Oil producers in a ‘dire situation’ and unable to ramp output, says Oxy CEO

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As oil prices surge to the highest levels since 2008, Oxy CEO Vicki Hollub said U.S. producers cannot increase output.

“We’re in a really dire situation,” she said Tuesday at CERAWeek by S&P Global. “We’ve never faced a scenario where we need to grow production, when actually supply chains not only in our industry, but every industry in the world, is being impacted by the pandemic.”

U.S producers were largely expecting to keep production flat this year, and in the face of surging crude prices, output can’t just be ramped, Hollub said.

“Now, with supply chain challenges, it makes any kind of attempt to grow now — and at a rapid pace — very, very difficult,” she said.

Production in the oil-rich Permian Basin is back around its pre-pandemic peak, according to Hollub, who said the region faces significant challenges to grow output further. It’s also the only shale basin in the U.S. that can grow production, she said.

Part of the difficulty is due to the life stage of wells in the region and the need to offset declines from wells that are past their peak. But the industry is also facing challenges that are reverberating throughout the economy, including labor shortages and issues securing raw materials. While the industry had prepared for these hurdles, it had not prepared for the need to crank output rapidly.

“The call for incremental production in the United States, at this point, especially with the supply chain challenges can’t happen at the level that’s needed not only for our country, but for the world. We’re in a significantly challenging scenario today,” she said.

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