Magazine article Global Finance

Oil Majors Battle for Shale Leadership

Magazine article Global Finance

Oil Majors Battle for Shale Leadership

Article excerpt

The Permian Basin of West Texas and New Mexico, the largest US shale oil field, recently passed Saudi Arabia's Ghawar field as the world's biggest oil producer. The battle between Chevron and Occidental Petroleum for Anadarko Petroleum will decide which becomes the top shale-oil producer in the Permian.

"Increasingly, super majors such as Chevron and ExxonMobil are dominating the Permian,"James Reeve, chief economist at Samba Financial Group, wrote in a recent report. "These firms have both the cash flow to ride out periods of low oil prices, and the technology to overcome issues stemming from congested well placement. Both Chevron and Exxon expect to treble their Permian output over the next five years or so."

By buying Anadarko, based in Woodland, Texas, Chevron would be able to connect several fields it already owns in the Permian to create a 75-mile-wide corridor where extended lateral drilling will enable the extraction of more oil at a lower cost per barrel.

As Chevron CEO and Chairman Michael Wirth commented in an interview with CNBC "the shale game is a scale game." The oil majors are piecing together multiple horizontal wells to industrialize the process.

Chevron says it has only tapped about 8% to 9% of its reserves. "With enhanced recovery techniques, one would expect a minimum recovery rate of 40%," says Reeve. …

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