Houston

CHEVRON Corp and Exxon Mobil Corp plan to sharply increase their oil production in the world's largest shale basin over the next five years, flooding markets with new supplies as demand growth is slowing.

Within hours of each other on Tuesday, the two largest energy companies in America announced that they want to pump almost two million barrels a day combined in the Permian Basin of west Texas and New Mexico, a higher amount than most Organization of the Petroleum Exporting Countries (Opec) nations. Chevron plans to reach 900,000 barrels a day by 2023, while Exxon aims for one million by 2024.

"Our position in the Permian just continues to get better, and underpins our resource base," Chevron chief executive officer Mike Wirth said in New York. The value of the company's Permian position has doubled over the past two years with reserve additions, he said.

The production surge from Exxon and Chevron appears likely to further weaken Opec's grip on oil market fundamentals and complicate the cartel's effort to control prices. It also shows that the world's most sophisticated and well-funded exploration companies will grow shale at a time when independent specialists, for years the pioneers of the new production techniques, are scaling back on exploration to conserve cash.

Saudi Arabia and the rest of Opec made the same mistake as Big Oil about US shale, when they largely ignored it as a short-term blip a decade ago. As US production soared above the 1970s-era records, both the cartel and Big Oil have had to face the new reality of high growth rates from previously overlooked fields from Texas to North Dakota.

"Exxon and Chevron's ambitious targets for Permian production are yet another reminder that the US shale revolution - already among the largest new sources of supply in history - still has a ways to go," said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University in New York.

The Permian is "challenging Opec's ability to prop up prices while retaining market share," Mr Bordoff, a former Obama administration energy official, added.

Once known for megaprojects in deep oceans and far-flung corners of the globe, Chevron affirmed its commitment to homegrown shale drilling with a target that represents a nearly 40 per cent increase in Permian output in about five years. In fact, the Permian and other Western Hemisphere shale fields will account for more than 80 per cent of the company's new production.

Exxon disclosed an even more ambitious Permian even as the oil giant is spending on major global projects from South America to Papua New Guinea. It said that its Permian wells are worth the money - oil as cheap as US$35 a barrel is sufficient to generate a 10 per cent profit.

US crude has averaged about US$53 this year, and has not flirted with the US$35 level since the very depths of the 2014-2016 market collapse three years ago.

The announcements underscored how the world's most sophisticated and well-funded exploration companies are muscling in on a shale region that was regarded as a backwater as recently as 10 years ago.

"We don't have resource anxiety, we won't chase lower return investments and we don't need to ramp up spending to restock a diminishing reserve base," Chevron's Mr Wirth said.

Globally, Chevron will increase capital spending to as much as US$22 billion a year till 2023, about 10 per cent above current levels, as it walks the line between expanding production and investor payouts. The company expects to raise dividend payments by 6 per cent this year.

Mr Wirth delivered an apparent jab at Exxon's plan to spend more than rivals on projects that will not deliver much growth for years. "Our investors don't need to wait for several years for the story to come together," he said. "We're delivering now."

Exxon's revised Permian target is 400,000 barrels larger and a year sooner than the company's prior estimate. Exxon plans to expand its fleet of rigs plying Permian sites by 15 per cent this year to 55, making it far and away the most-active driller in the region.

Exxon CEO Darren Woods is scheduled to meet analysts on Wednesday. He faces the daunting task of defending the least-favoured major integrated oil company among analysts, almost two-thirds of whom do not recommend buying Exxon shares, according to data compiled by Bloomberg.

The company had a disastrous 2018. Production dipped to a decade low in the second quarter and the stock posted its worst annual performance since Ronald Reagan became president. This year, Exxon's shares are up about 18 per cent in New York after falling 0.2 per cent to US$80.19 on Tuesday.

Chevron, up 13 per cent this year, gained one per cent to US$123.29. BLOOMBERG