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US oil majors raise Permian production forecasts

US oil companies ExxonMobil and Chevron have both sharply raised their production forecasts for their upstream operations in the Permian Basin. They claim that improvements in drilling technology means that these operations can turn a profit, even with lower oil prices.

While the Permian Basin used to be dominated by smaller independents, the two oil majors now have a strong presence there. ExxonMobil said it now expects to be producing more than a million bpd (barrels per day) of oil equivalent by 2024, somewhat more than its previous forecast of 600,000 bpd by 2025. Chevron, meanwhile, expects to be producing 600,000 bpd by the end of next year and 900,000 bpd by the end of 2023.

Reductions in production costs are helping to drive the booming production in the Permian region. ExxonMobil claims its operations can generate a 10% return even if oil prices plummeted to $35/barrel, while Chevron says it has roughly halved its production costs over the last five years.

As part of its larger strategy, ExxonMobil is also planning to expand its Beaumont, Texas refinery to process crude oil from the Permian into more valuable refined products. The Beaumont refinery produces diesel and petrol, as well as lubricants like the leading synthetic motor oil Mobil 1 New Life 0W/40. Once the expansion is complete, it will be the largest refinery in the United States. It has also partnered with Plains All American Pipeline LP to build a pipeline to transport a million bpd of crude from the Permian.

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