America's power play

Elite oil fields redefine meaning of crude's 'Big Three'

An oil pump operates in the Permian Basin oil field near Carlsbad, New Mexico.
Joe Raedle | Hulton Archive | Getty Images

Move over ExxonMobil, Chevron and ConocoPhillipsthere's a new "Big Three" in U.S. energy production. And they're not companies.

In a new update to its drilling productivity report from last week, the Energy Information Agency said North Dakota's Bakken and Texas' Permian Basin and Eagle Ford Shale are quietly generating more than a million barrels of oil per day each–comprising at least a third of total U.S. daily oil production. Shale oil drilling generated the equivalent of nearly 90 percent of the U.S.'s total energy needs in 2013, according to EIA figures.

Mark Perry, an economist at the University of Michigan and a scholar at the American Enterprise Institute, crunched the EIA's numbers even further. His analysis suggests the output of the combined three oil fields is actually exceeding 4 million bpd, which would make them the world's fifth largest oil producer by volume.

"In all of human history, there have only been ten oil fields in the world that have ever reached the one million barrel per day milestone," the economist wrote in a recent blog post. "Three of those ten are now active in the US–thanks to the advanced drilling techniques that started accessing oceans of shale oil in Texas and North Dakota about five years ago."

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Naturally, the impetus behind the new Big Three is the relentless shale revolution that has sent the world's largest economy churning out more than 8 million barrels per day. In April, North Dakota also became a member of the one million bpd club as output soared by 2.5 percent from March alone.

Yet of the major U.S. oil producing regions, the Permian Basin is the most unlikely cog in the machinery of the shale revolution. With little fanfare, it has assumed a more prominent role in the booming crude sector. The nearly 100-year old West Texas oil hub boasts 546 drilling rigs, more than 1/3 of the total onshore machines in the U.S. Four decades ago, the field's production was thought to have peaked around 2 million barrels a day.

Gradually, drilling flourished anew as technology evolved and fracking sent domestic production on a tear. New techniques to tap fossil fuels in the basin were pioneered by companies like Occidental Petroleum—the biggest of the Permian oil producers—which uses a carbon dioxide-based process to extend the life of shale wells, which tend to deplete at rates far quicker than conventional hubs.

Some of the unconventional drilling technology now being used in the Permian has its roots in North Dakota, explained Stephen Trammel, a director at IHS Energy.

"As horizontal drilling started to prove itself in Bakken and the shale gas plays, people started to apply that to the Permian zones," Trammel said. "It's a mix of unconventional and conventional, and the best part is that [wells] had already been drilled."

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The average recovery factor of a typical well is 34 percent, Trammel said. "That tells you 2/3 of the oil is still in the ground," he said, adding that technological advances have helped boost productivity.

Permian drilling is contributing to the U.S. energy independence storyand revitalized the local economy.

"Midland in the 2000s was the home of jackrabbits and tumbleweed, and now you can find a job in 2 seconds and the Motel 6 goes for $300 a night," Trammel joked.

--By CNBC's Javier E. David.