By Charles Kennedy
Earlier this month, the Energy Information Administration reported that oil output in the Permian shale play had hit a record, and it was going to continue growing. And now, the two biggest Permian operators have revealed plans for signficant production growth.
Exxon (NYSE:XOM) and Chevron (NYSE:CVX) both said within the past week that they had plans for a substantial ramp-up in Permian oil production during the release of their financial reports for 2021. Exxon eyes an increase of 25%. Chevron, although a little more modest, still expects to boost output in the start shale play by 10%.
According to Bloomberg, this is a clear indication that the US shale industry is back into growth mode after two years of strict discipline. Whether the increase of oil production in the Permian would be sufficient to weigh on global oil prices, however, is another matter.
Crude oil output at the Permian hit 4.92 million bpd in December, according to the Energy Information Administration, which forecast that it would expand further to 4.996 million bpd in January. The February forecast of the authority was for output of close to 5.1 million barrels daily.
In a further sign that the Permian is thriving as oil prices climb higher, the shale play hosts the most drilling rigs nationally at the moment. Merger and acquisition activity in the Permian has picked up substantially, with three deals worth a combined $1 billion completed in the last week alone, according to Texas media.
“US producers are going to be able to manage dual objectives in 2022,” said IHS Markit executive director Aaron Brady, as quoted by Bloomberg. “They’ll be able to return record cash to investors and also grow volumes to help meet fast-recovering world oil demand.”
Yet higher output in the Permian will not be enough to compensate for lower OPEC+ additions to global supply, according to another analyst.
“US production may surprise to the upside this year, but not by so much that it will significantly bring down oil prices,” Elisabeth Murphy from ESAI Energy told Bloomberg. “On top of that, OPEC+ is having trouble lifting output to add the additional barrels.”