Permian Basin Thesis

by David Archibald

19 February 2025

 

In May 2023 there was a break in trend of the Howard County gas/oil ratio, against oil production. After the break in trend, Howard County’s oil production stopped climbing and went into a near-straight line decline of 2.5% per month. The cause of the change in trend is likely due to the reservoir pressure dropping below the bubble point.

 

Figure 1: Howard County Gas/Oil Ratio January 2018 – November 2024

 

Three other major oil-producing counties in Texas have now also broken their uptrend on gas/oil ratio plotted against production — Midland, Martin and Karnes counties.

 

Figure 2: Midland County Gas/Oil Ratio January 2018 – November 2024

 

Figure 3: Martin County Gas/Oil Ratio January 2018 – November 2024

 

Figure 4: Karnes County Gas/Oil Ratio January 2018 – November 2024

 

If we assume that Midland, Martin and Karnes counties will now have declining oil production following the example of Howard County, of an average of 2.5% per month, then we can predict most of Texas’ oil production decline for the next two years with some confidence:

 

Figure 5: Projected oil production for four counties in Texas to December 2026

 

The total decline rate for these four counties is about 400,000 barrels/day/annum for the next two years. In the neighbouring state of New Mexico, Lea and Eddy counties currently each produce about one million barrels per day of oil. They can also be expected to tip over into decline in 2025, as the reservoir pressure falls below the bubble point. By the end of 2025 the annualised rate of production decline from the Permian Basin can be expected to be of the order of one million barrels per day.

 

David Archibald is the author of The Anticancer Garden in Australia