Energy Security

The Permian Basin is essential to meeting future energy needs, and with new advances, can do so while enhancing global efforts to reduce climate challenges. The United States is the top oil and gas producer in the world—and the Permian Basin accounts for nearly half of all U.S. production. The region is also a major center for renewable energy resources and innovative technologies that facilitate global production. The region is critical to U.S. energy security and improving the trade balance fostered by energy exports.

Despite temporary disruptions due to the COVID-19 pandemic and the February 2021 winter storm, the Permian Basin’s annual oil production has increased over the past three years, from 1.59 billion barrels in 2019 to 1.64 billion barrels in 2021.7 Production increased in early 2022 as the world economy returned to normal growth patterns and prices elevated because of supply and demand and the dislocations from the Russian invasion of Ukraine. Monthly production of natural gas in the Permian Basin has also risen. Overall annual natural gas production in the Permian has increased from 5.5 TCF (trillion cubic feet) in 2019 to almost 6.5 TCF in 2021.8

The Permian Basin has advantages over many regions, with massive untapped reserves from multiple layers of shale rock, costly energy infrastructure already in place, high driller productivity rates and relatively low breakeven costs. While the COVID-19 pandemic and associated decrease in demand and prices caused a major drop in rig counts in both New Mexico and Texas, rig counts are now steadily increasing. The total rig count fell from nearly 400 in mid-March 2020 to a low of 117 on August 14, 2020. Since that time, the number of rigs has rebounded to a total of 350 on July 15, 2022. According to Rystad Energy, the total completed lateral footage of wells in the Permian is expected to reach a record high of 50 million feet in 2022, beating 2021’s total of 45.8 million feet and racing past pre-COVID-19 levels of 47.5 million feet seen in 2019. Ongoing gains in rig count, frac count and operational efficiencies are to be expected.

Liquefied Natural Gas (LNG) is a rapidly growing segment of the international energy market and represents an emerging growth opportunity within the Permian Basin. The United States is now the world’s leading exporter of LNG as Europe’s energy crisis, Russia/Ukraine supply issues and shortages in China, and a growing demand for cleaner fuels, send demand for American shipments soaring. The U.S. Energy Information Administration (EIA) projects U.S. LNG exports will reach 11.4 billion cubic feet per day (bcfd) in 2022. This would account for roughly 22% of expected world LNG demand of 53.3 bcfd next year, according to Goldman Sachs analysts, and would outpace both Australia and Qatar, the two other largest exporters at present.

Production for the Permian Has Increased From

1.59b 1.64b

Barrels from 2019 to 2021

5.5 TCF 6.5 TCF

in Overall Annual Natural Gas Production from 2019 to 2021

Because LNG has opened the distribution of natural gas to areas well beyond the traditional pipeline network, it is rapidly creating a global natural gas market. The total number of U.S. cargoes shipped to Europe and Turkey in the first two months of 2022 reached a record of 164, according to Independent Commodity Intelligence Services (ICIS), a data intelligence firm. The previous record was 125 cargoes in the first quarter of 2020. LNG exports from the United States topped 7.7 million tons in December, according to ship-tracking data from ICIS LNG Edge, narrowly edging out rival producers Qatar and Australia for the first time. The U.S. only shipped its first LNG cargo from the lower 48 states in 2016 and has risen to become the world’s top exporter in just six years, as a shale gas revolution boosted domestic production and turned the country into a powerful force in global energy markets. The ports along the Texas Gulf Coast are home to the majority of active LNG facilities in the U.S., with others currently under development. In 2021, more than 46% of natural gas produced in Texas was produced in the Permian Basin.9 The resources within the region are well connected via pipeline to the areas where LNG facilities are located, and Permian Basin production supports LNG exports. This segment is still in its early stages (the first shipment from the Port of Corpus Christi occurred in December 2018), but it will be vital in future efforts to deliver clean energy throughout the world.

The Permian Basin holds significant oil and gas resources, clean energy sources and sources for LNG potential. This positions the region to provide much-needed energy to support global growth and prosperity, while addressing concerns of climate change and energy security.

7 Texas oil production data is from the Texas Railroad Commission Production Query System. New Mexico oil production data is from the State of New Mexico Oil Conservation Division Monthly County Production Summary. Sums were calculated by The Perryman Group. 8 Texas gas production data is from the Texas Railroad Commission Production Query System and New Mexico gas production data is from the State of New Mexico Oil Conservation Division Monthly County Production Summary. Sums were calculated by The Perryman Group. 9 https://www.rrc.texas.gov/oil-and-gas/research-and-statistics/production-data/ texas-monthly-oil-gas-production/ for Texas total; Texas Railroad Commission for Permian Basin total; calculated percent