A vital crop nutrient that lies underground near oil and natural gas reserves is holding back ExxonMobil’s development of a key asset in the booming Permian Basin, The Wall Street Journal reports.
Unlike many of its rivals in the largest U.S. oil patch, ExxonMobil shares a sizable chunk of its land with mining companies that extract potash and other minerals used to produce fertilizer from underground mines, blocking drillers’ direct access to oil-soaked rocks.
ExxonMobil paid $5.6 billion in 2017 for prime acreage in New Mexico’s fast-growing Delaware region, part of the broader Permian, which stretches into Texas, and it is now a pillar of the company’s growth plans.
More than one-quarter of Exxon’s best acreage in New Mexico coincides with underground potash mines, according to oil analytics firm FLOW Partners LLC. Due to regulations, higher drilling costs and safety concerns for underground miners, wells in that area are more expensive to complete and less productive, say people familiar with ExxonMobil’s operations, industry executives and analysts.
Exxon’s efforts there will yield less oil and gas, and ultimately less profit, than other areas of the Permian, according to the people. The company hasn’t disclosed to investors that the land it bought in the potash area could be affected by these issues because it doesn’t consider it material, said Exxon spokesperson Meghan Macdonald. Read the full story (subscription).