ExxonMobil Corp. plans to triple its oil and natural production in the Permian Basin of West Texas and New Mexico by 2025 and spend $2 billion there to expand a crude storage terminal, the company said Jan. 30.
The plans highlight the increasing importance of U.S. shale to the world’s largest publicly-traded oil producer alongside its global megaprojects in places such as Qatar and Guyana.
ExxonMobil has moved quickly to develop the Permian—the largest U.S. oil field and one located only about 523 km (325 miles) from its headquarters—since doubling its acreage there last year in a deal worth more than $6 billion.
The company estimates its Permian holdings are profitable at oil prices below $40 per barrel. U.S. oil prices slipped about 2% early Jan. 30 to $64.22 per barrel.
The Permian expansion is part of CEO Darren Woods’s plans for ExxonMobil to spend more than $50 billion in the U.S. over the next five years due to U.S. tax reform.
“The recent changes in the U.S. corporate tax rate have created an environment ripe for increased capital investment,” Sara Ortwein, president of XTO Energy, ExxonMobil’s shale-focused subsidiary, said in an interview.
It’s unclear whether ExxonMobil would have made the investments without U.S. tax reform, Ortwein said.
ExxonMobil said it now expects to pump more than 600,000 barrels of oil equivalent per day (boe/d) from the Permian within seven years by boosting output from both traditional and shale wells. The company's shale acreage alone should see a five-fold output increase over that time frame.
“The Permian is a huge resource base with lots of potential,” said Ortwein, who estimates ExxonMobil’s Permian holdings contain more than 3.4 billion barrels of oil equivalent.
To tap the acreage, ExxonMobil aims to boost its Permian drilling rig count by 65% from about 24.
ExxonMobil has cut its drilling cost per foot by about 70 percent since 2014 and doubled the footage drilled each day, making rigs more efficient.
ExxonMobil also plans to spend $2 billion to expand a crude storage terminal it acquired last year in Wink, Texas, in the western Permian.
The terminal expansion will help Exxon get more oil and condensate to refineries and chemical plants in the U.S. Gulf Coast. The company is studying how to expand Permian natural gas gathering and processing facilities, though no decisions have been made yet, Ortwein said.
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