US identifies ‘largest-ever’ unconventional oil resource potential in Texas and New Mexico

Unconventional oil and gas USGS Texas New Mexico Permian Basin
Estimates include 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids in Texas and New Mexico’s Wolfcamp Shale and Bone Spring Formation.

The United States is forging ahead in its pursuit for energy dominance, with a new report from the US government’s science bureau identifying what it claims to be the ‘largest-ever’ unconventional oil and gas resource potential in Texas and New Mexico.

According to the latest findings by the United States Geological Survey (USGS), the scientific agency within the US Department of the Interior, the Wolfcamp shale and overlying Bone Spring formation in the Delaware Basin portion of Texas and New Mexico’s Permian Basin province hold an estimated mean of 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas and 20 billion barrels of natural gas liquids.

This estimate is for unconventional – or “continuous” as referred to by the USGS – oil and consists of “undiscovered, technically recoverable” resources. The bureau’s assessment was conducted as part of a nationwide project assessing domestic petroleum basins.

Impressive potential

While the Permian Basin is already renowned as a prolific onshore basin, with 32% of US oil production flowing from the province at an average rate of 3.7 million barrels of oil per day, these findings show its potential is even greater than originally thought.

A 2016 evaluation conducted by the USGS on the Wolfcamp shale in the Midland Basin portion of the Permian province had found it to be the largest assessment of unconventional oil at the time. However, this Delaware Basin assessment trumps the Midland Basin estimate by more than two times.

USGS oil gas find Permian Basin
Permian Basin location map.

US Secretary of the Interior Ryan Zinke said while he had been bullish on oil and gas production in the US before, “Christmas came a few weeks early this year”.

“Now I know for a fact that American energy dominance is within our grasp as a nation,” he said.

USGS director Dr Jim Reilly said the Permian was not historically considered viable for producing large new recoverable resources, but thanks to advances in technology, the basin “continues to impress in terms of resource potential”.

“Knowing where these resources are located and how much exists is crucial to ensuring both our energy independence and energy dominance,” Dr Reilly said.

Permian Basin operators

This is great news for operators in the Permian Basin, which include major American oil and gas companies like EOG Resources (NYSE: EOG), Concho Resources (NYSE: CXO), Chevron (NYSE: CVX), Apache (NYSE: APA) and Occidental Petroleum (NYSE: OXY).

ASX-listed juniors operating in the basin include Winchester Energy (ASX: WEL), which holds interest in 17,000 net acres in the eastern Permian including the White Hat Ranch and Thomas Ranch oilfields, and Big Star Energy (ASX: BNL) (formerly Antares Energy), which holds acreage in the Midland Basin portion of the province.

Winchester chairman John Kopcheff told Small Caps that while his company’s acreage was 280km from the area where the USGS conducted the assessment (in the western part of the Permian), the report “shows the prolific oil-bearing nature of the Wolfcamp shale,” which is present throughout the basin.

“A significant unconventional shale oil resource is considered present in Winchester’s leasehold in the Wolfcamp D shale,” Mr Kopcheff said.

He said the company was currently preparing for a hydraulic fracturing program in the vertical wellbore of its existing Thomas Ranch 119 well “in order to gauge the prospectivity of the Wolfcamp D shale for further horizontal drilling and multi-stage fracking.”

“This is an activity that has proved to be very successful in Permian Basin acreage some 60kms to the southwest of Winchester’s leasehold,” Mr Kopcheff added.

Unconventional exploration in Australia

According to USGS Energy Resources Program coordinator Walter Guidoz, the results of the assessment “demonstrate the impact that improved technologies such as hydraulic fracturing and directional drilling have had on increasing the estimates of undiscovered, technically recoverable continuous (i.e. unconventional) resources.”

The findings could also have implications for Australia, with the Federal Resources and Northern Australia minister Matt Canavan even pointing out its importance in a tweet last week.

“This is big news, and another reason why Australia must search for oil in our unconventional basins,” he tweeted while sharing the USGS report.

Although, with unconventional exploration (and particularly, fracking technology) being a highly controversial topic in the country, Mr Canavan’s tweet was met with criticism from social media users.

“No, it’s more reason to search for alternative fuels that don’t drive climate change,” said one tweet.

“Maybe we could focus on developing new technology energy industries instead,” another commented.

Unconventional oil and gas exploration in Australia is currently obstructed by inconsistent legislation, as it is governed by each individual state and territory.

For example, while onshore unconventional exploration and development is broadly permitted in Queensland, Victoria has banned it altogether.

Other states and territories have varying restrictions on development and fracking, specifically. Moratoriums on the practice were lifted in Western Australia and the Northern Territory this year, although only in certain regions.

Mr Canavan is a clear supporter of the technology, having congratulated WA’s McGowan government on its recent change of mind.

“This is a sensible decision that will potentially earn billions of dollars for the WA and national economies,” he said.

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