North American Producers Slow to Shake Out New Output

The oil price spike and the emergence of targeted bans on Russian oil imports are not yet shaking out a cohesive supply response from North American producers.

Leading US independents say they will maintain their relatively slow pace of upstream growth, while Canada is likely to add some additional supply in light of higher oil prices, although meaningful additions take years to permit.

Eyes have turned to the US to see whether the country’s short-cycle shale patch might rise to the occasion.

US oil output was already set to grow this year absent triple-digit oil prices, and some additional incremental production could emerge from price-driven private producers and US majors Chevron and Exxon Mobil.

ConocoPhillips CEO Ryan Lance told CERAWeek by S&P Global on Tuesday that he thinks US crude and condensate production could rise by 800,000-900,000 barrels per day between the start and end of 2022 as a result. Similar growth could follow next year if oil prices remain strong — although $100-plus oil isn’t required.

But US producers aren’t poised to grow as one might expect at such astronomical prices, with publicly traded E&Ps arguing they are yet to have that mandate from investors.

Executives at multiple major US producers and other industry insiders tell Energy Intelligence that a lack of supportive and consistent messaging from the Biden administration around domestic oil supply growth is in part to blame for investors’ trepidation.

“Feedback so far is to stay at 5% [or under annual growth],” Scott Sheffield, CEO of Pioneer Natural Resources, said on the CERAWeek sidelines. “I think in the long term our attitude is we can add more barrels, [but] it’s going to take time. We need a combination of Biden accepting the fossil fuel industry as needed for this country, we need all Western countries to ban Russian oil and gas imports, and we need shareholder approval — a combination of all three.”

Sheffield suggested Biden reach out to the Saudis “as soon as possible” in the meantime.

Media reports this week suggested that Biden might travel to Saudi Arabia to hold talks with the kingdom's leadership around the current conflict in Ukraine. However, a US official told Energy Intelligence that no such plans could be confirmed.

Canada Goes Conventional

North of the US border, Canadian producers are taking a more conventional approach by working existing assets to boost output.

“Everyone is looking for opportunities to debottleneck the facilities,” Suncor CEO Mark Little told reporters at CERAWeek. “In this price environment, every single producer is trying to find opportunities to maximize the utilization of their physical assets.”

The Suncor boss expects such efforts, alongside already planned ramp-ups, to add “a few hundred thousand barrels” per day in output this year.

However, Little acknowledged that further growth in the oil sands patch requires extensive permitting and planning that can take “years” to deliver. Canada’s oil giants also face constraints from investors, which favor higher shareholder returns over additional growth.

He added that players are unlikely to make major changes to maintenance schedules to pump more crude.

“No one’s going to put their assets at risk from an integrity perspective,” he said.