Shale Pioneer Hess Says Key U.S. Fields Starting to Plateau

Shale pioneer John Hess said Tuesday that key U.S. shale fields are starting to plateau, calling shale "important but not the next Saudi Arabia."

Production in the Eagle Ford Shale in South Texas is starting to plateau, while the Bakken field in North Dakota where Hess is a major producer will hit its peak production levels within the next two years, said Hess, who spoke Tuesday in Houston at the Argus Americas Crude Summit.

The Permian Basin, the top U.S. shale field in Texas and New Mexico, will plateau in mid-decade and is already facing well interference issues, Hess said.

Longer-term offshore investments have become cost competitive with shale, Hess said, adding that OPEC will continue to act as the "Federal Reserve of oil."

In the short term, "the oil market is awash in oil right now, in part because of panic created by the coronavirus," Hess said. "It’s a major headwind."

But the biggest challenge for the oil and gas industry is long-term investment, Hess said. Companies remain under pressure to trim budgets and produce enough free cash flow that it can pay investors higher dividends or buy back shares.

The industry also has to respond to the threat of climate change, Hess said.

“Climate change is real,” he said, adding, “but how do we deal with it?” The world will need technological breakthroughs and faces the dual challenge of needing to “decarbonize liquid fuel and make the electric grid stable when it’s dependent on intermittent renewable energy.” 

(Reporting by Jennifer Hiller Editing by Chizu Nomiyama and Nick Zieminski)