The ambitious shale growth plans of the U.S. supermajors could in the future allow them to control so much of U.S. shale oil production that they could also control the price of the U.S. light tight oil going to foreign markets in an ‘OPEC of their own kind,’ Investing.com quoted John Kilduff, founding partner at Again Capital, as saying.
If the U.S. supermajors, such as Exxon and Chevron, end up controlling a lot of the U.S. shale production with their plans to significantly boost Permian production, and if smaller shale players bleed cash and decide to sell acreage and operations to Big Oil, then supermajors could be the ones determining the price of light crude oil, according to Kilduff.
Exxon and Chevron both announced increased targets for their Permian production last week. Chevron now sees its Permian unconventional net oil-equivalent production rising to 600,000 bpd by the end of 2020, and to 900,000 bpd by the end of 2023. Exxon revised up its Permian growth plans to produce more than 1 million oil-equivalent barrels per day by as early as 2024, which would be an increase of almost 80 percent.
According to Rystad Energy, the players with large-scale operations and acreage positions could get average returns of 20 percent in three years in the Wolfcamp A in the Permian Delaware, for example, even if WTI Midland oil price is at $45 a barrel. But smaller operators could struggle because of higher drilling, completion, operation, and transportation costs.
According to Kilduff, as carried by Investing.com, “The stars are aligning for the super majors to take control of shale and determine pricing for light crude in Asia, if not the world. They’ll be OPEC by a different name.”
Full article: U.S. Supermajors Could Form A New Oil Cartel (OilPrice)