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Commodity trader Vitol acquires Midland Basin shale acreage in US from Hunt Oil

Highlights

Upstream assets producing around 40,000 boe/d

Associated gas ties in to North American interests

Vitol, the world's largest independent oil trader, has agreed to acquire producing acreage in the Permian's Midland Basin from Hunt Oil as the trader looks to build a US shale position from existing mature assets.

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The assets, acquired by Vitol's Vencer Energy, cover 44,000 acres across five counties in the Midland Basin, with current production of about 40,000 boe/d, Vitol said in an April 30 statement. No financial details of the deal were given.

The Permian, which spans West Texas and southeastern New Mexico, is a prolific shale play with several sub-territories, including the Midland Basin. While oil is the main lure for drillers, significant amounts of associated gas are being lifted with the crude. That gas is increasingly being moved southward across the border to Mexico for use in electricity generation and eastward to Gulf Coast demand markets for use in producing LNG for export.

Those dynamics benefit Vitol, which has an agreement to offtake LNG supplies from Cheniere Energy. The 15-year agreement for 0.7 million mt/year of LNG, signed in 2018, will be used to support Cheniere's sixth liquefaction train at its Sabine Pass export terminal in Louisiana. Train 6 is expected to begin producing LNG by the end of this year. More broadly, in addition to its crude connections, Vitol has significant exposure to global gas and LNG markets.

The US upstream shale purchase is the first by Vencer, which Vitol created last year to acquire mature, producing oil and gas assets in US onshore shale basins.

"This is an important day for Vencer as it establishes itself as a significant shale producer in the US Lower 48," Vitol's Americas head Ben Marshall said in the statement. "We expect US oil to be an important part of global energy balances for years to come, and we believe this is an opportune time for investment into an entry platform in the Americas."

Privately held Hunt Oil has land positions in the Permian, the Williston Basin (Bakken) of North Dakota, the Eagle Ford shale of South Texas, and the Appalachian Basin (Marcellus) in Pennsylvania and West Virginia.

Vitol has been a relative newcomer to the upstream sector and in 2018 sought to grow its production footprint as part of a $1.4 million buyout of Petrobras' Nigerian oil assets.

GROWING FOOTPRINT

The move into shale basins in the US Lower-48 states marks Vitol's first US upstream position. It also follows a growing footprint by independent traders in the rising export flows of US crude oil and refined products over recent years. Rival trader Trafigura, for example, refers to itself as a market leader in exporting US crude to international markets including Canada, markets in Central and South America, the Caribbean, Europe, and Asia. Like Vitol, Trafigura also has interests in US LNG exports. A 15-year offtake agreement with Cheniere for 1 million mt/year of LNG took effect in 2019.

Vitol holds stakes in a number of producing upstream assets in West Africa, Eastern Europe, and the Americas, which currently produce around 32,000 barrels of oil equivalent a day. One of the company's major offshore assets is the Sankofa OCTP project in Ghana, which produces at a gross rate of 45,000 b/d of crude and around 200 MMcf/d into the domestic gas infrastructure.

Some of its other key upstream assets are in Mexico, Azerbaijan, Kazakhstan, Russia, and Ukraine.