Oil and Gas

UPDATE 1-Exxon aims to triple Permian shale output over next seven years

(Adds details of Permian expansion)

HOUSTON, Jan 30 (Reuters) - Exxon Mobil Corp plans to triple its oil and natural production in the Permian Basin of West Texas and New Mexico by 2025 and spend $2 billion there to expand a crude storage terminal, it said on Tuesday.

The plans highlight the increasing importance of U.S. shale to the world’s largest publicly-traded oil producer alongside its global mega-projects in places such as Qatar and Guyana.

Exxon has moved quickly to develop the Permian - the largest U.S. oilfield and one located only about 325 miles (523 km) from its headquarters - since doubling its acreage there last year in a deal worth more than $6 billion.

Exxon estimates its Permian holdings are profitable at oil prices below $40 per barrel. U.S. oil prices slipped about 2 percent on Tuesday morning to $64.22 per barrel.

The Permian expansion is part of Chief Executive Darren Woods’s plans for Exxon to spend more than $50 billion in the United States over the next five years due to U.S. tax reform.

“The recent changes in the U.S. corporate tax rate have created an environment ripe for increased capital investment,” Sara Ortwein, president of XTO Energy, Exxon’s shale-focused subsidiary, said in an interview.

It’s unclear whether Exxon would have made the investments without U.S. tax reform, Ortwein said.

Exxon said it now expects to pump more than 600,000 barrels of oil equivalent per day (boe/d) from the Permian within seven years by boosting output from both traditional and shale wells. The company’s shale acreage alone should see a five-fold output increase over that time frame.

“The Permian is a huge resource base with lots of potential,” said Ortwein, who estimates Exxon’s Permian holdings contain more than 3.4 billion barrels of oil equivalent.

To tap the acreage, Exxon aims to boost its Permian drilling rig count by 65 percent from about 24.

Exxon has cut its drilling cost per foot by about 70 percent since 2014 and doubled the footage drilled each day, making rigs more efficient.

Exxon also plans to spend $2 billion to expand a crude storage terminal it acquired last year in Wink, Texas, in the western Permian.

The terminal expansion will help Exxon get more oil and condensate to refineries and chemical plants in the U.S. Gulf Coast. The company is studying how to expand Permian natural gas gathering and processing facilities, though no decisions have been made yet, Ortwein said. (Reporting by Ernest Scheyder; Editing by Susan Thomas)