In Texas these days, there’s a feeling of absolute and unwavering confidence in the concept of an American energy revolution. From the depths of reserves to the richness of the energy, an incredible transformation is taking place.
We’ve been talking about the significant impact of the U.S.’s oil production for a while now, but the buzz about shale oil and gas is only getting louder. At Morgan Stanley’s energy forum in Houston in August, Director of Research John Derrick and Portfolio Manager Evan Smith said shale was the prevailing topic.
One area that’s driving this game-changing trend is located only hours from our headquarters. It’s the Permian Basin located in western Texas and southeastern New Mexico, covering an enormous area. Three component parts make up the Permian: The western Delaware, Central Basin and eastern Midland. If you overlay the Eagle Ford and Bakken basin areas over the Permian, you can see that both the Bakken and the Eagle Ford shale formations easily fit inside.
The area isn’t new to the oil industry, as companies have been drilling in the Permian area for almost a century. Back in the 1970s, oil production reached 2 million barrels per day, but fell to 800,000 barrels per day in 2007. It wasn’t because the oil wells had dried up but companies couldn’t get at the resource. But now since the introduction of shale technology, oil production began increasing once more to 1.2 million barrels per day by 2012.