What is the Permian Basin?

The Permian Basin is a significant oil and gas producing region to consider given its size, rich history and expected potential. What sand is to the Sahara, oil is to the Permian Basin — by some estimates, 30 billion barrels of crude oil and 75 trillion cubic feet of natural gas have been recovered from the region thus far. 

The Texas cities of Midland, Odessa and San Angelo serve as the headquarters for oil production activities for most of the Permian Basin. Located across western Texas and eastern New Mexico, the Permian Basin spans 75,000 square miles and accounted for 43% of the U.S. crude oil production and 17% of U.S. natural gas production last year alone, according to the U.S. Energy Information Administration. More than half of all oil rigs in the United States are currently at work in the Permian Basin, per Baker Hughes Rig Count Data.

According to the Railroad Commission of Texas (RRC), the state's oldest regulatory agency, the Permian Basin houses more than 7,000 oil fields across West Texas. The RRC notes various producing formations — including the Yates, San Andres, Clear Fork, Spraberry, Wolfcamp, Yeso, Bone Spring, Avalon, Canyon, Morrow, Devonian, and Ellenberger — make up the Permian Basin, with oil and natural gas production depths ranging from a few hundred feet to as many as five miles deep below the surface. 

The most notable of the smaller basins in the Permian Basin include the Delaware and Midland basins. The Delaware Basin, in the eastern part of the Permian Basin, spans 13,000 square miles and extends from Lea and Eddy counties in New Mexico in the north down to Pecos County, Texas, in the south. 

In the western section of the Permian Basin, the Midland Basin is the deepest of the Permian sub-basins, spanning roughly 14,000 square miles from Lynn County, Texas, in the north to Crockett County, Texas in the south.

Oil from these two basins migrates to the Central Basin, which is reportedly responsible for over 90% of the oil recovered from the Permian Basin to date, according to the energy research company Enverus.

The Permian Basin, Then and Now

The history of the Permian Basin dates back to the days of the dinosaurs. The name, "Permian," refers to the geological time frame approximately 251 to 291 million years ago. A "basin," by the way, is a geological term for a dip or depression in the earth's surface.

The first oil well was drilled in the region in 1919. But, because it was far from a gusher (only 10 barrels of oil a day), the original owner sold the operation to an investor who, after two years of drilling, did finally strike it rich with oil well Santa Rita No. 1.

According to the American Oil & Gas Historical Society, oil and natural gas began to show at the well on May 25, 1923. “On May 28, a loud roar was heard and Santa Rita No. 1 blew in. People as far away as Fort Worth traveled to see the well. When the necessary casing and other well equipment arrived a month later, it was brought under control — and the first commercial well in the Permian Basin went into production." 

That well continued to produce oil for 70 years.  

The Basin has had its ups and downs over the years — due to the 1973-74 Oil Embargo, oil production peaked before steadily declining to an all-time low after the 2008 recession. The Basin's resurgence around 2011 is attributed to the wide scale use of new horizontal drilling and hydraulic fracturing techniques, according to the Federal Reserve Bank of Dallas.

Technology’s Impact

Technology has had a big role in production going up — by no longer going down. 

This large, sedimentary basin features stacked reservoirs with oil and gas production depths ranging from a few hundred feet to five miles below the surface. When you can no longer get as much oil by drilling down, going sideways can lead you to success.  

"The geology of the Permian Basin is unique because it contains multiple ‘stacked plays,’” explains Chevron, a top operator in the Midland and Delaware basins. "These enable a single well to produce oil and natural gas from several layers of rock in different geological zones. That multiplies the basin’s natural resource potential. Stacked plays allow for multiple wells from a single pad location, using shared infrastructure."

When a long, horizontal well is fracked many times along its length, the fracking works to tease the oil molecules from the layer. The oil then flows back to the horizontal well and up to the surface.

According to the U.S. Energy Information Administration, the number of new horizontal wells increased to 4,524 in 2021, compared with just 350 in 2010. The average well length, horizontally, increased to more than 10,000 feet in the first nine months of 2022 alone, compared to less than 4,000 feet in all of 2010. At the beginning of 2020, there were nearly 400 operators in the Permian Basin including ExxonMobil, Shell, BP, and ConocoPhillips, though the vast majority of operators are smaller independent producers.

By applying horizontal drilling and hydraulic fracturing techniques, the Basin began regaining its esteemed position around 2010 and in April 2022 accounted for 43.6% of U.S. oil, up from 18.1% in 2013, according to the Federal Reserve Bank of Dallas. It is forecasted to reach one million barrels of oil-equivalent production per day in 2025 according to Chevron, which attributes its success to using advanced technologies including predictive analytics, advanced mapping of rock layers, and other tools.

A 2021 article published by the Colorado School of Mines reached the same conclusion.

"The geologic complexity of the prolific hydrocarbon reservoirs require unconventional, integrated geologic and engineering solutions to successfully extract hydrocarbons from the stacked, heterolithic source-reservoir systems," reads the report. "Continued research and development in the Permian Basin will be necessary for the basin to continue to be America’s most prolific petroleum basin.”

Besides oil and natural gas, the Permian Basin is also known for its major sylvite formations that are a source of potassium salt, also known as potash, which itself is mined for rock salt. The New Mexico portion of the Permian Basin is the top producer of potash in the United States. Potash is most commonly used as an agricultural fertilizer. 

The Permian Basin wells also produce large volumes of saltwater, which has created a business for some haulers who truck saltwater to injection wells across the basin where it is transported via pipeline to recycling facilities for use in hydraulic fracturing and irrigation.

Still, oil has and will continue to be the mainstay of the Permian Basin. As technology continues to advance, new wells will be drilled and the region will remain key to the growth of crude oil and natural gas production in the U.S.

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