Abstract

The worst global recession since the 1930s triggered a slump in energy demand, and oil and gas prices collapsed while industry activity and earnings also retreated. Oil prices recovered relatively quickly resulting in companies looking for liquids and increased activity in the Permian Basin. A slow economic recovery has begun along with a rebound in U.S. and worldwide GDP but many uncertainties remain with respect to the energy future.

During 2008, realization of the breakthrough in shale gas productivity transformed North American gas from a decade – long period of tight supplies with high and volatile prices to a new era of excess supplies in quest of a market. The shale revolution is no longer only about gas. The same technologies that unlocked gas from shale — long horizontal laterals with multi-staged slick water fracs — also are unlocking oil from shale and other tight, fine-grained formations. Driven by the fact that the price per Btu for oil is almost three times higher than the price per Btu for gas, along with the continued improvement in oil productivity and lessons learned from the Bakken shale in the Williston Basin, a boom is underway in the development of new unconventional oil plays. The Permian Basin has been a well-recognized oil province since the 1920s. Unconventional oil and gas plays are again drawing numerous companies to amass acreage positions in New Mexico and West Texas. In the Delaware basin Permian Bone Spring tight limestones and sandstones and the overlying Permian Avalon shale in Lea and Eddy counties are examples of new, unconventional targets. The low permeability of the Wolfberry play makes it another fine example. These opportunities, while in relatively early stages of development, have the potential to keep the Permian Basin in play for many years with long-lived reserves, multiple-pay reserves and predictability.

This oral presentation reviews the latest developments in unconventional plays, and it provides a framework to compare Permian plays with the new, high performance shale and tight, fine-grained oil and gas plays elsewhere. An understanding of new approaches can help Permian producers best manage their production, compete with other, low cost plays and find markets for abundant oil & gas supplies.

The size of the prize is enormous with several plays having a billion of barrels of oil or more in place. The challenge will be to establish cost-effective commercial production as a first step and then to enhance technologies and operations with an objective to achieve a step change in oil production and recoveries.

The emphasis on unconventional oil and gas plays means back to the basics for geologists and engineers. Knowledge of source rock and reservoir rock properties, subsurface mapping with well data, awareness of hydrocarbon shows, geochemistry, operating excellence and consideration of above-ground factors like transportation and markets, regulations and environmental concerns are important to unconventional plays. Only a year ago, the oil and gas business looked grim to many producers. Today, there are many new and challenging opportunities for U.S. producers, even in a mature basin like the Permian.