Abu Dhabi, UAESaturday 14 December 2019

Oxy keen on Middle East growth despite budget cuts

The biggest player in the Permian is eyeing low cost barrels in the Middle East

Occidental's president and chief executive Vicki Hollub expects shale's momentum to slow next year. Victor Besa / The National
Occidental's president and chief executive Vicki Hollub expects shale's momentum to slow next year. Victor Besa / The National

Occidental Petroleum, the biggest player in US shale basins, is still keen to pursue investment opportunities in the Middle East after revising its overall spending plans for next year by 40 per cent following its $38 billion acquisition of Anadarko.

"This year we paused our capital, we reduced it a little bit but that's kind of a one-year transition. Next year we expect we will increase our capital closer to levels consistent with growth here in the Middle East," Vicki Hollub told The National in an interview in Abu Dhabi.

"We will continue to grow in the Middle East and the level of capital after we go through this transition next year, we will increase again," she added.

Houston-headquartered Occidental Petroleum has been looking for cheap, sustainable oil and gas assets in the Middle East having acquired Oman's Block 72 and Abu Dhabi National Oil Company's onshore Block 3 earlier this year.

"We've grown our position in Oman, more than doubled it and ... here in Abu Dhabi, we see lots of opportunities with Block 3," said Ms Hollub.

"We hope to be drilling no later than the beginning of next year on [Block 3]. We think it's going to be a significant value for us in the country," she added.

Occidental Petroleum took on Chevron, the world's third-biggest oil supermajor to acquire Anadarko Petroleum in a $38bn deal that will give Ms Hollub's firm a stronger position in the Permian, with total production of more than 1.3 million barrels per day, the equivalent daily output of Opec producers such as Libya.

It is now the biggest player in the Permian oil patch, which has been one of the key drivers behind the rise of the US as the world's top oil producer. The basin produces around 4 million bpd, with output expected to reach 5.4 million bpd by 2023, according to IHS Markit, outpacing most Middle Eastern producers with the exception of Saudi Arabia.

Outside of the shale patch, Occidental looks to grow its assets in the Middle East, as growth from US shale basins cools off due to lower investment levels seen this year.

Investment bank Goldman Sachs has reduced its outlook for US shale growth, revising it to 0.7 million bpd for next year. from 1 million bpd previously. It also revised its forecast for 2019 lower to 1.1 million bpd.

"I think the growth from US shale will not continue at the rate that it's been growing in the past few years. I think it will grow but the rate of growth will probably decline," said Ms Hollub.

"The rate of growth will be a third or half next year," she added.

Oil prices have remained largely in bearish territory this year, unfazed by geopolitical tensions and a major attack on Saudi oil facilities, as the US-China trade war and a slowing global economy exerted downward pressure on prices.

Shale drillers remain squeezed due to the low oil price environment, with banks reluctant to lend to US energy firms.

Ms Hollub expects more consolidation on the back of the low ebb in the Permian and noted the company is still keen on acquisitions following the financial close of Anadarko in August.

"Oh yes, we want to continue to grow our position," she added.

Updated: November 13, 2019 10:14 PM

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