Energy companies continued to invest in the Permian Basin of southeast New Mexico and West Texas, an area believed to be among the most lucrative oil and gas regions in the world, as fuel demand surged, and fossil fuel producers sought to increase production.
Orion Diversified Holding was the latest to purchase property in the region as it hoped to capitalize on the area’s growth.
The company announced its purchase of 9,280 acres in Pecos County, Texas, near the state’s border with New Mexico in the western Delaware sub-basin, along with five oil and gas wells in Ector County near Odessa, Texas on the eastern side within the Midland sub-basin.
The wells were operated by Occidental Petroleum, and the company planned on soon closing on another deal for 320 acres and seven wells also in the Permian, per a news release.
Thomas Lull, chief executive officer of Orion said the company recently sought to grow its operations in the Permian and the Bakken Shale region in North Dakota, while also producing in the south Texas Eagle Ford Basin.
“Under new leadership Orion has grown fast with almost 16,000 gross mineral acres in the largest oil and gas fields from the Permian Basin to the Bakken Shale,” Lull said. “This is a very large acreage acquisition for Orion and these wells are being operated by Occidental Petroleum.”
While oil-and-gas-production was targeted by energy companies in the region, so was infrastructure to process natural gas produced during extraction.
Dallas-based Caracara Services announced last month a joint venture with Houston’s Battalion Oil Corporation to fund and build the Brazos Amine Treater in the Delaware Basin to treat produced gas and sequester carbon that would otherwise be released into the air as pollution.
The first phase of the facility will have a treatment capacity of 30 million cubic feet per day (cfd) at up to 10 percent acid gas removing hydrogen sulfide (H2S) and carbon dioxide (CO2) that form toxic acids when interacting with water.
The company is planning a second treatment facility, also with a 30 million cfd capacity around the Monument Draw area in Texas’ Winkler and Ward counties.
The facilities will treat the produced “sour” gas from operations throughout the region spanning West Texas and southeast New Mexico and deliver the resulting “sweet” gas to midstream companies in the area.
Caracara Chief Executive Officer Clane LaCrosse said the projects will help reduce pollution associated with oil and gas production as more companies sought to reduce environmental impacts in response to both policy and investor pressures.
“As the hydrocarbon industry evolves in the global energy transition, Caracara Services is uniquely positioned for growth,” LaCrosse said. “We look forward to continuing our partnership with Battalion and designing custom solutions for additional operating partners in high H2S and CO2 fields moving forward.”
The company’s director of gas assets Lester Caldwell said the facility will take a different approach than typical gas treatment by sequestering the pollutants underground instead of burning them on the surface.
“Raw natural gas that contains these harmful compounds at levels above industry standards can have impacts on humans, the environment and our climate,” Caldwell said.
“Unlike traditional industry processes that released CO2 into the atmosphere and destroyed H2S by means of combustion or catalytic reduction, the Brazos Amine Treater plant will sequester the harmful compounds deep underground, in a depleted reservoir, to permanently render the compounds harmless to life, the environment and the atmosphere.”
More infrastructure to produce and process oil and gas was likely to continue to enter the Permian Basin region, as analysts predicted the region’s fossil fuel production would continue to grow faster than some of the biggest-producing countries in the world.
The price of oil continued to climb throughout the year, rising to $118 a barrel as of Monday, per Chicago Mercantile Exchange and expected to maintain in the triple digits until April 2023.
A May 31 report from energy analytics firm Rystad Energy said the region’s oil output was expected to grow by 1 million barrels per day this year (bpd), increasing from 4.7 million bpd last year to 5.6 million bpd in 2022.
Next year, Rystad forecast production would increase again to 6.5 million bpd, an increase of 900,000 bpd.
In comparison, Iraq, the sixth-largest oil producer in the world last year, per data from Energy Information Administration was expected to grow 600,000 bpd this year and 400,000 bpd in 2023.
The report showed the Permian Basin alone produced more oil than any other entire country aside from Russia and Saudi Arabia – the two biggest producers after the U.S.
By 2023, Rystad predicted the Permian Basin will produce about half of all oil generated in the U.S., up from about 42 percent last year.
Espen Erlingsen, head of upstream research at Rystad Energy, said the region will continue to grow amid increasing demand and supply constraints, as companies recover from the COVID-19 pandemic and the global market adapts to recent bans on Russian imports following its invasion of Ukraine earlier this year.
“The Permian has become the hot spot for U.S. oil production thanks to significant resources, low brea-keven costs and high oil content,” Erlingsen said. “This trend is only likely to continue as global oil markets struggle with supply constraints and the demand for oil shows little sign of easing.”