Chevron to increase production, maintain capex level through 2017

Chevron Corp. will increase production by 20% through 2017 without raising capital expenditures, executives said Mar. 11 at the company's annual security analyst meeting in New York.

Net production is expected to rise to 3.1 million boe/d in 2017 from 2.6 million boe/d in 2013 due to expansion of the Tengizchevroil (TCO) consortium, deepwater and shale oil production, and increased LNG.

Meanwhile, Chevron sees its outlays flattening in 2015-16 after spending peaked in 2013. Chevron’s upstream capital and exploratory (C&E) program for 2014 is expected to be $35.8 billion, while C&E for 2015-16 also is expected settle into that range.

The company’s reporting of near-term capex plans comes a week after John Watson, Chevron chairman and chief executive officer, remarked during IHS CERAWeek that “$100/bbl is becoming the new $20/bbl in our business.” He said, “Costs have caught up to revenues for many classes of projects (OGJ Online, Mar. 4, 2014).”

Major projects in 2014

The TCO expansion projects will increase production to 1 million boe/d, while LNG projects such as Wheatstone and Gorgon, a mid-2015 start-up, will advance (OGJ Online, Oct. 2, 2013; Nov. 5, 2013). About 22% of the company’s capital spending will target LNG. Twenty-one percent will target its upstream base.

US production increases will be largely aided by Chevron’s position in the Permian basin in Texas, where the company holds 1.9 million net acres with 17,000 well prospects.

The company expects to produce more than 250 million b/d from the basin by 2020. This comes with low lease holding costs and access to infrastructure.

In the Duvernay, Chevron will conduct appraisal drilling this year over its 325,000 acres, and in Argentina, where the company is currently producing 15 million boe/d gross, the company plans to drill 140 wells with 17 rigs this year (OGJ Online, July 16, 2013, Aug. 2, 2013).

The Gulf of Mexico will see the start-up of the Jack-St. Malo this year with a capacity of 177 million boe/d, and Big Foot with 79 million boe/d capacity.

A majority of Chevron’s 2013 production came in North America, which is expected to be supplanted by the Asia-Pacific region by 2017.

“Our plan for production growth is solid and will be driven by near-term project ramp-ups as well as our larger major capital projects, which begin starting up later this year,” commented Jay Johnson, senior vice-president, upstream.

“These projects are attractive, and when combined with profitable production growth from our shale and tight resource developments, are expected to add over 800,000 boe/d by 2017. We also have a deep queue of other growth opportunities, which should allow us to continue growing production to the end of the decade,” Johnson said.

The company also plans to divest $10 billion during 2014-16, up from the $7 billion it divested in 2011-13.