FORT WORTH, Texas -- Scott Sheffield, chairman and CEO of Pioneer Natural Resources, kicked off the DUG Permian Basin conference on May 21 by expounding on the Permian Basin’s great promise for long-term growth and the major hurdle that stands in its way: the 1975 U.S. Energy Policy and Conservation Act, which bans crude oil imports and exports except in select circumstances.

Pioneer deals exclusively in light sweet crude in its Permian Basin assets, which is why Sheffield said the company started lobbying for a lift on the ban almost a year ago.

“There’s really only one item that can derail the growth in the Permian Basin, and that’s the import/export ban that was enacted in 1975,” he said. “A lot of the refiners have gotten together, and we’re talking to Congress about relaxing the ban on crudes. I’m cautiously optimistic that they might. In two to three years we need the ban on crude released, allowing us to continue this tremendous growth.”

The Permian Basin is the most active in the world today, Sheffield said, with more than 300 rigs currently in the Spraberry and Wolfcamp shales alone.

“The Permian Basin is up to 550 rigs, and I see it continuing to grow significantly over the next several years,” he said.

The Permian Basin comprises nearly one-third of all rig activity in the country. Pioneer has 24 horizontal and 11 vertical rigs currently operating in the basin, and that number will increase during the next few years, Sheffield said.

“We released and updated our 50 billion recoverable numbers in Spraberry and Wolfcamp,” he said. “We are up to 75Bboe. We think that over time, as downspacing occurs, this number will continue to go up as more of the zones are becoming more and more productive. You’re getting close to 1 trillion barrels of oil-in-place equivalent, with somewhere between 5% and 10% oil-recovery rates.”

Much of the oil being produced in the U.S., about 150Bboe, he said, was discovered only four or five years ago. This boom has caused tremendous growth in the industry, but has also made it clear that “dislocation cannot happen.”

“You can see what happens to the rig count when something happens, when something dislocates,” Sheffield said. “What we don’t want is for that rig count to collapse. Our refineries are built for heavy crudes, not sweet crudes. So what’s going to happen with the ban on exports of crude oil?”

Pioneer and others in the industry are working to inform the president and Congressional leaders about the positive impact lifting the ban would have on the U.S. and world economies, he said.

“We know we have to make it clear to the administration and to Congress that if you do remove the ban on crude oil, if anything, it should put more pressure on the world to be solvent in gasoline prices, as most studies show,” Sheffield said. “We essentially can’t afford to have this dislocation happen where we’ll have too much crude, with refineries at an all-time high at 92% refining capabilities today. We cannot exceed that 92%.

“This Ukrainian situation is actually helping [our cause] significantly. I feel sorry for the Ukrainians and for what is happening in Russia, but suddenly Europe has woken up and said, 'We can’t rely on Gazprom for natural gas and crude oil exports from Russia for the next 30 years.' Europe has made a significant amount of calls into this administration to get LNG to them quicker and to remove the export ban.”

Comments