MIDLAND, Texas — It’s been a year of mergers in the oil and gas industry, from Exxon acquiring Pioneer to Chevron acquiring Hess and now Oxy acquiring CrownRock. While these mergers go through the process of becoming official, the likely eventual reality will have a global impact.
This has been a trend due to these companies having their eyes on the future. With demand increasing for oil and gas resources across the world, these significant mergers look to have the United States be a major player in selling those resources, with the Permian Basin playing a key role.
Large companies investing in large opportunities.
“They’re not buying this stuff to let it sit in the ground," said Ray Perryman, President of The Perryman Group -- an economic research company.
That "stuff" being shale resources for oil and natural gas.
“They have great confidence that they’re going to be producing these resources for the foreseeable future, and they can achieve some efficiencies that some of the smaller producers are not able to achieve," Perryman said.
The Permian Basin is home to the largest supply of shale resources in the world, says Perryman.
“I think the most important thing it states is all of these acquisitions were to acquire shale resources – two of them in the Permian Basin [and] one of them in Guyana – but they were all to acquire shale resources, which basically says these major oil companies have a lot of confidence that they’re going to be producing these resources for many decades to come," Perryman said.
Mergers of this magnitude speak to what the state of oil and gas is right now.
“It says that although we are dealing with some significant climate issues in the world, and we’re dealing with a lot of other issues in terms of what the future of energy is going to look like, everyone recognizes that while we’re going to have to produce it in a cleaner way than we have before and we’re going to have to do it in different ways than we have before, that oil and gas – particularly the low-carbon type of oil that comes out of the Permian Basin – is going to be in high demand for the foreseeable future," Perryman said.
The impact these major companies can have is far-reaching.
“Probably 80% or more of the new demand for oil is going to be in the emerging parts of the world, and a lot of that oil will now be coming from the Permian Basin," Perryman said. "And you have larger producers that tend to have greater efficiencies, greater capital, greater ability to go through the ups-and-downs of the pricing cycle – things of that nature. So, I think it will probably add a little bit of stability to the industry from a global perspective.”
Stability for the world and growth in the Permian Basin.
“There’s going to be a long-term demand for these resources, so it makes sense that companies that already have a presence in the area would want to expand in that presence," Perryman said.
Perryman mentioned that Exxon Mobil has a large presence in New Mexico, with a merger allowing them to expand into other areas of the Permian Basin. He added that technological advancements have increased production over the years and that there is still upside for more moving forward.