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Formation in NM, Texas called largest oil reserve in U.S.

Copyright © 2018 Albuquerque Journal

Southeastern New Mexico and West Texas are sitting on a sea of potentially recoverable oil and gas reserves in the Delaware Basin, according to a new report by the U.S. Geological Survey.

The U.S. Department of the Interior said Thursday that two underground layers in the Delaware, known as the Wolfcamp Shale and Bone Spring Formation, together contain 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids.

That’s the largest pool of oil and gas reserves ever announced by the USGS anywhere in the U.S., propelling the Permian Basin in New Mexico and Texas into the nation’s premier zone for energy production with some of the largest recoverable reserves in the world, said New Mexico Oil and Gas Association Executive Director Ryan Flynn.

“Even for someone who understands the resources and potential of the Permian Basin, I can’t help but be surprised by the sheer enormity of what the USGS has reported,” Flynn said. “The Permian resources shared by New Mexico and Texas make this area one of the most important places in the world in terms of oil production.”

And total reserves in the Delaware Basin, an oval-shaped formation within the Permian that stretches from southwestern Texas northward into Lea and Eddy counties, could be far larger than reported. That’s because the USGS looked only at the Wolfcamp and Bone Spring formations, or just two of the many layers of hydrocarbon-filled shale rock zones in the Delaware.

“Those are very important pieces of the basin, but it’s not the whole thing,” Flynn said. “That’s what makes this report so surprising, even for us.”

The USGS said its estimates are for “continuous unconventional oil,” meaning it’s spread throughout the Wolfcamp and Bone Spring formations rather than concentrated in one place. It said the reserves are “undiscovered,” meaning they have yet to be produced, and that they’re “technically recoverable” with current technologies.

The USGS released a separate assessment in 2016 of hydrocarbon potential in the Midland Basin portion of the Permian in West Texas. That report showed 20 billion barrels of unrecovered oil, 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids.

At the time, it was the largest pool of potentially recoverable hydrocarbons ever reported in the U.S. by the Geological Survey. But the latest report on the Delaware shows more than twice the level of oil and many times more natural gas and liquids.

The USGS did not evaluate the profitability of extracting the Delaware resources outlined in its assessment. But modern technologies of hydraulic fracturing, or fracking, into hard rock and then burrowing horizontally into pools of oil and gas trapped in different layers of shale have made production in the Permian, and particularly the Delaware Basin, highly attractive.

Some of the most lucrative gushers in the U.S. spring from the Delaware, converting that zone and other parts of the Permian into the No. 1 oil and gas producing region in the U.S. today.

“The results we’ve released today demonstrate the impact that improved technologies such as hydraulic fracturing and directional drilling have had on increasing the estimates of undiscovered, technically recoverable, continuous resources,” USGS Energy Resources Program Coordinator Walter Guidroz said in a statement.

Given the level of industry activity already underway in the Delaware, the new USGS estimates mean New Mexico will benefit from continued production for many years to come, Flynn said.

The oil boom in southeastern New Mexico has generated $1.2 billion in surplus, or new money, available for state spending in the next fiscal year budget.

“That surplus has the potential to become the norm, not the exception, as we move forward,” Flynn said.

U.S. Interior Secretary Ryan Zinke said Christmas came a few weeks early.

“Before this assessment came down, I was bullish on oil and gas production in the United States,” Zinke said in a prepared statement. “Now, I know for a fact that American energy dominance is within our grasp as a nation.”

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