Policy incoherence hindering industry production to ease high oil prices, Chevron CEO says

Inconsistent U.S. policies are keeping oil companies from increasing production to bring down prices, Chevron’s chairman said. 

The Biden administration has gone back and forth on lease sales in recent weeks to protect wildlife. On Friday, the administration offered the fewest number of leases in history in the Gulf of Mexico according to the U.S. Department of the Interior. In September, the government canceled more than 13 million acres in Western Arctic lease sales to ConocoPhillips and removed 6 million acres from a 73.4 million lease auction in the Gulf of Mexico to protect an endangered whale species. Both leases were approved in March. 

“The signals have been mixed, and that makes it kind of difficult for companies to invest with confidence,” Mike Wirth said when asked at the Energy Security Summit in Oklahoma State University, Okla., what oil companies and even the White House can do about high prices. 

Chevron and other large oil companies profit both from rising oil prices and expanding their reach of projects. While uncertainty around oil leases in the U.S. tampers their ability to produce more of the commodity domestically, its investments abroad are paving the way for growth once production cuts end. 

“For a company the size of Chevron that’s so diversified, any sort of near-term permitting issues are not going to cause them any change in their production growth,” said Neal Dingmann, managing director energy analyst at Truist Securities. 

Both Russia and Saudi Arabia have extended their voluntary reductions for the rest of the year and promised to adjust production every month if more cuts are needed. 

Chevron projects abroad include the extraction of unconventional oil and gas resources from Argentina’s El Trapial, the fourth-largest shale oil reserve in the world, and the Tengiz Future Growth Project, now delayed until the end of 2024, that would expand production in Kazakhstan by 40 percent, to 280,000 barrels a day. 

Natural gas production is another asset with the discovery of 3.5 trillion cubic meters of gas off the eastern Mediterranean coasts of Cyprus, Israel and Egypt. The company and its partners NewMed Energy and Ratio Energies want to double field production in the area by 2027, Reuters reported. 

In the U.S., Chevron has merged with  PDC Energy in Denver, becoming Colorado’s largest oil producer and one of the company’s five largest production units in the world. It is expected to produce 400,000 oil barrels a day. 

“A company like Chevron is pretty well positioned in respect to the direction of the market,” said Ronald Rizzuto, a professor of finance in the University of Colorado.

Chevron has also purchased 77 acres of land, the equivalent of 58 football fields, in northwest Houston, possibly for research and development. 

A company spokesperson declined to comment.

Despite outperforming the S&P 500 in September, Chevron is still behind its rival Exxon, which reached an all-time high in the last week. Both companies ended the month with gains of 4.1 percent and 5.4 percent respectively. 

But analysts say they believe in Chevron’s long-term positive outlook.

“We like the discipline in their spending,” said Jason Gabelman, director of sustainability and energy transition at TD Cowen