds behind Marvel’s Cinematic Universe that has spanned 11 years, 21 films, and $19 billion in ticket sales had a plan from the very start of the journey. Similarly, companies in our industry are operating in a similar fashion (certainly, there are exceptions). Worldwide, there is a direct correlation between energy consumption and the standard of living. So, as the standard of living for many around the world continues to rise, they will require more energy. I am excited for what the future holds for our industry, especially here in the Permian Basin. We have much left to do, and I believe we have the talent to get the job done!
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