Chevron CEO John Watson on Monday warned that U.S. shale oil alone cannot meet the world’s growing appetite for crude.
Global oil demand is growing by more than a million barrels per day each year. American producers are meeting much of that consumption growth after a revolution in drilling technology that has allowed them to unlock oil and gas from shale rock formations.
“Shale can help. Certainly between now and the end of the decade it will be a big contributor to meeting that million-barrels-of-oil-demand growth that’s out there,” Watson told CNBC’s “Power Lunch” on the sidelines of the Milken Global Conference in Los Angeles.
“But ultimately oil fields decline, and we’re going to need all sources of supply, including the shales, but also deepwater and other sources around the world,” he said.
Investment in oil exploration and development — especially expensive projects like offshore drilling — has plummeted as oil companies slash spending plans amid a prolonged crude price slump. That could cause the market to become undersupplied in the future, the International Energy Agency warns.
Meanwhile, U.S. shale oil production has rebounded as crude prices stabilize around $50 a barrel, supported by output cuts by OPEC and other exporting nations aimed at cutting brimming global stockpiles. The recovery has also been underwritten by falling service costs and efficiency gains in the U.S. shale oil patch.
That has led to a land rush in the low-cost Permian Basin in parts of Texas and New Mexico, where Chevron is a major player.
Watson said President Donald Trump’s rollback of energy-sector regulations could kick-start the economy by removing rules and guidance that “were heaping costs on our industry with no discernible benefit,” he said.
In his first 100 days, Trump has set in motion reviews that would, among other things, remove limits on offshore drilling, rewrite President Barack Obama’s signature plan to reduce carbon emissions from power plants and potentially ease tough fuel efficiency standards.
Many environmentalists and Democrats counter that Obama-era measures were critical to reducing America’s contribution to climate change. Canceling them significantly handicaps U.S. attempts to mitigate the effects of global warming, they say.
