Cutting-edge technologies are bringing new life to an old oil field in Texas. The Permian Basin is bucking the odds to become one of the few areas in the struggling oil industry still attracting new investors. As oil prices continue to fall, professional oil and gas reserves evaluation becomes ever more critical to ensure the highest possible returns on investment. The example of the Permian Basin may point the way for other oil companies to achieve similar success even in the current economic environment.
Horizontal Drilling the Key to Unlocking Permian Basin Oil Reserves
One of the most important technologies in use in the Permian Basin is the use of horizontal drilling to access hidden reserves still locked in this oil field. The area was largely abandoned after the 1970s as oil companies looked elsewhere for easier pickings; oil locked in shale formations was considered too difficult to extract in a cost-effective manner. Initial costs for horizontal wells significantly exceed those associated with traditional vertical drilling. For those willing to make the investment, however, the rewards can be well worth the extra money upfront. Some high-producing wells in the Permian Basin have been pumping out enough oil to make up for low prices industry-wide, making these extraction efforts a cost-effective choice for energy companies and investors alike.
Fracking Also Producing High Yields
Hydraulic fracturing strategies, better known as fracking, have also had a significant impact on production in the Permian Basin. The same techniques used to good effect in the Bakken formation of North Dakota have been implemented in some areas to extract oil from areas once thought to be useless for production purposes. The high yields possible with fracking techniques have helped to saturate the oil market and resulted in prices of about $30 per barrel. This has led to reduced profits throughout the industry, causing shock waves through Wall Street that have sent many investors running for cover in other sectors of the economy. A number of companies drilling in the Permian Basin, however, have achieved high extraction volumes that, in some cases, have more than made up for the low prices prevalent in the industry.
Maximizing Profits in the Oil Industry
Most economic experts estimate that oil prices must reach at least $45 per barrel to make new drilling operations economically feasible. Some forward-thinking companies are investing in petroleum economics training for their key employees to achieve higher returns on investment and improved predictive capabilities for various strategies in drilling and extraction. Petroleum economics courses can provide added insights into the factors that affect profitability, allowing oil companies to make the best possible choices regarding drilling sites and methods.
Location a Key Factor in Profitability
The past history of drilling in the Permian Basin has left a legacy of existing infrastructure that makes this area even more attractive for investors and oil companies. Pipelines and companies that specialize in supporting the energy industry are already in place, minimizing the investment in time, money and effort required to process and distribute oil once it has been extracted. A shorter trip to the oil refineries also reduces risks to public safety and promotes a safer environment for workers in and around these drilling sites. Unlike the drilling and fracking sites in remote areas of the Bakken formation, Permian Basin operations offer a near-ideal location for maximizing profitability.
While some energy companies are adopting a wait-and-see approach to the current glut of oil on the market, firms drilling in the Permian Basin are actively seeking new capital to make the most of this high-yield oil field. Investing in advanced training in petroleum economics can also ensure the most effective use of available funds to promote greater profitability now and well into the next decade.