Exxon is shelling out $60B to double its Permian production. Why there?
Exxon is shelling out $60B to double its Permian production. Why there?
With an oil and gas portfolio that spans six continents, Exxon is making a huge bet on U.S. oil production. They just announced a $60 billion deal to buy Pioneer Natural Resources, one of the largest oil and gas acreage owners in the Permian Basin. This will double Exxon’s presence in the region, which is the highest producing oil patch in the United States.
So, among all the oil plays in the world — what is it exactly that makes this desolate stretch of West Texas so attractive for Exxon?
If the Permian Basin were its own country, it would be among the top five oil producers in the world, said Karr Ingham with the Texas Alliance of Energy Producers.
“We just tend to look past this how important this little part of Texas is down there. The production increase is spectacular,” Ingham said.
That’s been true since fracking revived the Permian Basin around 2010. That created ample opportunity for companies like Pioneer.
“Their cost of producing a barrel of oil out there is as low as anybody’s. This is what is attractive to Exxon Mobil,” Ingham said.
And unlike more time-intensive projects like deepwater drilling, “it’s something that you can exploit and develop relatively quickly and scale your activity up and down depending on how the market circumstances play out,” said Mark Finley at Rice University.
He said uncertainty abroad is another reason Exxon and other U.S. multinationals are pushing to invest in the Permian.
“The domestic barrels as a share of their global portfolio is much bigger now. And that’s clearly what they’re aiming for down the road,” Finley said.
And that’s also good for national security, said Ed Hirs with the University of Houston.
“We are very dependent upon our trading partners to get six to seven million barrels of oil a day into the United States,” Hirs said.
And as Strategic Petroleum Reserves have been depleted, “it could put us in a difficult situation, if a conflict of the Middle East spreads,” Hirs said.
Making production in the Permian Basin’s quiet 66 West Texas and New Mexico counties all the more attractive.
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