Washington — ExxonMobil aims to ease global oil and gas production shut-ins by about 40% to 200,000 b/d of oil equivalent as demand for transportation fuels slowly recovers from a second-quarter plunge.
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About 70% of the shut-ins expected to persist into Q3 are from government mandates, with the rest being market-based cuts, the company said.
ExxonMobil sees global gasoline and diesel demand returning to year-ago levels by Q4, while jet fuel demand will take much longer to recover.
The driller posted a $1.1 billion loss in Q2, its largest-ever quarterly loss, as global oil demand sank 20% year on year.
"The demand destruction in the second quarter was unprecedented in the history of modern oil markets," Neil Chapman, senior vice president, said during a July 31 earnings call. "Absolute demand fell to levels we haven't seen in nearly 20 years. We've never seen a decline with this magnitude and pace before."
ExxonMobil's global oil and gas production fell to 3.6 million boe/d, down 10% from the previous quarter and down 7% year on year.
North American production of crude and other liquids fell to 1.1 million b/d, down 11% from Q1 and down 2% year on year.
While output from the US Permian Basin actually rose 9% year on year to 298,000 boe/d in Q2, a sharp reduction in capital expenditures is expected to cap the outlook for the rest of the year.
The driller's Permian rig count fell to 30 in Q2 and will fall further to 10-15 by the end of the year, it said.
"That really is just a short-term to manage our current capital planning," Chapman said of the Permian rig count. "One of the great attractions of short cycle is you can take that capital off quickly and, of course, you can put it back on pretty quickly."
Restarting shut wells
Chapman said the driller's focus in the Permian remains Poker Lake in Eddy County, New Mexico, where it started operations in Q2 at its new Delaware central processing facility to collect oil and gas supply in the basin for delivery to the Gulf Coast export markets.
Asked about the flow rates of Permian wells that were being brought back from shut-ins, Chapman said the wells were returning at or above where they left off on the decline curve.
"We wanted to be sure that when we bring them back online that they come back at what I always describe as the same position on the tight curve," he said. "That's indeed what we've seen."
ExxonMobil expects its Permian output to average 345,000 boe/d in 2020, only 15,000 boe/d below its March outlook and more than 70,000 boe/d above 2019 output.
S&P Global Platts Analytics expects total US oil production to decline around 500,000 b/d year on year in 2020 and more than 1.5 million b/d in 2021. That would put US output about 3.4 million b/d below Platts' pre-price collapse forecast by end-2021.
In Guyana, the first phase of the Liza project demonstrated production capacity of 120,000 b/d, and the second phase is set for 2022 startup, the company said.
In May, ExxonMobil pushed back its Guyana targets by six months to a year as a result of the country's election uncertainty and the challenges of rotating crews to prevent virus spread. It now expects to produce 750,000 b/d by 2026.
ExxonMobil's global refining throughput fell to 3.5 million b/d, down 14% from the previous quarter and down 11% year on year.
US refining throughput fell to 1.4 million b/d, down 8% from Q1 but up steady year on year.
Fossil fuels' future
Amid concern the pandemic has hastened a permanent decline in the fossil fuel sector, Chapman said long-term predictions for global energy growth have not changed. ExxonMobil expects energy demand to grow 25% by 2040, and fossil fuels will be needed to meet it.
"The population will continue to grow, economies will continue to grow," he said. "This relationship between societal progress or human development and energy consumption is absolutely clear.
"In our business, which is a depletion business, it's not just a question of the growth in demand. It's the depletion as well. ... There is a need for hydrocarbons to come into the market and for people to invest in hydrocarbons to meet that energy demand."