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Monitoring the Permian basin using Earth observations

A novel way to gain an accurate view of shale activity in close to real time is through the use of satellites. Remote-sensing capabilities have expanded rapidly, along with the commercial availability of high-resolution and very-high-resolution images. 

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The extraordinary boom in US shale is set to continue, with production forecast to top 11 million barrels by 2025. However, the short-term outlook for exploration and production (E&P) activity is looking less certain after January’s 15 percent drop in the price of Brent oil, as well as recent debates over whether peak shale production is in sight.

A novel way to gain an accurate view of shale activity in close to real time is through the use of satellites. Remote-sensing capabilities have expanded rapidly, along with the commercial availability of high-resolution and very-high-resolution images. The combination of on-demand image acquisition, up to daily revisit rates, and advanced-analytics image processing is providing an outside-in way to observe and report activity that offers timely insight and independence from other market sources.

Recent advances in cloud computing and advanced analytics have delivered the enormous image-processing capacity needed to derive highly accurate operational metrics. Unlike approaches that process fuzzy images via AI to “guess” what is happening on the ground, high-resolution imagery allows events to be measured with absolute accuracy, and qualified with fine detail. For example, an inspection can be distinguished from a hydraulic fracturing event, and the number of fracking trucks involved can be counted at pad level.

Gaining valuable insight

The Permian is the most prolific unconventional basin in the US, accounting for more than half of shale production output. Since September 2019, we have monitored 30,000 square kilometers of the basin twice a month using high-resolution imagery, identifying every newly cleared well pad and every drilling or fracking event.

This monitoring has yielded revealing insights that could prove enormously valuable for the many businesses active in the basin, helping them to plan investments, optimize operations, and forecast production.

In the 11 most productive counties—nine in Texas and two in New Mexico—representing roughly 90 percent of activity in the Permian, we found, for instance, that:

  • 1,066 new pads were cleared
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  • 2,290 wells were drilled
  • and 2,109 wells saw hydraulic fracking between September 1 2019 and January 23 2020.

Since the number of fracs is slightly lower than that of new wells drilled, the number of drilled but uncompleted wells (DUCs) has marginally increased over the period.

How has activity evolved?

Over the past four and a half months, we have been monitoring individual wells in the Permian throughout their lifecycle from new well-pad construction to drilling, DUCs, and fracking. By combining our observations with publicly available regulatory data using advanced analytics, we have gained insights into shale oil and gas activity in close to real time. We found that:

New well-pad clearances have been increasing steadily since November 2019, with large public E&P companies leading the pack and a decline in the share of majors. For more than 20 percent of well-pad clearances, permits had not been filed with state regulators.

The number of active rigs has remained stable overall but activity is gradually moving from the Delaware sub-basin, with active rigs down by 12, to the Midland sub-basin, with active rigs up by 13. In terms of operators, we observed a slight decline in drilling activity by majors and a sharp rise in activity among smaller public E&P companies, one of which increased its active rig count from 13 to 19.

Fracking activity has rebounded over the past couple of months after a dip in November 2019, with large public E&P companies leading the resurgence. In the Midland sub-basin, fracking has increased steadily since October 2019, while the Delaware basin has exhibited more cyclical activity.

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The DUC count has risen marginally since September 2019, mainly among majors and private E&P companies.

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Of all fracking activity observed over the period, roughly half was from DUC inventory dating back before August 2019. Reliance on older DUC inventory was greatest among majors, with wells drilled before September 2019 accounting for more than 60 percent of the wells they fracked.

The monitoring of the Permian basin is expected to improve rapidly over the next few months with the addition of critical new data attributes such as working capital (for rigs, pipes, sand, and frac fleets) and pad-specific information on water and sand injection. The availability of this data will open up new opportunities for optimizing operations and monitoring competitors. Over the next few weeks, we will be watching closely to see how global oil and gas dynamics affect activity in the basin in real time.

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