America’s reign as the world’s largest oil producer may be ending.
Many of the best wells in the Permian Basin, which spans parts of West Texas and New Mexico, are producing less oil, according to a report from The Wall Street Journal (WSJ).
The report suggests that many of the biggest wells in the region are mirroring a production plateau that has been witnessed at other more mature U.S. shale oil fields.
At the CERAWeek conference in Houston this week, executives noted a slowdown in domestic shale oil production, indicating that a return to foreign oil dependence could be in the U.S. future.
At a panel conference at CERAWeek, ConocoPhillips CEO Ryan Lance said, “The world is going back to a world that we had in the ‘70s and the ‘80s,” per the WSJ. Lance was referencing a time when OPEC supplied much of the world’s oil.
In 1979, OPEC had a global market share of 47%, according to Energy Education.
By 2021, its total global market share was 37.9%, according to Statista.
The average well produced 6% less oil in 2022 than in 2021, according to Novi Labs.
While the availability of domestic oil production safeguards the United States from relying on foreign entities, without exploration or new technological advances, companies could be forced to use lower-quality wells that are only viable if prices are higher.
From around 2010 until just before the pandemic, oil production nearly doubled in the U.S., from 7.2 million barrels per day to a high of 13 million barrels per day.
Production of shale oil has yet to get back to pre-pandemic levels. This decline is mainly due to investors pressuring companies to limit spending and growth and instead focus on generating higher profits. As previously reported by The Dallas Express, ExxonMobil and Chevron posted record profits in 2022.
Even if oil surpasses $100 per barrel, Pioneer Natural Resources CEO Scott Sheffield said, “All the shareholders that I’ve talked to said that if anybody goes back to growth, they will punish those companies,” per The Atlantic.
The slower well performance is also leading companies to look to mergers for growth.
Last week, Chevron executives said the company did not reach its production target in the Delaware basin, according to Hart Energy.
Sheffield said that global markets would become more reliant on Middle Eastern crude in the long term if shale oil continues to decline.
“We’re just not gonna have that big growth pump like we used to.”
Oil and gas industry veteran Richard Welch told The Dallas Express that the talk of an oil production decline is a familiar one.
“It seems like we hear these rumors every five years or so. ‘Oil is drying up! We’re going to run out!'” he said.
“2023 is a different objective with the immense push for unreliable renewable energy. Oil production in the Permian has almost doubled since 2017. Figures estimate that there are 200 years of supply in West Texas alone,” Welch explained.
“This is why it’s extremely important to keep exploring, drilling, and building our reserves. When not so many ‘gushers’ are active, then we won’t be in a bind.”
