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We may slow down, but we still have growth available. At what cost is yet to be determined.
Predicting the exact timing of peak oil production in the Permian Basin is complex and depends on various factors, including geological limits, technological advancements, economic conditions, and operational strategies.
However, based on available data and expert analyses, there is growing discussion about whether the Permian is approaching or has already reached its peak output.
As the movie “Princess Bride” points out in this scene, not everything is as it seems.
The Permian Basin, spanning western Texas and eastern New Mexico, is the largest oil-producing region in the United States, accounting for nearly half of U.S. crude oil production. In recent years, production has continued to rise, reaching around 6.3 million barrels per day (b/d) in 2024, according to the U.S. Energy Information Administration (EIA). The EIA forecasts a further increase to approximately 6.6 million b/d by the end of 2025, driven by productivity gains and new infrastructure. However, several indicators suggest that this growth may slow or plateau soon after.
Some analysts and industry leaders argue that the Permian is nearing its peak due to geological constraints. For instance, reports indicate that nearly two-thirds of the core Midland sub-basin and over half of the Delaware sub-basin—key areas within the Permian—have already been drilled. As the best drilling locations (Tier 1 inventory) are depleted, operators are shifting to less productive “child” wells, which often yield 5-20% less oil than initial “parent” wells. Additionally, the basin is producing more water and gas relative to oil, increasing costs and complicating operations. Occidental Petroleum CEO Vicki Hollub has suggested that U.S. oil production, heavily reliant on the Permian, could peak between 2027 and 2030, followed by a decline.
Other perspectives highlight short-term declines or plateaus. Posts on X and some analyses suggest a potential 5-10% drop (327,500-660,000 b/d) in Permian output between April and June 2025, following a peak of 6.55-6.6 million b/d in March 2025. This could reflect temporary factors like high-grading (focusing on the best wells) during 2020-2021 or current operational adjustments rather than a permanent peak. Meanwhile, firms like Goldman Sachs and Rystad Energy predict slower growth—around 270,000-360,000 b/d annually through 2026—due to maturing geology and fewer rigs, but not an immediate decline.
On the optimistic side, technological improvements, such as longer laterals and enhanced fracturing techniques, have historically defied peak predictions by boosting per-well productivity. The EIA notes that despite a declining rig count (down to 302 rigs by late 2023 from 351 a year earlier), output per rig has risen significantly, from 624 b/d in 2019 to 1,359 b/d in 2024. New pipelines, like the Matterhorn Express (adding 2.5 billion cubic feet per day of gas takeaway capacity in 2024), could also alleviate constraints and support further oil production.
However, longer-term forecasts vary widely. Goehring & Rozencwajg predicted in 2023 that the Permian could peak as early as 2024, arguing that half its recoverable reserves (estimated at 30-40 billion barrels) have been produced. Others, like Wood Mackenzie, suggest a peak closer to 2030 at 7.3-8 million b/d, followed by a gradual decline. The EIA’s outlook remains more bullish, expecting U.S. production, led by the Permian, to hit 13.7 million b/d in 2025 without signaling an imminent basin-specific peak.
In a great article from Oilprice.com, Txvetana Paraskova makes some excellent points.
- In the Permian, the gas-to-oil ratio (GOR) has steadily risen from 34% of total production in 2014 to 40% in 2024. Pressure within the reservoir declines as more oil is brought to the surface, which allows more natural gas to be released from the geologic formation. The pressure will also decrease as more wells are concentrated within an area, the EIA says.
- Another ratio is even more suggestive of the Permian oil wells and the operating costs for drilling wells—produced water.The water-to-oil ratio in the Permian is much higher than in other basins. On average, four barrels of water are produced for each barrel of oil, according to data from oilfield water analytics firm B3 Insight cited by Reuters.
- The higher produced water ratio will ultimately drive costs for oil producers higher, according to Shannon Flowers, director of crude and water marketing at Coterra Energy.
- “There cannot be “U.S. energy dominance” and $50 per barrel oil; those two statements are contradictory. At $50-per-barrel oil, we will see U.S. oil production start to decline immediately and likely significantly (1 million barrels per day plus within a couple quarters),” an executive at an exploration and production firm wrote in comments to the Dallas Fed Energy Survey for the first quarter of 2025.“The U.S. oil cost curve is in a different place than it was five years ago; $70 per barrel is the new $50 per barrel,” the executive noted.
In summary, while the Permian Basin may not have peaked yet, evidence suggests it could be approaching a turning point within the next few years—potentially between 2025 and 2030. Short-term fluctuations are likely, but the long-term trajectory hinges on whether innovation can offset geological decline.
For now, the consensus leans toward slower growth rather than an abrupt peak in 2025, though the possibility cannot be ruled out, given the basin’s maturing profile. I also know that other oil sources in the U.S. can make up for any declines in the Permian.
“One basin does not define a country’s energy wealth, but it can impact the decision making along the way. – Stu Turley”
Originally posted on The Energy News Beat Substack
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