Upcoming Decline in Primary U.S. Oil Output? The Need for Enhanced Oil Recovery Will Grow

     U.S. oil output is not infinite. While we have significant supply for the years ahead, we are already seeing the beginnings up ahead in the distance of the shrinking of premium acreage and well production decline.

     The Permian Basin is producing 6.5 million barrels per day, just less than half of the 13.5 million barrels per day of total U.S. oil production. However, as Reuters reports, NOVI Labs notes that in the Permian sub-basins, the Midland Basin has drilled about two-thirds of the core acreage, and over half of the core acreage in the Delaware Basin has been drilled. Of course, there are still new zones being evaluated, such as the Dean in the Midland and the Pearsall in South Texas. Other potential additions include drilling deeper to the Barnett and Woodford in the Midland Basin. Drilling in the Permian Basin as a whole exceeded 6000 wells drilled and completed in 2023, as noted below. It was done with fewer rigs and longer laterals.

     The Permian Basin also produces large amounts of associated natural gas, and those amounts are rising as the gas-to-oil ratio (GOR) increases, as is typical for oil fields. The region also produces lots of formation water,r which is challenging to treat and dispose of. Occidental CEO Vicki Hollub thinks the Permian will see peak production between 2027 and 2030, just a few years away. Continental founder and billionaire Harold Hamm agrees that Permian production is plateauing.

“The gas-to-oil ratio (GOR) has risen steadily from around 3,100 cubic feet of natural gas per barrel of oil produced (cf/b), or 34% of total production in 2014, to 4,000 cf/b, or 40%, in 2024, the EIA said.”

The Basin produces four barrels of water for every barrel of water produced, which is much higher than in most oil fields, where one to one is more common. The water-to-oil ratio (WOR) can rise to as much as 12 to 1 on the fringes. At a four-to-one WOR, that means $2 per barrel of water disposal costs.

     The Bakken oil field mainly in North Dakota, is even further into decline territory. Proven reserves in the Bakken and Three Forks formations are 7 billion barrels, and adding in probable and possible reserves makes it 10 billion barrels. Total oil in place could be as much as 20 billion barrels. Even so, the field is beginning to decline.

     Other oil plays, such as the Utica Shale in Ohio, have great economics but have an oil window that is quite limited in extent. The Uinta Basin in Northeast Utah is another emerging oil play that can add some reserves but not enough to offset the prolific Permian.

     Mouin Almasoodi, Subsurface Engineering Manager at Devon Energy, notes in a LinkedIn post that most U.S. oil production is now “front-end loaded” and thus, we must consider enhanced oil recovery for these unconventional wells.

“With the U.S. now producing ~13.5 million barrels of oil per day, the highest in the world, many overlook a critical vulnerability: over 55% of this production comes from wells that are two years old or less. This heavy reliance on new wells means that without continuous drilling and investment, we could face severe energy shortages and major disruptions to daily life within a year.”

“It’s time to turn serious attention to the untapped potential of older unconventional wells. It's time to stop treating older unconventional wells as afterthoughts. We must have an honest, urgent conversation about improving per-well recovery. The same ingenuity and innovative spirit that unlocked the shale revolution must now be directed toward cracking the code for unconventional EOR.”

     The bottom line is that U.S. shale oil and tight oil, which have faster-than-normal decline rates, won’t last forever. Hollub, Almasoodi, and others are right: we need to work on developing EOR strategies for these basins. Hollub noted that Oxy has been injecting CO2 into conventional wells to recover more oil. Pilot tests in shale basins indicate Occidental could recover 20% of oil in shale reservoirs using CO2 injection, up from 10% currently. She thinks that EOR will be essential in the future to provide energy security. She thinks carbon capture and utilization for injecting to recover more oil will be vital. Oxy has been at the forefront of direct carbon capture (DAC).

“The U.S. could tap into another 50B-70B barrels of oil by using enhanced oil recovery techniques with CO2 pulled in by direct air capture facilities, projects that Occidental (OXY) is developing, Hollub said on the company's earnings conference call.”

While the Trump administration has frozen funds for the 45Q tax credit provided by the IRA, he is aware of the business case for DAC paired with EOR, based on conversations they have had, she noted. New EOR techniques are being explored for different basins, and I will probably write about them in the future.  

 

 

References:

 

US oil producers face new challenges as top oilfield flags. Shariq Khan and Georgina McCartney. Reuters. March 27, 2025. US oil producers face new challenges as top oilfield flags

How Much Oil is Left in the Bakken?  Krystal. OFTRB. December 11, 2024. How Much Oil is Left in the Bakken? - oftrb.com

Bakken Break-Even Prices Threaten Profits. Art Berman. January 28, 2024. Bakken Break-Even Prices Threaten Profits | Art Berman

Occidental Petroleum sees US oil output peaking in next five years. Khaleej Times. March 11, 2025. Occidental Petroleum sees US oil output peaking in next five years

Carbon capture would boost U.S. energy independence, Occidental CEO says. Seeking Alpha. February 19, 2025. Carbon capture would boost U.S. energy independence, Occidental CEO says