U.S. shale producers realise that with great power comes great responsibility.
In what could potentially offset OPEC’s move to cut oil productions so as to reduce the glut in the global oil pool, U.S. shale oil producers are plotting an ambitious production target outside of the Permian Basin in Texas.
The United States’s largest oil field, the Permian, is already seeing a surge in output levels from the past six months. The move only indicates a resurgence in shale oil output, as shale oil firms rebound from a two-year price war with OPEC.
Companies, including Chesapeake Energy Corp, Hess Corp, Continental Resources Inc and others have detailed their growth plans at an energy conference in Houston this week. Their proposals outlined a steady growth of U.S. shale oil supply through the next decade.
The rising clout of U.S energy companies have largely frustrated efforts made by OPEC countries to control the global oil prices through production curbs, its first in almost 8 years.
Representatives from OPEC nations and from private players have acknowledged the power shift taking place at the energy conference in Houston.
“We are on something of an equal basis today with OPEC,” said Harold Hamm, founder and chief executive of Continental Resources.
In the Bakken shale fields of North Dakota, Continental is the largest leaseholder. The company has oilfield service contractors on its payroll to service frack wells that it had accumulated during the price downturn.
“We have this great opportunity to run with,” said Frank Patterson, Chesapeake’s head of exploration and production. “We can develop what we have and grow.”
Already Hess, one of the largest oil producers at Bakken, plans on adding four rigs this year. He went on to add, the company has more than a decade of drilling locations at current oil prices.
“We’re back to growth in the Bakken,” said Chief Executive John Hess during an interview.
In 2016, the Permian Basin saw $28 billion in land acquisitions. The Chevron Corp, which controls 2 million Permian acres, expects its oil output to jump by at least 20% by the end of the 2020.
“We’re ramping up,” said John Watson, Chevron’s CEO.
A rise in American oil stockpiles runs the risk of creating a new global glut in the oil pool, which could push down oil prices further down. This has made OPEC pretty nervous.
So as to get a better understanding of the dynamics of the oil market, a couple of CEOs of U.S. oil producers met with OPEC ministers last weekend, ahead of the CERAWeek conference at a dinner organized by investment bank Lazard Ltd.
The meeting was the first between the two groups. It was described by attendees as cordial.
“OPEC is trying to figure out U.S. shale,” Scott Sheffield, chairman of Pioneer Natural Resource Co, while the “U.S. shale is trying to understand where (oil) prices will go. We’re educating each other.”
OPEC will now meet on May 25 in Austria, to decide on whether it will extend or deepen its supply cuts.
“It’s really healthy that shale producers understand the importance of OPEC,” said Hess. “We’re all in the same boat.”
Sheffield, Hess and other U.S. CEOs of U.S. shale producers, said they expect OPEC to renew its production curbs.
“We have the potential to oversupply the market,” said Continental’s Hamm. “And we have a great responsibility not to do so.”
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