It was between Carlsbad and Loving, I think, that I saw my first natural gas flare. In the Permian, oil is usually the first priority, and while natural gas production in the region is large and rising, the infrastructure to capture and convey it has lagged, so lots gets burned off in the field. Farther south, there were times when I could see flare after flare after flare all the way to the horizon, until the land got so flat that I couldn’t see the horizon anymore.
When U.S. shale emerged as a threat to OPEC in 2014, the cartel tried to kill it off by flooding the market with crude, sending oil prices below $30 a barrel. The move backfired: While some of the weaker U.S. players were swamped, others cut costs aggressively and invested in new technology. The American industry emerged leaner and stronger. Today, U.S. drillers are unshakably confident. “The Permian is huge,” says Vicki Hollub, chief executive officer of Occidental Petroleum Corp., the basin’s biggest producer, in an email. It “has the capability to sustain its position with respect to the rest of the world for another decade or two at least.”
The Permian, however, is also showing signs of overheating. Sand, which is used to prop open the fractures in rock that allow the oil to flow, has become a precious commodity that fetches about $60 a ton. Truck drivers command salaries of $150,000 a year. Getting a child into day care “is like you’re scalping tickets to a Rolling Stones concert,” says Jessica McCoy, a mother in Midland, Texas, the Permian’s unofficial capital. And the region’s roads, overwhelmed by the sheer volume of trucks barreling down thoroughfares designed for farm traffic, are among the deadliest in the country.
Meanwhile, a shortage of pipelines to transport crude from the Permian’s fields to refineries and tankers on the Gulf Coast threatens to cap production growth at least until next year, when new conduits come online. The basin’s total output has been growing by an estimated 31,000 barrels a day, down from the 134,000 barrels-a-day gains logged in October of last year.
Operators will have to spend more than $300 billion in the next five years to meet the industry’s goal of boosting the Permian’s production by half, according to Arthur D. Little, a Boston-based consulting firm.