CERAWeek ’17: Permian has room to grow at $40/bbl says Oxy, Pioneer

HOUSTON -- Lessons learned from the shale revolution, combined with excellent geology, will allow Permian basin operations to grow and maintain profitability at a mere $40/bbl, according to two of the region’s top operators—Occidental Petroleum and Pioneer Natural Resources.

“Right now, a lot of producers have significant opportunities that are economical to develop under $40/bbl,” Occidental President and CEO Vicki Hollub told the CERAWeek crowd on Tuesday afternoon. She said that Permian production could eventually grow to 5 million bopd. “I just think it is going to depend on oil prices. It will be there one day, it is just a matter of how fast it can get there.”

Occidental began trimming its business three years ago to focus on five areas that gave the company its best returns. The Permian was one of the five areas, along with five in the Middle East and one in South America. The company considers the Permian one of its core areas, Hollub said.

“Today, you can grow the company at 5%, at $40-oil,” said Pioneer Executive Chairman and CEO Scott Sheffield. He compared the potential of the Permian to Ghawar field in Saudi Arabia. “You could easily see 8 to 10 MMbpd out of the Permian by 2027.” He went on to say that the Permian could contain an estimated total of 160-170 Bbbl of recoverable oil.

“People have to realize we are currently going after two to three benches in the Permian. There are 12 to 16 benches we can go after in various price environments,” Sheffield said. “When you have 12 to 16 benches in the Permian, if the service companies can figure out how we can drill six to eight at one time, and frac them all at once, it will take the Permian to a level we can’t believe. Instead of growing 500,000 bpd a year, it could easily reach 1 MMbpd each year.”

To fully take advantage of the Permian’s resources, he said additional infrastructure requirements would be needed, including many new pipelines, NGL lines, and natural gas lines to Mexico. “It’s the second largest associated gas field, and it’s going to go to 20 Bcfd,” he said. “We have to get our gas out of the Permian, and we have to keep a great relationship with Mexico to be able to do that.”

Sheffield said Pioneer is growing its Permian business at about 30% annually. “The Permian is going to be a big supplier to the world over the next few years.”