The Permian Basin, stretching across West Texas and southeastern New Mexico, has long been the cornerstone of US oil production. Its history dates back more than a century, but its significance continues to grow as it reshapes both domestic and global energy dynamics.  

From discovery to dominance 

The basin's story begins with early geological speculation. In 1917 J A Udden, a professor at Texas University, suggested oil-bearing formations might extend north from the Marathon Mountains. That theory was proven in 1923 when the Santa Rita No. 1 rig struck the Big Lake Oil Field, ushering in sustained production. Since then, the Permian has delivered around 30 billion barrels of crude, securing energy for North America – a linchpin for the nation's unrivalled prosperity.  

 

The region's transformation accelerated decades later through the persistence of George P Mitchell and his company, Mitchell Energy. In the 1980s and 1990s, Mitchell refined hydraulic fracturing in the Barnett Shale, despite scepticism from peers. His work on "slickwater fracking"—injecting high-pressure fluids to fracture rock—combined with advances in horizontal drilling, unlocked previously uneconomic tight formations. These techniques spread to the Permian in the 2010s, unleashing one of the world's most prolific oil and gas provinces. 

The US Energy Information Administration projects the Permian will remain the single largest source of tight oil, accounting for roughly half of North America's output through 2040.   

A model for global basins 

The shale drilling template proven in the Permian has become a model worldwide. Australia's Beetaloo Basin, still in early stages with no commercial output, is exploring similar methods to offset looming supply shortfalls on the east coast. The Permian has also become a proving ground for advanced drilling and data-driven optimisation that influence global supply practices. 

Its output has helped shift the US from a net importer to a net exporter of petroleum since 2019, altering global trade balances and geopolitical leverage. 

An enduring presence 

Among the many operators in the basin, Chevron holds one of the deepest footprints. Its position was strengthened by the 2001 acquisition of Texaco, which brought more than 2 million acres of mineral rights tied to 19th-century railway land grants. Unlike rivals who pared back in the 1980s and 1990s, Chevron maintained its leases, which became highly valuable when fracking technology took off. 

Today, Chevron has an interest in about one in five wells across the basin, spanning direct operations, joint ventures and royalty holdings. The company reports that this scale has translated into consistent outperformance, with returns over 2020–24 averaging more than 10% above peers such as Occidental Petroleum and EOG Resources. It now plans to reduce reinvestment rates by around 20% through 2026, shifting emphasis from production growth to cash generation. 

Chevron's strategy rests on three pillars. Operated assets, about half its output, follow a "factory model" of standardised drilling and completion. Non-operated ventures provide exposure to more than 10,000 wells managed by others, giving visibility into basin-wide trends. And royalty interests, accounting for about 15% of volumes, deliver production-linked revenue without fresh investment, making Chevron the largest royalty producer in the region. 

The role of technology 

Technology has underpinned the company's strong returns. Chevron applies artificial intelligence and advanced analytics to optimise well design, spacing and costs. Innovations such as simultaneous fracturing of multiple wells and high-pressure gas lifts have shortened development times and improved recoveries. 

The company estimates that refinements over the past decade have lifted average recoveries per well by more than 50%. Its current outlook is to sustain output at around 1 million barrels of oil equivalent a day through at least the late 2020s and potentially longer, though forecasts beyond that remain uncertain. 

Global implications 

The Permian has become a swing factor in world oil markets. Rising US output gives Washington more flexibility to respond to supply disruptions, from OPEC cuts to Middle East conflicts. For Europe and Asia, U.S. crude exports offer diversification away from traditional suppliers and reduce exposure to geopolitical risk.  

At the same time, the basin highlights the tension between energy security and climate goals. While demand for affordable oil persists, governments are pushing for rapid decarbonisation. Chevron's strategy in the Permian reflects how producers are balancing shareholder returns, national supply needs, and the uncertainties of the global energy transition.