Exxon CEO Doesn't See Supply Shortage Pushing Up Oil Prices
(Bloomberg) -- The world’s largest publicly listed oil company says ample production from U.S. shale regions will keep prices subdued for years to come, disagreeing with others in the industry who have warned about a looming shortage.
Rex Tillerson, chief executive officer at Exxon Mobil Corp., presented an upbeat view of how technology will allow companies to pump more, preventing a price “blow out” in the future. Falling costs in America’s shale fields will counteract OPEC’s renewed commitment to supply management and the long-term effect of underinvestment in exploration.
"I don’t necessarily have the view that we are setting ourselves up for some big collapse in supply within the next three, four, five years," he told executives and officials at the annual Oil & Money conference in London.
Tillerson, who has worked at Exxon for more than four decades, put himself at odds with officials including Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih and rivals such as Patrick Pouyanne, the head of French oil giant Total SA. The Organization of Petroleum Exporting Countries and the International Energy Agency have also warned that the market could face a supply crunch after the industry cut spending to the bone to weather a prolonged downturn.
To read about OPEC’s gift to the oil majors, click here.
In its World Energy Investment report last month, the IEA said that oil companies have cut investment in new production by 24 percent this year, following a 25 percent reduction in 2015 due to low oil prices. Next year they could cut spending for an unprecedented third year in a row, the Paris-based agency warned.
Reassure Consumers
Exxon’s upbeat view may be reassuring for consumers, but it presents problems for the company. Exxon excels at huge, capital-intensive and technically challenging projects that make sense when oil prices are significantly higher than $60 a barrel. Like other behemoths, unless it can cut costs further, Exxon could see itself squeezed by nimbler U.S. shale producers.
Cheaper, faster fracking means tight oil remains viable, even at a relatively low price, Tillerson said. Large swathes of U.S. shale become economical at $60 a barrel as costs fall and productivity increases, he said.
Other speakers at the conference echoed his views. ConocoPhillips CEO Ryan Lance estimates that new wells are viable in the Permian, Eagle Ford and Bakken shale basins at just $40 a barrel, he said Tuesday. Production in the Permian can grow by 300,000 barrels a day for the next 10 years “easy,” said Scott Sheffield, chief executive officer of Pioneer Natural Resources Co., which is adding five drill rigs in the basin.
“It’s difficult to see a big supply precipice out there,” Tillerson said. “It’s difficult to see a big price blowout.”
Bankruptcy Fears
Despite persistent fears of bankruptcies in the U.S. oil patch as banks cut lending to the energy industry, Tillerson said the current boom-and-bust cycle has “confirmed the viability of a very large resource base in North America,” adding that shale would serve as “enormous spare capacity” to meet future demand.
The comments are likely to reinforce the emerging view at the Oil & Money conference, which every year gathers some of the leading industry voices, that oil prices will remain at around $50 to $60 a barrel for the next few years.
To contact the reporters on this story: Rakteem Katakey in London at rkatakey@bloomberg.net ;Javier Blas in London at jblas3@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine, James Herron
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Gunvor CEO Sees Russian Refining Capacity Taking Hit from Drone Strikes
- These Factors Helped Brent Oil Price Break Above $85
- Sinopec Engineering Posts Higher Annual Petrochemicals Revenue
- Imperial Pipeline in Winnipeg Goes Offline for Three Months
- Gaz System to Acquire Gas Storage Poland
- Subsea7 Secures Contract to Service Woodside's Trion
- Adnoc Inks Supply Deal for Ruwais LNG Project with Germany's SEFE
- EIA Boosts USA Crude Oil Production Forecasts
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension