US shale becomes safe haven as oil prices languish

SUV. The automaker is looking to end a poor record in the large SUV segment, where it discontinued its Veracruz in 2013 as sales dwindled.

The new model will help Hyundai raise its number of SUV models to six next year, from two last year. Its premium brand Genesis also plans to launch its first SUV next year. — Reuters HOUSTON: Big Oil is investing more in US shale, not less, after the recent tumble in crude prices.

It’s a far cry from four years ago when Opec declared war on American shale areas, which at the time had some of the highest costs anywhere in the world and were often the first on the chopping block during tough times.

The cost of shale production has fallen so much since then that it’s becoming a safe haven for major oil companies in times of volatile prices, providing rapid, reliable growth and quick returns even with crude trading for just over US$50 a barrel, down by almost a third since the start of October.

The US shale sector has helped boost American production to an average of 10.9 million barrels a day this year, the most on record. Output is forecast to grow a further 11% next year, according the Energy Information Administration.

ConocoPhillips said it’s spending half its 2019 budget in the continental US, while Chevron Corp is investing more at home than it’s done for more than a decade, with US$3.6bil going to the Permian Basin alone.

Anadarko Petroleum Corp and Hess Corp, both global operators, plan to increase spending on their American assets more than 40%.

Oil’s recent collapse caused “some different allocation going on within the budget,” Conoco chief executive officer Ryan Lance said on Bloomberg TV. “We’re putting more toward our US unconventional position,” he said, referring to shale.

Production growth “slows down at US$50 but I don’t think it stops at US$50, and it certainly continues if prices get back to US$60,” Lance said. Skeptics thought shale “wouldn’t last long, but it’s here, it’s a huge resource and it’s going to be resilient and long lasting.”

Oil companies will spend almost US$124bil in the US next year, a third of total capital expenditure globally, Evercore ISI wrote in a note. That’s a 10% increase from a year earlier, while expenditure outside North America is seen growing 7.2%. — Bloomberg