Gilmer: We Should View The Permian Basin As A Permanent Resource David Blackmon
https://www.forbes.com/sites/davidblackmon/2017/08/17/gilmer-we-should-view-the-permian-basin-as-a-permanent-resource/#7fca090256ff
The Permian Basin is a sedimentary basin largely contained in the western part of the U.S. state of Texas and the southeastern part of the U.S. state of New Mexico.
Allen Gilmer, chairman and CEO of Drilling Info, speaks at the Hart Energy DUG Eagle Ford Shale conference in San Antonio, Texas. Photographer: Eddie Seal/Bloomberg
Allen Gilmer, Co-Founder and Executive Chairman at DrillingInfo, Inc., is not a man who minces words, an attribute that has served him well during a long career in the oil and gas industry. When it comes to the Permian Basin and the amount of oil and gas resource contained in it, he becomes positively loquacious.
“We should view the Permian Basin as a permanent resource,” he says, “The Permian is best viewed as a near infinite resource – we will never produce the last drop of economic oil from the Basin.”
No one disputes that the resource in the Permian is huge, but ‘infinite’ is a big word. I asked him to expand on that concept. “That is the practical reality with the amount of resource that is in the ground,” he says, “The research we’ve done indicates that we have at least half a trillion barrels in the Permian at reasonable economics, and it could be as high as 2 trillion barrels. That is, as a practical matter, an infinite amount of resource, and it is something that has huge geopolitical consequence for the United States, in a very good way. It has a huge consequence in terms of GDP, and right now it is creating an American energy global ascendancy.”
Obviously, it is also a practical matter that the pace at which the industry produces the crude resource that underlies the Permian region in multiple formations will be constrained to some extent by commodity prices, costs, infrastructure and other potentially limiting factors. We have seen the Basin go into another boom over the last 12 months despite relatively low prices and, more recently, rapidly rising costs. Gilmer believes that infrastructure will be the most significant constraint going forward.
“The biggest thing that will get in the way of the Permian’s growing to its full potential is infrastructure,” he says, “I’m not sure you can really put any more trucks on that main highway [US 285] that goes up from Fort Stockton to Carlsbad.” He relates a story of a recent trip he and his wife took to Ruidoso, where his family has a home, and sitting at single highway intersection for more than 45 minutes because there was a mile-long backup of mostly oilfield service trucks trying to get through. “That used to be the back road I would take to go home to Ruidoso when I was a kid. Those roads can’t take that – you literally cannot put 50%, or even 20% more traffic on them. So we are reaching infrastructure limits in the basin.”
I had the idea for this interview when I saw Gilmer give a presentation at a conference in April, during which he discussed his view of the Permian, classifying it as America’s “Super Basin.” The data he presents to support his findings was stunning, and compelling. Gilmer says one of the main reasons he’s been giving a series of presentations this year was as a response to the current “Keep it in the Ground” movement coming from the anti-fossil fuel community.
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