US oil executive censure puts spotlight on shale-OPEC meetings
02/05/2024 20:01
By Sabrina Valle
HOUSTON, May 2 (Reuters) - A U.S. regulator's censure of
a top U.S. oil executive over private meetings with the
Organization of the Petroleum Exporting Countries (OPEC) group
of oil producers has put a spotlight on dinners attended by
dozens of shale executives.
The U.S. Federal Trade Commission (FTC) on Thursday barred
former Pioneer Natural Resources PXD.N CEO Scott Sheffield
from joining the board of Exxon Mobil, which is acquiring
Pioneer for $60 billion in stock.
The FTC accused the 72-year-old executive of leading a
coordinated effort with other U.S. oil firms and with OPEC "to
keep production artificially low" and increase oil companies'
profits.
In its complaint, the FTC pointed to meetings that shale and
OPEC officials held over several years, including a series of
private dinners at a Houston energy conference.
Executives who attended previously had described to Reuters
the meetings as discussing oil demand, spare production capacity
and shareholder requirements.
Pioneer said Sheffield had acted in the best interests of
the oil industry, its investors, and said his actions helped
lift U.S. oil production and exports.
"The FTC's complaint reflects a fundamental misunderstanding
of the U.S. and global oil markets and misreads the nature and
intent of Mr. Sheffield’s actions," the company said, defending
its former chief as "a leading and internationally respected
industry authority."
The first shale-OPEC dinner, in March 2017, was organized by
then-OPEC Secretary General Mohammed Barkindo after OPEC had
failed in a price war to halt U.S. shale's rapid market share
gains and wanted to understand how the industry operated, the
FTC said.
Subsequent dinners at the CERAWeek energy conference in
Houston brought OPEC together with shale executives including
Hess HES.N CEO John Hess, Occidental Petroleum OXY.N CEO
Vicki Hollub, Devon Energy DVN.N CEO Rick Muncrief, and
Chesapeake Energy CHK.O chief Domenic Dell'Osso, among others.
Spokespeople for the companies did not respond to requests
for comment.
"I’m seeing a series of meetings where OPEC is reaching out
and spending more time with US independents than I have seen
over my entire career,” Sheffield said in 2017, according to the
FTC complaint.
OPEC members had been perplexed by how quickly U.S.
companies had recovered from losses during an OPEC-initiated
price war between 2014 through 2016 that had led to dozens of
U.S. energy bankruptcies.
But the shale industry quickly bounced back with heavy
investments and led the U.S. to become the world's largest oil
producer in a few years. It produced a record 12.9 million
barrels per day last year.
In 2017, OPEC cut its production, reducing a market glut
that reduced global prices, and handed a victory to U.S.
producers. The glut returned in 2020 after demand plummeted on
COVID-19 shutdowns.
Sheffield was vocal about his desire to move away from the
boom-bust cycles that plagued the U.S. oil business, and became
an outspoken advocate for prioritizing shareholder returns over
production gains.
He spoke about his contacts with Saudi Aramco officials and
other members of the shale dinners attended OPEC meetings in
Vienna. In a March 2023 Reuters interview, Sheffield said
Pioneer had twice hosted Saudi officials and explained the
company's operations and business practices to them.
"They can get the same information from most service
companies," he said. "But they like to talk to producers... we
have so much data."
(Reporting by Sabrina Valle and Liz Hampton; editing by Gary
McWilliams and Deepa Babington)
((sabrina.valle@tr.com; Twitter: @sabrinavalle))