The big oil companies turned up late to the Permian party, but they are making up for lost time. ExxonMobil and Chevron, the two largest US oil groups, this week announced plans for spectacular production growth in the Permian Basin, the heartland of the US shale boom that stretches from west Texas into east New Mexico. The Permian’s oil output has already shown prodigious growth in recent years: it has doubled since the summer of 2016, to 4m barrels a day, or roughly a third of total US daily production. The announcements from Exxon and Chevron were a signal that the boom would continue.
“It is quite a stunning development, in terms of the scale and the scope for acceleration,” said Lysle Brinker, an equity analyst at IHS Markit. “This Permian opportunity is something that these companies haven’t had for a very longtime.” But Exxon and Chevron are betting heavily on the region at a time when concerns about the financial and technical challenges facing the shale industry have been growing.
In their annual presentations to analysts this week, the companies made the case that – for different reasons – they could overcome those problems and achieve both strong growth in production and increased returns on investment. Darren Woods, Exxon’s chief executive, told journalists after his presentation: “We’re changing the way that game gets played, and along with it the returns that we generate in that game.”
Their bets on shale are big enough that both companies’ overall performance into the 2020s will depend heavily on whether they are able to make good on those commitments. Although they are now growing rapidly in the Permian, both Exxon and Chevron were followers into the region rather than leaders. As elsewhere in the US shale industry, it was small and mid-sized exploration and production companies that were agile and innovative enough to see the opportunity first and move to exploit it.