CERAWEEK: US crude 2024 output growth likely drops to 300,000-400,000 b/d: ConocoPhillips CEO

US crude oil production growth in 2024 will likely drop to about 300,000-400,000 b/d in 2024, down from around 1 million b/d in 2023, a top industry veteran said March 19, even as the number of drilling rigs remain at fairly low levels.

ConocoPhillips CEO Ryan Lance said at the CERAWeek by S&P Global conference that he had predicted less production growth last year of about 800,000 b/d, but many industry-watchers had expected fewer volumes.

Current US production is about 13.3 million b/d, according to the US Energy Information Administration and in March 2023 it averaged 12.2 million b/d.

For 2024, S&P Global Commodity Insights forecasts about 625,000 b/d of crude oil growth.

In any case, the large, unanticipated growth in 2023 is "starting to moderate," Lance said.

"Probably later this decade we'll see US production plateau and will probably stay there a long time," he said. "I don't know that we'll get to 15 [million b/d], but I think we'll pass through 14 million [b/d] on the way to 15 million [b/d]."

Lance did not attribute a motive for the more moderate crude growth, but US rig counts have fallen sharply over the past year.

Industry rigs down 30%+ since early 2023

The number of rigs working in US oil and gas fields totaled 660 for the week ended March 14, according to S&P Global analysts, down from around 700 in late October 2023 and 867 at the start of 2023 – a drop of more than 30% in a little over 14 months.

However, production rose because more efficient operations have improved well and basin productivity: For example, improved well completions, longer horizontal well legs known as laterals, and Simul-frac – completing two wells at the same time – have all lowered the cost of wells while at the same time reducing the amount of required equipment.

Ovintiv recently introduced the first "Trimul-frac" well into industry – completing three wells at the same time.

Still, more sophisticated rigs and equipment mean the cost to upstream operators has not dropped much in the past year. Leading-edge day rates for a top-tier rig remain around $35,000, down from around $40,000 in late 2022.

The role of natural gas

Lance said the role of natural gas is still underestimated. While gas prices have dropped below $2/MMBtu from over $3/MMBtu in late 2023, natural gas as a bridge fuel to the energy transition needs to be given more attention, he said.

"Where is this power [for greater electrification for the energy transition] going to come from?" Lance said. "Data centers are required 24/7 and 365 days a year."

"[Power generation for data centers] used to be located next to fiber optic cables, but today they want to locate them next to a power source," Lance said. "They prefer that [power generation] is sustainable and renewable but they also recognize that...adequate battery backup is insufficient."

"The whole combination will be an expectation that gas...will be needed for a long period of time," he added.

Lance expects the industry over the next five-to-10 years will build more gas-fired power generation in the US.

"We'll need it to solve the energy problem we have and maintain the competitive advantage in energy security, food security and advancements in artificial intelligence," he said. "That will have enormous impacts on every one of your businesses today."

Policymakers should think ahead

Lance also said that policymakers need to think two or three years ahead because of the amount of time needed for markets to respond to longer-lead upstream activities.

Longer-term events sometimes result in policy decisions that if implemented, could have drastic effects on markets down the road, Lance said, such as the current pause in permitting new LNG exports. E&P operators that might have been thinking in late 2023 of adding a couple of rigs in the new year, probably didn't anticipate the subsequent drop in gas prices, Lance suggested.

"So there's this uncertainty that you're sowing the seeds for two, three years down the road," he said. "The [Biden] Administration could have chosen to not pause LNG exports, but the market changes dramatically" over multiple years.