Exxon Mobil Corp. plans to reduce the cost of pumping oil in the Permian to
about $15 a barrel
The scale of Exxon’s drilling means that it can spread its costs over such a big
operation that the basin will become competitive with almost anywhere in the
world, Staale Gjervik, president of XTO Energy, the super-major’s shale
division, said in an interview with Bloomberg.
Development, operating and land acquisition costs will be “in and around $15 a
barrel,” he said on the sidelines of the CERAWeek Conference by IHS Markit in
Houston. West Texas Intermediate futures traded at almost $59 on March 14. “The
way we are approaching it is very unique compared to most, if not really
everybody out there, as far as the scale," he said.
The shale revolution has made the Permian into the world’s largest shale field,
with production topping 4 million barrels a day, almost as much as Iraq, OPEC’s
second-biggest member. But the rapid growth has often meant that producers burn
cash flow to reinvest in the expansion, prompting investors to call on them to
focus more on returns in 2019.
Exxon plans to deploy 55 rigs in the Permian this year, by far the most of any
driller, as it aims to increase output in the region fivefold to about 1 million
barrels a day by 2024. Its strategy also includes building its own takeaway
infrastructure from separation tanks to pipelines, and it’s even joining a giant
conduit project to make sure its oil doesn’t get stuck in bottlenecks that have
depressed prices in West Texas.
Chevron Corp is also aiming for strong growth in the basin. They announced
plans last week for 900,000 barrels a day by 2023. Royal Dutch Shell Plc is
“actively looking” for deals to bulk up its Permian operations, Wael Sawan, the
company’s upstream director-in-waiting said. Even so, its production will
increase about 30 percent a year.