Notes Abstract Introduction The value of research Production as a metric for research value Oil Natural gas Meeting future U.S. energy demands Production Imports Energy research Summary References
The University of Texas owns oil and gas royalty rights to approximately 2.1 million acres in the Permian Basin of West Texas. Oil production from these lands has been steadily decreasing for the past two decades (Figure 13 below). There are two "humps" in the oil production decline, one in the mid-1980s and one in the late 1990s, that combined represent more than 10 million barrels of incremental oil (production above the decline). What was the cause of the two humps?
Figure 13: Oil production decline on University of Texas lands in West Texas.
One possibility is that the humps are related to exploration and development driven by oil price. However, oil price data indicate that the 1980s hump occurred during a price fall, the 1990s hump occurred during a price rise, and there was a complete price cycle in the mid-1990s that had no impact on University Lands oil production (Figure 14 below).
Another possibility is that University Lands oil production is related to larger scale production cycles, driven by a complex set of global economic factors. One proxy for these larger scale cycles is oil production from all of Texas. In fact, the mid-1980s oil hump on University Lands does mirror the oil production in Texas, both falling in 1986 with the global price decline (Figure 15 below). However, the 1990s hump on University Lands occurred when Texas oil production did very little, and there is a hump in Texas oil production in the mid-1990s related to the oil price cycle (Figure 14 above) that has no University Lands equivalent.
The Bureau of Economic Geology, funded in part by The University of Texas System, performed two sets of studies on University Lands reservoirs, one that began in the mid-1980s and one that began in the late 1990s (Figure 16 below). Often in partnership with operators, 11 fields were characterized in the mid-1980s study, and 5 fields in the late 1990s study. Incremental production from these 16 fields accounts for nearly half of the 10 million barrels of incremental oil represented by the two humps. Part of the remainder can be attributed to "copy-cat" programs implemented by operators in similar fields. A $3 million investment in research and technology by the royalty owner, and a multi-million-dollar investment in field development by operators, resulted in 10 million incremental barrels of oil.
The study of multiple fields, coordinated with an operational improvement effort, resulted in incremental production and a positive economic benefit. The ideal program would shingle these production humps, resulting in a long-term improvement in production decline (Figure 17 below). The impact of this type of program on all U.S. oil production (Figure 18 below) would result in more than 6 billion barrels of incremental oil over the next 15 years.