US Federal Trade Commission accuses ex-Pioneer boss of seeking to collude with Opec

US regulators have accused the former boss of the largest US shale oil producer of trying to collude with the Opec cartel to drive up prices.

Report informs citing Financial Times that the US Federal Trade Commission made the allegations against Scott Sheffield, a towering figure in the US shale industry who until December served as chief executive of Pioneer Natural Resources.

ExxonMobil agreed to purchase Pioneer in October in a $60bn deal and required the FTC’s approval.

On Thursday, the regulator said it would not seek to block the takeover but banned Sheffield from Exxon’s board.

The FTC said it sought to prevent him from “engaging in collusive activity that would potentially raise crude oil prices, leading American consumers and businesses to pay higher prices for gasoline, diesel fuel, heating oil and jet fuel”.

Kyle Mach, deputy director of the FTC’s bureau of competition, said: “Mr Sheffield’s past conduct makes it crystal clear that he should be nowhere near Exxon’s boardroom.”

The agency’s allegations focus on Sheffield’s calls for lower production as oil prices crashed at the onset of the Covid-19 pandemic in 2020. He was among the US oil executives publicly urging Opec and Russia to rein in supply.

It alleged that Sheffield and Opec had sought to limit the competition injected into the market by a surge in US supply by “embark[ing] on a series of efforts to co-ordinate output levels to keep production artificially low”.

Sheffield was a vocal advocate of throttling back US production during the 2020 crash, calling on the Railroad Commission of Texas, which regulates the industry in the state, to mandate curbs. The FTC cited comments in which he said: “If Texas leads the way, maybe we can get Opec to cut production.”

In a heavily-redacted complaint, the regulator alleged that, through public statements, text messages, in-person meetings and WhatsApp chats, Sheffield had sought to align oil production across the US’s oil-rich Permian Basin with the broader Opec+ alliance of producer countries, which includes Russia.

It also pointed to a dinner Sheffield and other shale executives had held with late Opec secretary-general Mohammed Barkindo in 2017 and comments he made suggesting the cartel was “reaching out and spending more time” with US producers than at any previous time in his career.

Senior executives at US producers have held regular private dinners with Opec executives in recent years, often on the fringes of the annual CERAWeek energy conference in Houston.

Exxon said it had agreed to the FTC’s demand not to add Sheffield to its board of directors, as was originally planned. “We learned about these allegations from the Federal Trade Commission. They are entirely inconsistent with how we do business.”

Pioneer said it disagreed with and was surprised by the FTC’s complaint, which it said “reflects a fundamental misunderstanding of the US and global oil markets and misreads the nature and intent of Mr Sheffield’s actions”.

But Pioneer added that neither it nor Sheffield would take any steps to prevent the merger from closing. The acquisition — Exxon’s biggest since it merged with Mobil in 1999 — is set to be completed on Friday.

The combination of Exxon and Pioneer’s shale assets hands the supermajor a dominant position in the Permian, the vast field in western Texas and New Mexico that has helped the US become the world’s largest oil and gas producer.

Asked whether there was a broader government investigation into possible oil market collusion, an FTC spokeswoman told the Financial Times the commission had a “responsibility to refer potentially criminal behaviour and takes that obligation very seriously”.

Sheffield, 71, retired from a second act as Pioneer chief executive at the end of 2023. He is an important figure in the shale revolution, which unfolded as enterprising wildcatters employed hydraulic fracturing and horizontal drilling techniques to blast open previously uneconomic oil and gas reserves.

He has advocated a new model of capital discipline in the industry to win back investors who fled the space in response to excessive spending on new drilling.

But the FTC accused him of “publicly threatening US shale producers who might deviate from a co-ordinated output reduction scheme”.

The FTC voted 3-2 to accept the consent agreement on Exxon’s deal for Pioneer, with the two dissents coming from the agency’s Republican commissioners.

“Corporate executives are not always credible narrators,” said FTC chair Lina Khan. “But when corporate executives’ words or actions reveal, against their interests, a belief that they can collude, we should generally believe them.”