Hess CEO says OPEC ‘back in the driver’s seat’ as U.S. shale growth slows

The Organization of the Petroleum Exporting Countries (OPEC) is “back in the driver’s seat” as the top swing producer amid slowing U.S. shale growth, Hess Corp Chief Executive Officer John Hess said on Thursday at an investor conference in Miami, Florida.

Hess anticipates U.S. oil production will hit around 13 million barrels per day in the next few years and then plateau. He said shale oil output is slowing due to investor pressure to focus on returns over growth, inflation and inventory depletion.

U.S. shale executives in recent weeks have lamented lower-than-expected productivity on certain wells, and warned that output growth in the prolific shale patch is poised to slow. The U.S. Energy Information Administration last week cut its forecast for 2023 shale growth by 21%.

“Shale was thought of as a swing producer, the Saudis and the OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer,” Hess said, cautioning though that OPEC lacked spare capacity to easily boost its production.

The producer group in October agreed to cut oil output by 2 million bpd amid concerns of an economic slowdown. On Wednesday, Hess said the cut was as much political jab at U.S. President Joe Biden, who was trying to lower gasoline prices, as it was an economic move.

In the United States, where Hess operates in the massive Bakken shale of North Dakota, he warned that many companies only have about a decade of life remaining.

“A lot of companies have already hit the wall,” he said, adding they were missing production and investment targets. “I think you are starting to see some cracks in the armor in that regard.”

Hess anticipates U.S. oil production will grow by about 500,000 bpd this year and next.

The company’s future decline in shale will be more than compensated by growth in Guyana, he added. An Exxon Mobil Corp-led consortium Hess participates in expects to triple current production to 1.2 million barrels per day in 2027, with a potential to double estimates of recoverable oil volumes in the country from the current 11 billion barrels.

“We are in the resource business and if you are going to grow future cashflow, you have to grow your resource,” he said.