“Distance not only gives nostalgia, but perspective, and maybe objectivity.” —Robert Morgan
As we stand here in the still-new 2020s decade and look about us, we can reflect that the ten years that brought us to this moment were some of the most eventful, and even un-anticipated, years that the Permian Basin has known. Distance gives perspective, certainly. Does distance give objectivity? That happens only if we apply the lessons that our perspective gives us. And while I cannot promise I have any knack for applying those lessons—maybe no single individual does—there still remains some value to be taken from the mere attempt. So here’s a quick appraisal of the changes the Basin has seen in ten years, and what we might—might—derive from it.
Just getting our arms around the “changes the Basin has seen” is itself a tall order, and again, it’s hard to deliver on that one as well. So for an abbreviated survey of the past decade, I’ll just compare some news from 2012 with news of today. For our news source, we take up this magazine itself, Permian Basin Oil and Gas, which has been the premiere periodical covering our region for that stretch (and for longer, of course). My own involvement with the magazine began late in 2011, so the year 2012 was still my own Permian “coming of age,” so to speak. It was an eye-opening year, but then it was so vastly different from today, that it’s hard to believe those eras were but ten years apart.
Consider this passage from the October 2012 issue of the magazine:
The March 2014 issue of PB Oil and Gas arrived in prosperous times—a good six months before the downturn that arrived in the autumn of that year. By 2014, the Permian had already astounded the world.
“The Permian Basin is now enjoying a renaissance, thanks to the new technology of horizontal drilling and hydraulic fracturing that has the region’s production curve on an incline for the first time in 30 years…
“Barry Smitherman, then-chairman of the Texas Railroad Commission, said: ‘The Basin is currently producing about 800,000 barrels of liquids a day, which is up significantly from just a year ago. I see no reason why it won’t get to a million barrels… At last count, the Permian Basin was producing 20 percent of our oil production in the Lower 48.’”
That was then. We know how quickly it “got to a million barrels.” It was within less than a year of Smitherman’s remark. But 1 million barrels was just a passing mark on the way to far bigger things.
This year the Basin is projected to eclipse the 4.9 million barrel mark, and that’s just by mid-year. And we already know that the Basin is producing roughly half of the nation’s oil.
In December of 2012, PB Oil and Gas began a three-part series that was an effort to define the phenomenon that was the burgeoning Permian Basin. That series, entitled “Vital Independence,” laid the credit at the feet of the independent oil companies who had “cracked the code” and ushered in the Shale Miracle. As the article stated, “It wasn’t the major oil companies who virtually re-invented the oil and gas industry. It was the independents—mainly in the Barnett Shale and the Permian Basin.”
This magazine was the first periodical to draw such clear, marked distinctions between major oil and independent oil and to show how pronounced was the impact of the independents—which is to say, the oil industry of West Texas and New Mexico. For it was these entities who changed the world.
And for all of that, the year 2012 had not heard of many of the phenomena we now take for granted: pad drilling, 2-mile laterals, million-gallon fracs, drilling “fairways” and “corridors,” fully automated drilling rigs.
As we reported in 2012:
“As for the contributions of the independent E&P companies on the whole—well, that explosion of ingenuity and resourcefulness and achievement is one that continues to resound and resonate through not just the energy business itself, but through Wall Street, main street, credit markets, international economies, export markets—indeed, the entire world. One and all, these farflung entities and enclaves owe their gratitude to the independent oil and gas companies—companies that dominate the Permian Basin…. Big Oil did not effect this miracle. It was the next-level-down that did it.”
We quoted oilman Bob Landreth on that point. “The majors [major oil companies] will never again be the force they used to be 40 or 50 years ago. That is not going to happen.”
Well, maybe the majors are not what they once were, but as for being a force (once again) in the Permian—that was one development that many of us did not expect. And yet here we are.
Big Oil vacated its place in the Permian in the 1980s and 1990s, leaving it for greener prospects offshore and overseas. That’s where they were when the Shale Revolution erupted.
In 2012, Big Oil wasn’t giving off signs of coming back to the Permian Basin. Nor did we at this magazine consider that to be a likely prospect—they were already on the outside, looking in. The independents held all the leaseholds. Of course, it wasn’t but a few years—it really gathered momentum in the bust of 2015—that the majors started buying their way into the play.
But in those heady years before the majors returned, the independents had a heyday. It was a bullish time, of course, but it was also an ebullient time. The independents, when they had the Basin to themselves, were a different breed. They thought big, and they were passionately pro-oil. There was none of this “decarbonization” talk in their circles. There was no insistence on O&G being “transition” fuels. There was no “ESG” movement. Instead, it was all enthusiasm and pride and go-getter-ism. It was the time of “Drill, Baby, Drill,” with no apologies.
That’s largely gone. With the major multi-national oil companies now dominating the scene, the talk has shifted to a kind of “phase out” mentality. Some majors even seek to project how un-involved in oil production they can become by 2030, 2050, or beyond.
That’s to say nothing of the dampening effect that has come with the election of 2020 and the White House shifting to a Progressive administration. The killing of the Keystone Pipeline and the government’s pursuit of greater imports of Russian oil and OPEC oil shows where the politics reside now.
We stand at a pinnacle of success as far as innovation and industry have taken us. With the Basin on the threshold of 5-million-barrels-a-day production, this would seem to be a cause for rejoicing, not apologies.
So what are the changes of a decade? In work and in achievement, they’ve been extraordinary. Bordering on miraculous. But in terms of outlook and pride, the changes have been for the worse.
But that’s not to say we should take these reversals as something irreversible. The Basin has a long history of beating the odds. Already, we are seeing signs that the capital markets’ “blacklisting” (so to speak) of oil is losing some of its sway. Public sentiment is turning on oil-unfriendly funds such as Blackrock. We are not out of these doldrums yet, but we are not beaten by them, either. Can 2022 be a year of reaching an inflection point? Why not? And when it happens, that Basin spirit will rise again.