Billions of Barrels of Oil Discovered in Texas
10 Walter Russell Mead's Blog by Jamie
A U.S. energy company just discovered a “world class” oil and gas resource in west Texas, out on the fringes of the already prolific Permian basin. The WSJ reports on Apache Corp.’s encouraging new find:
The discovery, which Apache is calling “Alpine High,” is in an area near the Davis Mountains that had been overlooked by geologists and engineers, who believed it would be a poor fit for hydraulic fracturing. It could be worth $8 billion by conservative estimates, or even 10 times more, according to the company. […]
The company has begun drilling in the area and says the early wells, which produce more natural gas than oil, are capable of providing at least a 30% profit margin at today’s prices, including all costs associated with drilling. Some are so prolific that they can break even at a price of 10 cents per million British thermal units, according to the company. Natural gas futures closed Tuesday at $2.72. […]The new play is a short distance from extensive drilling operations and is likely to stoke the speculative fever that has recently engulfed the Permian, a vast swath of geology in West Texas and New Mexico that has been gushing oil and gas for almost 100 years. The Permian has become popular again because producers have found ways to use newer technologies to extract oil from the area at a profit, even at current below-$50-a-barrel prices. The oil industry has a long history of big discoveries that haven’t panned out, but there’s already a lot to be excited about with the Alpine High resource. For one, the first wells are already proving profitable, even at today’s bargain hydrocarbon prices. Secondly, the field’s proximity to existing drilling operations will make it easier to source the necessary transportation and services.
Speaking of long histories, this is yet another example of those “peak oil” decriers looking foolish. Gaia’s riches continue to surprise even the more bullish analysts among us, and the shale revolution put an end to the notion that the planet’s energy carrying capacity was somehow tapped out. In reality, large new reserves of oil and gas are being discovered all around the world. We’re living in an era of extraordinary energy abundance, and thanks to a market environment that has accommodated a deep pool of companies interested in exploring and inventing new ways to drill more with less, the United States stands at the center of this renaissance.
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