US Shale Oil Drillers Slash Output from the Permian Basin
- 30-Mar-2021 6:00 PM
- Journalist: Robert Hume
Exxon Mobil and Chevron Corporation, America’s top shale firms have deaccelerated the drilling activity with both the players operating cautiously since the pandemic pressured the oil prices to historic lows in 2020. The US oil production is now about 11 million bpd (barrels per day), down from the record lows of 13 million bpd levels observed in late 2019.
As the world is already oversupplied with oil barrels and the US shale oil industry is dealing with mounted debts, both the companies have strategically opted to pause further capitalising on oil processing in the US’ top producing basin, Permian till next year. While Chevron is expecting to stick to around 1 million bpd, Exxon will roll out 700,000 barrels daily by 2025, the companies revealed in their investor days recently.
Oil producers in the United States have started witnessing sharp rebound in prices in the recent months but pressured demand and increasing investor pressure to reduce debt has kept the drillers away from exploring the new wells. As per the latest stats, share of the drilling activity by Exxon Mobil and Chevron from the Permian Basin oil field in Texas and New Mexico dropped below 5% in March down over 27% observed last spring.
While Chevron is currently operating around five rigs in the Permian, Exxon is running nearly seven Permian rigs in March, whose count it is planning to maintain around 7 to 10 this year, down sharply from the count of 60 noted in March last year. Exxon chief executive Darren Woods revealed in one of his statements that the company would use additional profits to reduce its debt instead of spending more on drilling activities.
ExxonMobil is also planning to strategically shift its product mix from refineries and petrochemical products and slowly transition to higher margin products by cutting its output of fuel oil and gasoline and investing more on diesel and jet fuel. In Singapore, it has already started converting fuel oil into higher value lubricants and distillates.
As per ChemAnalyst, “Exxon and Chevron are not the only US companies slashing their outputs and revising their capex spending, several shale companies have decided to follow the same suit despite WTI oil prices having retraced back to pre-pandemic levels of above USD 60 per barrel. Amid recovering dynamics and increase in number of virus-immune population it is estimated that both the companies may increase their Permian spending next year.”