Peak Permian? Geology And Water Say We're Close

The Permian Basin, the top US oil-producing basin, has started to show signs of geological limits, with some areas exhausted and others not expected to be as prolific. Despite record US crude oil production, growth has slowed since 2022, and top executives at major shale firms believe that Permian oil production could hit its peak as early as the end of this decade. The gas-to-oil ratio in the Permian has risen from 34% in 2014 to 40% in 2024, indicating that the basin is reaching geological constraints. Higher water-to-oil ratios also suggest that the basin is facing challenges, with four barrels of water produced for each barrel of oil. The Permian still leads US oil production growth, but forecasters expect growth to slow down. Total US crude oil production is expected to average 13.61 million bpd this year and 13.76 million bpd next year, according to the Energy Information Administration. Executives at major oil companies, including Occidental Petroleum and ConocoPhillips, expect US oil production to peak between 2027 and 2030 and then decline. The decline is expected to be slow due to the large amount of resources left to drill, but the remaining resources may not be as oil-yielding as the best Permian locations. The increasing water-to-oil ratio and gas-to-oil ratio will drive costs for oil producers higher, making it challenging for them to operate at low oil prices. The US oil industry is concerned about the impact of low oil prices, with one executive noting that a $50 per barrel oil price would lead to a significant decline in US oil production.