Delaware Basin

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Introduction

The Delaware Basin is a hydrocarbon rich sedimentary basin that lies within the Permian Basin. The Delaware Basin covers around 6.4 million acres in far West Texas and South Eastern New Mexico. It is located in an arid southwestern portion of the United States of America.

Map showing the area covered by the Delaware Basin.

History

During the early 1900’s during the initial exploration boom in Texas, the Permian Basin, which includes the Delaware Basin, was overlooked as a “graveyard”. The area of the country where the Delaware and Permian Basin is located is arid and sparsely populated. During the early 1920’s there was not a single producing well within 100 miles of the Delaware Basin. Frank Pickrell founded Texon Oil and Land Company. Pickrell had acreage leased in the Permian and a tight time constraint. A geologist had pinpointed a target miles away from the railroad where the drilling equipment was delivered. However, Pickrell’s lease was about to expire so he ordered his men to drill a wildcat well 124 feet from the railroad station. This well was named the Santa Rita #1. On May 27, 1923 the well blew out. It produced 100 to 150 barrels of oil a day. Because of the lack of pipelines, the oil from the Santa Rita #1 was transported by railroad. The Santa Rita #1 spurred further investment and exploration for conventional reserves in the Permian. During the original oil boom in the Permian basin, drillers targeted conventional wells.[1] Conventional drilling in the Permian basin was said to be "In the late afternoon of life and the sunset is almost in view." in 1978 as Permian oil production entered a period of decline. [2]

However, as horizontal drilling and fracking technology developed, it became economical to target non-conventional shale plays within the Delaware Basin. With the advent of horizontal drilling and hydraulic fracturing, production in the Permian Basin grew from 920,000 barrels per day to 2 million barrels per day.[3] In the later half of 2016, the Delaware Basin became one of the most popular plays in the USA. Companies started acquiring a lot of acreage once it became clear that pre-tax Internal Rate of Return exceeded 50% at mid $50 a barrel. Wells in the Delaware average $6 to $8 million dollars per well. [4]

Geology

A stratigraphic map displaying the different formations within the Delaware Basin.

The Delaware Basin was a sea that evaporated. As a result, it contains many evaporites including sylvite, salt, gypsum and other minerals. As a result, The water produced when drilling for oil in the Delaware Basin needs to be disposed of through salt water disposal methods, such as reinjection.[5] Sand in the Delaware Basin is mined for use as proppant in unconventional oil and gas wells.[6]

As you can see from the diagram to the right, there are many different formations within the Delaware Basin. These formations have been described by geologist as similar to a "layer cake". In fact, geologist postulate that there may be as many as a dozen produceable plays within the Delaware using modern horizontal drilling and fracking techniques. This allows one wellpad to produce multiple formations. This has environmental advantages as well as economic advantages.[7]

The Wolfcamp Shale is of particular interest due to the prolific volume  of oil and gas contained within it. The Bone spring formation is the most productive formation. [8]

Geologic Risks

Fracking is key to the development of unconventional wells in the Delaware Basin.Unconventional wells in the Permian take millions of barrels of water to frack. Because the Delaware Basin is located in an arid region, sourcing water for frack jobs is difficult and expensive. In addition, producing wells will produce a lot of salt water that has to be disposed of properly. This adds to the cost of production. Many wells in the Delaware Basin produce 5-10 barrels of salt water to every barrel of oil they produce. Unfortunately, often the salt water cannot be used in the fracking process so you have a two fold issue of disposing and acquiring massive amounts of water. Transporting millions of pounds of proppant from the trains that bring them in to the well site is another logistical problem that adds significant cost to wells in the Delaware Basin. [9] 85% of gas in the Delaware Basin contains greater than 100 ppm Hydrogen Sulfide. Hydrogen Sulfide corrodes pipes and adds substantial cost to wells which must use H2S resistant metals in wells containing H2S. This can add significant cost to wells. [10] Prairie chickens are an endangered bird that happen to live in the Permian. Well producers must abide by regulations as to not disturb the birds unnecessarily. Drillers need to file a plan that shows how they will prevent environmental harm coming to the birds. This includes limiting unnecessary travel through their habitat and not drilling during certain times of the day when the birds are active. [11] [12]

Petroleum Elements

Seal

Seals trap hydrocarbons from escaping to the surface. Hydrocarbons are lighter than water and will escape to the surface and ultimately the atmosphere unless there is an impervious layer of rock that blocks migration to the surface. Seals for this play include anhydrite, shaly carbonates, dolomite, and other evaporites. Think of an ocean evaporating and leaving behind a lot of salt and other things that were previously in the water. This results in a effective seal for hydrocarbons and effective stratigraphic traps.

Source Rock and Migration

Lagoonal shales and shaly limestone provide the source rocks for the hydrocarbons found within the Delaware Basin. As the facies shifted over geologic time, they left behind various layers of alternating shales as the depositional environment shifted with the water level. In unconventional plays, the source rock and the reservoir is the same. The most prolific unconventional source rock in the Delaware Basin is the Bone Spring formations. The oil recovery factor within the Bone Springs formations has increased in recent years to as high as 34%.[13]

Reservoir

The reservoirs within the Delaware basin are porous and permeable carbonates such as limestone and dolomite as well as sandstones. The Ramsey Sandstones in the Delaware Basin act as reservoirs for the conventional fields in the area. The Ramsey Sandstones range from 15 to 30 feet thick. The hydrocarbons are trapped with an updip facies change into low permeability silt stone. Research has indicated that the Ramsey Sandstones were deposited by turbidity currents in deep water channel levees.[14] The Bone Spring Shale is found at depths between 8,000-11,000 ft. [15]

Trap

The traps in the Permian are mostly stratigraphic traps from the layers of limestone that cover the reservoirs. These are from progressive lagoons and reefs moving back and forth over time. This facies change will often result in a impermeable facies overlaying a reservoir, which creates a trap. [16]

Future Petroleum Potential of this Area

It appears that the Delaware Basin will continue to be a productive play into the foreseeable future. Barring any regulatory interference or unseen changes, the Delaware Basin will continue to produce massive amounts of hydrocarbons. Texas has a relatively favorable legislative environment for oil and gas producers. The main risk to the future petroleum potential in the Delaware Basin is economic. It appears that most unconventional wells in the area have a breakeven cost around $30 per barrel. The scenario where future production potential of the Delaware Basin is imperiled is a scenario where the price stays around $25 per barrel or less for a significant period of time. [17]

Petroleum and Facility Engineering

A map displaying the growth of wells targeting the Bone Spring formations from 2004 to 2019.

CO2 injection has been an moderately effective method of enhanced oil recovery for conventional wells within the Delaware Basin. However, the marginal increase in production has been less than other wells that used CO2 injection. Researchers speculate this is due to the turbidity channel depositional environment for targets in the Delaware Basin.[18] With the advent of horizontal drilling and hydraulic fracking, producers began targeting tight shale plays such as the Wolfcamp shale and Bone Springs tight sands. This evolution in technology caused a boom in drilling activity across the Delaware Basin. Estimating porosity, net mineral pay and water saturation are all very important considerations for these wells. Mud logs, porosity analysis and other logging techniques are very important in confirming the mineralogy of the target formation in order to have the right information for the frack job. [19] Multi stage and multi cluster hydraulic fracturing jobs are used in the Delaware basin to increase marginal production per well. These are often used to target unconventional Wolfcamp formations. [20] Formation conditions within the Delaware basin are not consistent. This leads to variation in the type of cement and casing selections. [21] There are three oil refineries located in or around the Permian Basin. These include Navajo in New Mexico and El Paso and Big Spring in Texas. As of 2017, there were 4 major crude pipelines out of the Permian Basin. Basin and Centurion pipelines run to Cushing, Oklahoma. The Philips pipeline runs to Borger Texas north of the Permian Basin. The West Texas Gulf Pipeline runs east Southeast and East to Goodrich, TX and Longview, TX. In 2016, due to an significant lower price differential between regional Permian oil and oil prices in other regions, 6 new pipelines were operational. These pipelines brought oil to different regions in Texas and Lousiana including refineries on the gulf coast.[22] Arguably the most prolific play within the Delaware Basin is the Bone Spring formations. From 2005 to 2019, the amount of producing wells targeting the Bone Spring formations gre from 436 wells to 4,338 wells. With the advent of horizontal drilling and hydraulic fracturing wells became more productive as well. Between 2005 and 2019, average initial daily crude oil production per well for the first 6 months of operation went from 67 to 770 barrels per day.[23]

See also

Permian Basin

References

  1. Darcy, Joseph R. “From the Drake Well to the Santa Rita #1: TheHistory of the U.S. Permian Basin: A Miracle OfTechnological Innovation.” Oil and Gas, Natural Resources, and Energy Journal 3, no. 5 (January 1, 2018). https://digitalcommons.law.ou.edu/cgi/viewcontent.cgi?article=1134&context=onej.
  2. Mcrae, Shaun. “Crude Oil Price Differentials and Pipeline Infrastructure.” National Bureau of Economic Research, December 2017. https://doi.org/10.3386/w24170.
  3. Mcrae, Shaun. “Crude Oil Price Differentials and Pipeline Infrastructure.” National Bureau of Economic Research, December 2017. https://doi.org/10.3386/w24170.
  4. Harp, Alan. “America's Hottest Oil Play: The Southern Delaware Basin.” Stout, May 1, 2017. https://www.stout.com/en/insights/article/sj17-americas-hottest-oil-play-the-southern-delaware-basin/.
  5. Lemons, Casee R. “Spatiotemporal and stratigraphic trends in salt-water disposal practices of the Permian Basin, Texas and New Mexico, United States” Environmental Geosciences Journal 4, no. 26 (December 15, 2019). https://pubs.geoscienceworld.org/eg/article-abstract/26/4/107/575986/Spatiotemporal-and-stratigraphic-trends-in-salt?redirectedFrom=PDF
  6. Darcy, Joseph R. “From the Drake Well to the Santa Rita #1: TheHistory of the U.S. Permian Basin: A Miracle OfTechnological Innovation.” Oil and Gas, Natural Resources, and Energy Journal 3, no. 5 (January 1, 2018). https://digitalcommons.law.ou.edu/cgi/viewcontent.cgi?article=1134&context=onej.
  7. Darcy, Joseph R. “From the Drake Well to the Santa Rita #1: TheHistory of the U.S. Permian Basin: A Miracle OfTechnological Innovation.” Oil and Gas, Natural Resources, and Energy Journal 3, no. 5 (January 1, 2018). https://digitalcommons.law.ou.edu/cgi/viewcontent.cgi?article=1134&context=onej. . [1]
  8. Mark A. Engle, Francisco R. Reyes, Matthew S. Varonka, William H. Orem, Lin Ma, Adam J. Ianno, Tiffani M. Schell, Pei Xu, Kenneth C. Carroll, Geochemistry of formation waters from the Wolfcamp and “Cline” shales: Insights into brine origin, reservoir connectivity, and fluid flow in the Permian Basin, USA, Chemical Geology, Volume 425, 2016, Pages 76-92, ISSN 0009-2541, https://doi.org/10.1016/j.chemgeo.2016.01.025. (http://www.sciencedirect.com/science/article/pii/S0009254116300419)
  9. Darcy, Joseph R. “From the Drake Well to the Santa Rita #1: TheHistory of the U.S. Permian Basin: A Miracle OfTechnological Innovation.” Oil and Gas, Natural Resources, and Energy Journal 3, no. 5 (January 1, 2018). https://digitalcommons.law.ou.edu/cgi/viewcontent.cgi?article=1134&context=onej. . [2]
  10. Xia, Daniel “Hydrogen Sulfide in the Permian Basin” AAPG Annual Convention and Exhibition (April 4, 2017). http://www.searchanddiscovery.com/abstracts/html/2017/90291ace/abstracts/2607979.html
  11. Jankowitz, R., 2007. Oil And Gas Development Guidelinesconserving New Mexico’S Wildlife Habitats And Wildlife. [online] Wildlife.state.nm.us. Available at: <http://www.wildlife.state.nm.us/download/conservation/habitat-handbook/Oil-and-gas-develelopment-guidelines.pdf> [Accessed 28 April 2020].
  12. Thomas W. Lipp and Andrew J. Gregory , Environmental Impacts of Energy Development on Prairie-Grouse and Sage-Grouse in the Continental United States(2018)SDRP Journal of Earth Sciences & Environmental Studies 3(1 https://www.siftdesk.org/article-details/Environmental-Impacts-of-Energy-Development-on-Prairie-Grouse-and-Sage-Grouse-in-the-Continental-United-States/310
  13. Popova, Olga. “U.S. Energy Information Administration - EIA - Independent Statistics and Analysis.” EIA updates geologic maps of the Delaware Basin's Bone Spring formation - Today in Energy - U.S. Energy Information Administration (EIA). EIA, December 4, 2019. https://www.eia.gov/todayinenergy/detail.php?id=42175#tab4.
  14. “OUTCROP CHARACTERIZATION.” Reservoir characterization, Delaware Basin, Project Summary. Accessed April 29, 2020. http://www.beg.utexas.edu/resprog/delbas/summary.htm.
  15. “Bone Spring: A Sleeping Giant.” IHS Markit. IHS Markit, October 16, 2019. https://ihsmarkit.com/research-analysis/Bone-spring-a-sleeping-giant.html.
  16. Febuary 13, 2013 Petroleum System of the Upper Permian - Permian Basin (Online) Available at:(http://www.sepmstrata.org/page.aspx?pageid=138)[Accessed 28 April 2020].
  17. Harp, Alan. “America's Hottest Oil Play: The Southern Delaware Basin.” Stout, May 1, 2017. https://www.stout.com/en/insights/article/sj17-americas-hottest-oil-play-the-southern-delaware-basin/.
  18. Shirley P. Dutton, William A. Flanders, Mark D. Barton; Reservoir characterization of a Permian deep-water sandstone, East Ford field, Delaware basin, Texas. AAPG Bulletin ; 87 (4): 609–627. doi: https://doi-org.ezproxy.lib.ou.edu/10.1306/10100201085
  19. Malik, Mayank, Christopher Schmidt, Ed Joseph Stockhausen, Nathan Kyle Vrubel, and Ken Schwartz. “Integrated Petrophysical Evaluation of Unconventional Reservoirs in the Delaware Basin.” SPE Annual Technical Conference and Exhibition, 2013. https://doi.org/10.2118/166264-ms.
  20. Parker, Justin, Lucas W. Bazan, Van P. Tran, Robert White, and Michael G. Lattibeaudiere. “Technology Integration: A Methodology to Enhance Production in Horizontal Wolfcamp Shale Wells in the Delaware Basin.” SPE Liquids-Rich Basins Conference - North America, 2015. https://doi.org/10.2118/175535-ms.
  21. Gibbs, Max A. “Delaware Basin Cementing - Problems and Solutions.” Journal of Petroleum Technology 18, no. 10 (January 1966): 1281–85. https://doi.org/10.2118/1401-pa.
  22. Mcrae, Shaun. “Crude Oil Price Differentials and Pipeline Infrastructure.” National Bureau of Economic Research, December 2017. https://doi.org/10.3386/w24170.
  23. Popova, Olga. “U.S. Energy Information Administration - EIA - Independent Statistics and Analysis.” EIA updates geologic maps of the Delaware Basin's Bone Spring formation - Today in Energy - U.S. Energy Information Administration (EIA). EIA, December 4, 2019. https://www.eia.gov/todayinenergy/detail.php?id=42175#tab4.