Although Saudi Arabia’s oil industry owes a good deal of their success to Big Oil, only Chevron has a special place in the hearts of all Saudi sheiks.
And if we’re going to be specific, their affection is for Standard Oil Company of California (SOCAL).
You see, SOCAL is responsible for discovering the largest oil field in history, the mighty Ghawar oil field.
At the time of the discovery, the United States was the undisputed global leader in oil production. Just as production peaked in the U.S. in the early 1970s, something peculiar was taking place in Saudi Arabia…
It was right around that time that the Saudi government started building a stake in the California-Arabian Standard Oil Company (also known as ARAMCO), a subsidiary of SOCAL in the region.
You can probably piece together the rest of the story.
The Saudis gained full control over the next decade and renamed the company Saudi Aramco in 1988.
Long before the new name, however, Saudi Arabia overtook the U.S. to become the world’s largest oil producer — a title it may soon be forced to give back.
Public Enemy #1
There’s a new phrase floating around the Big Oil boardrooms today: stacked pay zones.
These three little words are behind the United States officially becoming Public Enemy #1 to the Saudi Royal family…
Three syllables will be responsible for the United States once again reigning superior in global oil production.
Nobody can claim we didn’t see this coming.
Last year, the IEA made a bold prediction that U.S. would top both Russia and Saudi Arabia in oil production as early as 2017. More recently, the Energy Information Administration chimed in, suggesting that the U.S. will take the crown this year.
Now, when it comes to profiting from the U.S. takeover, it isn’t enough to only look at the broad picture, because there are very specific areas within the United States that offer individual investors the best bang for their buck.
The sheik drove his Cadillac, he went cruising for Texas
In order to find the biggest and brightest (not to mention the most lucrative) spot in the U.S. oil industry, there are really only two places to look:
The chart above clearly shows that the bulk of the United States’ onshore oil supply comes from just eight states. Also note that only two of these states actually increased production during the last three years.
Whittling this list down further, however, isn’t as easy as you might think.
You won’t ever see the top oil play making headlines in the mainstream media. And you also have to understand that the sweet spot for U.S. oil it isn’t the Bakken.
And it’s not the Eagle Ford, either— although it’s awfully close to the latter.
In case you haven’t guessed it by now, I’m referring to the Permian Basin.
The data coming out of this area raises more than a few eyebrows in the U.S. oil industry.
Consider this fact: Nearly six out of every ten barrels of oil produced in the U.S. is pumped out of the Permian.
If that’s not enough to catch your interest, bear in mind that at current estimates, there’s more recoverable oil in this play than both the Bakken and Eagle Ford combined.
So you can understand why Big Oil is so interested in West Texas.
Actually, the Permian Basin is one of the only ways Chevron will ever reach its five-year production target of 3.3 million boepd — which is why the company spent $2 billion buying Permian assets from Chesapeake Energy last year.
Trust me, they’ve long forgotten the sand dunes of Saudi Arabia, and the Permian is the perfect place to help get a boost. With only five months to go before the ball drops in Times Square, oil production in the Permian has practically matched the oil produced in 2012.
For those of you who want to see what a real oil boom looks like, look no further than the Spraberry…
Found in the Midland Basin of the Permian, the Spraberry trend was discovered back in 1948.
While the rest of the top Permian fields continue their long-term decline, output in the Spraberry increased 200% within just four years!
And this story gets even better…
Directly beneath the Spraberry lie even more pay zones that companies will soon exploit, one of which is the Wolfcamp Shale. Keep this name tucked away somewhere safe, because it’s going to shape future headlines in the oil industry…
Unlike the Spraberry Formation, which has been drilled for more than 70 years, the Wolfcamp was only recently opened up after drillers combined horizontal drilling techniques with hydraulic fracturing.
It’s actually one of the few places left in the U.S. that’s more active than the Eagle Ford Shale.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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