Monumental innovations

Feb. 10, 2014
Oil production from the Permian basin in West Texas is once again on the rise. According to the January Drilling Productivity Report published by the US Energy Information Administration, production from the Permian is expected to increase by 3,000 b/d from January through February.

Tayvis DunnAhoe
Exploration Editor

Oil production from the Permian basin in West Texas is once again on the rise. According to the January Drilling Productivity Report published by the US Energy Information Administration, production from the Permian is expected to increase by 3,000 b/d from January through February. This would bring production for the entire play to nearly 1.4 million b/d.

Since 1921, the Permian basin has produced a cumulative 29 billion bbl of oil according to the Texas Railroad Commission. Accumulative production from the Permian is impressive, but it has been achieved through extreme cycles of boom and bust.

Boom cycles are influenced by new technology, available infrastructure, and high demand. Innovation through new technology can improve production, but not all innovations become standard.

Problem solving

East of Monahans, Tex., the Million Barrel Museum encompasses a 14½-acre site where, in 1928, Shell Oil Co. attempted to solve an infrastructure problem. With a rapid rise in Permian production, limited pipeline capacity for most of the play necessitated additional storage capacity. In January of that year, construction began on a tank capable of storing up to 1 million bbl of crude until it could be shipped by rail or through the few pipelines from Ward County to refineries on the Gulf Coast.

Once completed, the concrete-lined tank measured 20 ft deep, 620 ft long, and 510 ft wide with a footprint of 8 acres. A wooden roof constructed of 8-in. uprights and replete with an abundance of lightning rods mitigated evaporation. Once filled, the tank held 1.084 million bbl of oil. Within days, the concrete proved to be a faulty barrier and most of the tank's contents had seeped through to the ground. At a cost of $250,000, the tank was abandoned. Adjusted for inflation, the same project today would have cost nearly $3.5 million.

The tank was refilled with water in 1956 and christened "Melody Park." The new recreational lake opened and closed on the same day as, once again, the contents seeped through the concrete liner.

Today, the Million Barrel Museum is open to the public and a portion of the tank's liner has been repurposed as an amphitheater that hosts local performances. While the facility is certainly a marvel curiosity, from an industry standpoint it is a monument to innovation that failed.

More background

In 1926, the T.G. Hendrick No. 1 well struck oil in Winkler County just north of Monahans. By the end of 1927, Hendrick oil field was producing 50,000 b/d with no direct pipeline access. In his book, The Permian Basin: Petroleum Empire of the Southwest, author Samuel D. Myers says, "The Hendrick field was the first in the Permian basin to be drilled essentially with rotary equipment." New technology would make the Permian a frontrunner for oil production, and by 1938 the American Petroleum Institute announced that the basin had produced more than 1 billion bbl of oil.

Hendrick field production peaked in March 1929 when 577 wells produced 5,304,360 bbl of oil in a 30-day period. By the end of 1931, the field was in decline with only 11 million bbl of oil produced in the previous year—which was down further in 1945 at little more than 1.5 million bbl, according to Myers.

Today, Hendrick field ranks among the Top 50 highest producing fields in the Permian, but is dwarfed by giants such as the modern day Spraberry trend.

As did rotary drilling equipment in the 1920s, horizontal drilling and hydraulic fracturing have dramatically enhanced reserves growth in several North American plays. Improved infrastructure and energy demand have all but eliminated the need for storage capacity. And yet the question remains as to what elements of the current oil boom from the Permian might make interesting museums in the future.