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By Ernest Scheyder
HOUSTON, March 9 U.S. shale oil producers are
plotting ambitious production growth outside the red-hot Permian
Basin in Texas, widening a resurgence that could confound OPEC's
strategy to tighten global supplies.
As shale firms rebound from a two-year price war with OPEC,
many are planning to expand production in North Dakota, Oklahoma
and other shale regions.
The Permian - America's largest oilfield - has already seen
output jump in the past six months.
Hess Corp, Chesapeake Energy Corp,
Continental Resources Inc and other firms detailed their
growth plans at an energy conference in Houston this week. The
projects they outlined would result in a steady supply of
American crude exports through the next decade.
Rising U.S. energy clout has frustrated efforts by the
Organization of the Petroleum Exporting Countries to control
global oil prices through a production curb announced
last fall - its first in eight years.
The rise in U.S. output was enough to boost domestic crude
stockpiles last week by 8.2 million barrels, more than quadruple
estimates from analysts polled by Reuters.
The unexpected supply surge pushed U.S. oil prices
down more than 5 percent on Wednesday to close at $50.49.
The price drop underscored the growing impact of U.S. shale
production on global supplies and prices relative to OPEC member
nations, which once exercised dominant influence on global
markets. Representatives from both sectors acknowledged that
power shift at the energy conference in Houston.
"We are on something of an equal basis today with OPEC,"
said Harold Hamm, founder and chief executive of Continental
Resources, which has invested heavily in Oklahoma shale projects
in the past year.
In North Dakota's Bakken shale fields, where Continental is
the largest leaseholder, the company has hired oilfield service
contractors to frack wells that it had mothballed during the
Chesapeake - which has one of the largest acreage positions
of any U.S. producer, with holdings in Pennsylvania and
Louisiana - has only drilled an average of 25 percent of its
land, giving it years of inventory to drill and frack.
"We have this great opportunity to run with," said Frank
Patterson, Chesapeake's head of exploration and production. "We
can develop what we have and grow."
Hess, one of the largest Bakken producers, is adding four
rigs this year and says it has more than a decade of drilling
locations at current oil prices.
"We're back to growth in the Bakken," Chief Executive John
Hess said in an interview.
These and other expansion plans come as the Permian Basin
saw $28 billion in land acquisitions in 2016, more than triple
the prior year. Chevron Corp, which controls 2 million
Permian acres, expects its output there to jump 20 percent by
the end of the decade.
"We're ramping up," Chevron CEO John Watson said.
Yet as the rise in American oil stockpiles shows, producers
run the risk of pumping too much and creating a new glut that
could push prices down.
The U.S. Energy Information Administration boosted its
forecast this week for American oil production for 2017, now
expecting output to rise 330,000 barrels per day from last year.
Production in the United States is about 5 percent below the
OPEC WARNS SHALE PRODUCERS
A handful of chief executives at U.S. oil producers met with
OPEC ministers last weekend ahead of the CERAWeek conference at
a dinner organized by investment bank Lazard Ltd. The
meeting, the first between the two groups, was described by
attendees as cordial.
"OPEC is trying to figure out U.S. shale," Scott Sheffield,
chairman of Pioneer Natural Resource Co, said in an
interview. "U.S. shale is trying to understand where (oil)
prices will go. We're educating each other."
OPEC plans to meet on May 25 in Austria to decide whether to
extend or deepen the supply cuts.
OPEC Secretary General Mohammed Barkindo said this week that
for the cartel to renew its production output agreement,
non-OPEC members must be on board.
Hess, Sheffield and other U.S. shale leaders said they
expect the group will renew the production curbs.
"It's really healthy that shale producers understand the
importance of OPEC," said Hess. "We're all in the same boat."
While American producers seem unlikely to agree to any broad
output curb with OPEC, they are keenly aware of the supply and
demand for oil.
"We have the potential to oversupply the market," said
Continental's Hamm. "And we have a great responsibility not to
(Edited by Brian Thevenot)