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To Many’s Dismay, Permian Produces More Gas and Condensate Instead of Oil and Profits

To Many’s Dismay, Permian Produces More Gas and Condensate Instead of Oil and Profits

aerial view of West Texas oil fields

As oil prices plummet, oil bankruptcies mount, and investors shun the shale industry, America’s top oil field — the Permian shale that straddles Texas and New Mexico — faces many new challenges that make profits appear more elusive than ever for the financially failing shale oil industry.

Many of those problems can be traced to two issues for the Permian Basin: The quality of its oil and the sheer volume of natural gas coming from its oil wells.

The latter issue comes as natural gas fetches record low prices in both U.S. and global markets. Prices for natural gas in Texas are often negative — meaning oil producers have to pay someone to take their natural gas, or, without any infrastructure to capture and process it, they burn (flare) or vent (directly release) the gas.

As DeSmog has detailed, much of the best oil-producing shale in the Permian already has been drilled and fracked over the past decade. And so operators have moved on to drill in less productive areas, one of which is the Delaware sub-basin of the Permian. Taking a close look at the Delaware Basin highlights many of the current challenges facing Permian oil producers.

Delaware Basin Producing More Gas Along With the Oil

The Delaware Basin is where most of the new oil production is coming out of the Permian. As a Bloomberg Wire story reported in December, “in recent years investments have shifted to the Delaware, where output is much gassier than in the historic Midland portion of the Permian.”

The last thing a Permian oil producer wants is to have natural gas coming out of the ground with the oil because, as Bloomberg notes, this persistent “nuisance” is “undercutting profits for explorers.” That’s a generous assessment because many explorers have no profits to undercut, only losses to grow.

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