CERAWeek ’17: Chevron to boost Permian output 35% through 2020
HOUSTON -- Chevron plans to capitalize on its Permian basin position of 2 million acres by growing production in the region 25% to 35% through the end of the decade, said Chevron Chairman and CEO John Watson during remarks delivered Wednesday at the 2017 CERAWeek conference in Houston.
Production eventually could exceed 700,000 bopd, he noted. “It will depend on some of the gains that we are making, with productivity continuing to be realized and accelerated.” About 1.5 million acres in Chevron’s Permian portfolio are shale resources, and a majority of it is without royalty, Watson said. “We’ve had a couple of small acquisitions over the last few years, but we did hang on to some of the acreage for a long time … I’ve always thought that you really want to understand your acreage before you sell anything, really understand the geology.”
The company is currently operating 11 rigs in the Permian and plans to raise that count to 20 operated rigs by 2018. “Beyond ’18, we are looking at adding rigs pretty systematically, so that we can generate good returns on the investments that we are making,” Watson said. “As we look at high-grading the acreage that we have in the Permian, we want to be really thoughtful about how we do that, so we want to make sure that we understand all of the benches and horizons.”
Still, Watson said he doesn’t think shale will produce enough to meet growing oil demand in years to come. “Although we are getting more energy-efficient, you still have literally billions of people that are entering the middle class, and so it is fairly predictable what is going to happen … Demand is likely to grow for our product for some time, and in due course,” he said. “We’ve seen cases where we grew 1 million bpd per year in the unconventional space, but that was when oil was almost $100/bbl. If you see 1 MMbopd in demand growth per year, I don’t think shale is going to be enough. People forget, there is a 97-MMbpd market for liquids, and shale is 5 MMbpd, so I think we are going to need more investment.”
Outside of the Permian, Watson said Chevron is focusing its exploration on well-known basins. “The truth is we haven’t had very many large discoveries of oil, as an industry in emerging basins, so it has been challenging,” he said. “We tend to focus on basins that we know something about, basins like Thailand, Nigeria and Gulf of Mexico.” He listed South America, and Brazil in particular, as another area with great potential.
Watson said Argentina’s Vaca Muerta, where Chevron is partnering with YPF, is one of the few places outside of North America where there is enough oil industry infrastructure and quality geology to pursue shale resources. “We are working to get our costs competitive and all the productivity gains that we have gained in the Permian and in the Marcellus applied there.”
