Oil & Gas News

Chevron expects 15% growth in Permian output

Chevron, Permian

By: Adrian Hedden – Carlsbad Current Argus – One of the world’s largest energy companies and leading oil producers in the Permian Basin announced it planned to increase production in the region in response to apparently sustained $100 or more per-barrel oil prices this year.

Domestic oil prices were reported at $104 per barrel Monday morning, per the Chicago Mercantile Exchange, following weeks of triple-digit prices this spring since Russia invaded Ukraine and was subsequently shunned from the global market.

Oil prices peaked for the year so far following the invasion, skyrocketing to about $123 per barrel on March 8, per historical data from Nasdaq, and then fluctuating between the mid $90s and the $115 per barrel mark for the rest of spring.

Analysts expected prices to remain above $100 a barrel through the spring and summer, dipping to $99 a barrel in September, per future quotes, and continuing to decline to $94 a barrel by the end of the year.

In response to the higher prices, surpassing pre-COVID-19 levels as the health crisis subsided and fuel demand grew, Chevron in Friday’s investor announcement raised its projected oil production in the Permian 15 percent more than 2021.

That meant the global company planned to produce between 700,000 and 750,000 barrels of oil a day out of the prolific region shared by southeast New Mexico and West Texas.

Chevron, Quote

In the first quarter of 2022, Chevron reported production climbed to 692,000 barrels a day and expected that to grow in the coming months.

The company credited growth in its Permian Basin operations as driving an overall increase of 109,000 barrels of oil per day to a total of 1.18 million barrels per day in Q1 2022.

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Chevron is doing its part to grow domestic supply with U.S. oil and gas production up 10 percent over the first quarter last year,” said Chief Executive Officer Mike Wirth.

The company’s ambitions for growth in the Permian came at a time of sustained increases in oil and gas rigs going into service in New Mexico, Texas, and across the basin.

Baker Hughes reported on Friday New Mexico added a rig for a total of 98, up 28 rigs from a total of 70 a year ago.

In the last year, Texas added 127 rigs for its total of 344 rigs on Friday, Baker Hughes reported, while the basin-wide rig count was at 335 – an increase of 106 rigs in the last year.

Aside from crude oil production, the Permian Basin – the world’s most active fossil fuel region – could also see increased pressure to generate liquified natural gas (LNG) for exportation to Europe after Russia’s exit from the global market disrupted foreign fuel supplies.

LNG is natural gas produced in the Permian which is converted to liquid and transported overseas via barges.

Russia was a major source of natural gas in Europe until the Ukraine invasion, and experts predicted the U.S. and Permian Basin could be called on to make up gaps left by supply disruption in the wake of the conflict.

A report from international energy market analytics firm Rystad Energy showed global LNG demand could reach 436 million tons in 2022, while available supply was reported at 410 million tons.

This could lead to high natural gas prices in Europe, the report read, and projects established in response might not provide relief until 2024.

Last year, Russia provided about 31 percent of Europe’s gas supply, the report read, and removing that supply could mean a “boom” in other producing regions like the Permian Basin.

“There simply is not enough LNG around to meet demand. In the short term, this will make for a hard winter in Europe. For producers, it suggests the next LNG boom is here, but it will arrive too late to meet the sharp spike in demand,” said Kaushal Ramesh, senior analyst for gas and LNG at Rystad.

“The stage is set for a sustained supply deficit, high prices, extreme volatility, bullish markets, and heightened LNG geopolitics.”


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