A PBPA Q&A with Vicki Hollub, President and CEO, Occidental Petroleum Corporation
Occidental is the largest producer in the Permian Basin, and the company has been a valued operator in the region and member of the Permian Basin Petroleum Association. Tell us about Occidental’s business in the region.
We are proud to be the No. 1 producer in the Permian Basin and to be working in one of the largest and most active oil basins in the United States.
In West Texas and southeast New Mexico, we manage our Permian operations through two businesses: Permian Resources, which develops growth-oriented unconventional opportunities, and Permian EOR, which uses enhanced oil recovery (EOR) techniques, such as carbon dioxide and water flooding to maximize oil production in mature fields.
The synergies between our Permian Resources and EOR operations allow us to optimize production in the region, and our marketing operations provide key gathering and takeaway access to multiple markets.
What are some of the challenges Occidental has experienced in the region and how has the company been successful in spite of adversity?
The Permian has been an important part of our portfolio for decades. Starting with the Cities Service acquisition in 1982, Occidental has recognized the potential of the prolific Permian. Since then we have increased our positions through strategic transactions, including the acquisition of Altura in 2000 and Anadarko earlier this year. While others were exiting the area, we have persistently grown our position: first with conventional reservoirs and enhanced oil recovery, and more recently through industry-leading unconventional resource development. We know these rocks better than anyone and understand how to effectively develop high-performing wells. For example, Occidental delivered more than 26 of the top 100 Delaware Basin wells while only drilling 7 percent of the wells in 2018.
We have achieved success because our employees are empowered to develop solutions that generate results. This philosophy has helped us advance the company to where we are today: the leading producer in the Permian.
Permian assets, especially for a company like ours, bring the best of all worlds. The basin has conventional and unconventional reservoirs, gas, CO2 sources and good rock. We have everything we need here. In developing stacked pay basins, the infrastructure is already in place. And the exciting thing is that all the way from less than 1,000 feet to 20,000 feet, there are hydrocarbons in multiple intervals. So, it’s a matter of engineering and figuring out the right way to drill and complete it. That’s what happened in the shale play. Everybody knew the hydrocarbons were there. It was just a matter of engineering to make it commercially productive.
We are also investing in technologies that will bring forward the application of CO2 enhanced oil recovery to shales across the Permian, DJ and Powder River Basins, in the Rockies region, and in our conventional reservoirs in our international locations.
And we are not just focused on technology. In our operations, we continuously seek ways to increase efficiency. Through our integrated logistics-and-maintenance hub located in Carlsbad, New Mexico, we are reducing our traffic and travel between our operations. The facility is the first in the region to centralize facilities in one site for sand, cement, drilling services and equipment.
As the CEO of a large international energy company, can you describe how operators with substantial assets in the Permian Basin, like Occidental, impact global markets, as well as the economic and energy security of the United States?
What is happening in the basin is transforming global oil markets, and has brought about U.S energy security. The Permian Strategic Partnership estimates the gross value of Permian oil and gas at the wellhead is projected to exceed $200 billion per year by 2025, with approximately $50 billion in industry investment annually. They predict this investment will generate 10% of the GDP of the entire state of Texas, and a far greater share of New Mexico’s GDP. Under current tax policies, the production growth could generate more than $120 billion in state severance tax and approximately $5 billion for local county governments in Texas and New Mexico through 2030. Production in the basin produces local and state economic value and secures our energy supply.
For Occidental, the region is significant to our business. In 2018, approximately 57% of our total production was developed in the Permian. We export Permian crude oil to the rest of the world through a terminal we built – and later sold – at the Port of Corpus Christi. We have the capacity to deliver 470,000 barrels a day through the terminal and transport it to Europe and Asia. Currently, we are one of the largest exporters in the United States, exporting approximately 10 percent of all domestic crude.
You have stated that Occidental aspires to become a carbon-neutral company, and Oxy Low Carbon Ventures was established to make that vision a reality by developing solutions to produce lower carbon energy. What is low carbon ventures doing to realize that vision?
In our industry, the social license to operate is critical and something we take very seriously at Occidental. For us, it is a box that we are able to check that really nobody else can check in the industry, and that is our ability to lead our industry into a low-carbon environment. We believe that it is our moral and social responsibility to take this lead. As we approach our company’s 100-year anniversary in 2020, we have many technical and production achievements to be proud of, including our low carbon work, which is a key differentiator for our company. Our Low Carbon Ventures team has a dual objective — to enhance profitability and sustainability of our businesses while meeting the challenge of reducing atmospheric greenhouse gases.
Our low-carbon strategy includes three main pathways to de-carbonization: emissions reduction, reduced energy consumption and reduction of the levels of carbon dioxide in the atmosphere. Low Carbon Ventures is also capitalizing on our global leadership in enhanced oil recovery, which uses carbon dioxide and water flooding to extend the life of producing fields. Occidental is the world’s largest handler of carbon dioxide for enhanced oil recovery.
As part of this strategy, we have committed to making the partnerships and investments necessary to de-carbonize fossil fuels through carbon capture, use and sequestration, through using carbon dioxide in our enhanced oil recovery. And we will also use carbon dioxide to make chemicals, concrete, plastics and other products.
Low Carbon Ventures is also leading and supporting the development of innovative new carbon capture technologies – like our planned direct air capture facility with Carbon Engineering in the Permian and our investment in NET Power, which produces emissions-free electricity and captures carbon dioxide for enhanced oil recovery and other uses.
Excellent article! I am very curious as to the location of the new facility being constructed by OXY and Carbon Engineering in the basin. I hope that is is the prototype facility that will serve as a template to merge responsible Carbon management and the E&P business in the Permian.