ExxonMobil and Chevron have sharply lifted their expectations for production in the Permian Basin, the heartland of the US shale boom, in the first half of the 2020S. In a presentation to analysts this week, Exxon is revising up its projection of oil and gas production in the Permian region of Texas and New Mexico from 600,000 barrels equivalent a day to 1m in 2024, while Chevron has lifted its estimate from 650,000 b/d to 900,000 in 2023.
The revised projections demonstrate the two largest US energy groups’ confidence in the continued growth of the country’s oil and gas production. The ambitious expansion plans also lay down a marker for Opec, the oil producers’ cartel, that competition from US shale, which has put downward pressure on prices and transformed global crude markets over the past decade, can be expected to continue well into the 2020s.
They also reflect the way that the shale industry, which was pioneered by small and mid-sized companies, is increasingly being dominated by larger players. The growth plans mean that both companies expect approximately to treble their Permian production from 2018 levels over the next five years or so.
Michael Wirth, Chevron’s chief executive, said at a presentation for analysts in New York that he was confident of being able to achieve further growth beyond that. “This doesn’t end where our charts end. Not even close,” he said. “We’re right now recovering high single-digits [percentages] of the hydrocarbon in place. If we left 90 percent of the oil and gas behind, it would be the first time in the history of the industry.”
Standard production techniques typically lead to 20-40 percent of the original oil in place being extracted, and enhanced oil recovery raises that to 30-60 percent. Mr Wirth added that Chevron was not seeing problems with an issue that has raised concerns about long-term prospects in the Permian Basin: the fact that newer “child” wells drilled too close to an older “parent” would have lower production, and could cut output from the original well.