PT Chevron Pacific Indonesia (CPI) - an affiliate of
) - announced the start of an expansion plan at Duri field in
Sumatra. The company will spend around $500 million for the same.
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The project involves building of 539 new wells, which includes
358 producing wells, 36 temperature observation wells, and 145
steam injection wells. These steam injection wells will be
utilized to infuse steam into wells so that oil can flow easily.
The project - which is likely to boost Chevron's growth prospects
in Indonesia - comes on the heels of the Area 12 expansion, which
was completed by the company in 2009. It added 40,000 barrels of
oil per day (bpd) to production.
Management expects the North Duri Development Area 13 project to
contribute 17,000 bpd at peak production level. It is also
anticipated that Chevron Pacific will produce 343,212 bpd or 39%
of Indonesia's total estimated production (870,000 bpd) by 2013
The second-largest U.S. oil company by market value after
), Chevron currently holds a Zacks #3 Rank (short-term Hold
rating). We also maintain our long-term Neutral recommendation on
In recent times, management has made significant progress in
re-balancing Chevron's asset portfolio by divesting non-core and
high-cost assets. The company's decision to sell its marketing
businesses in Kenya, Nigeria, Uganda, Western Africa and Brazil
is part of that strategy. In particular, Chevron plans to exit
the low profit generating business and concentrate on the
discovery of oil and gas worldwide.
However, Chevron's production growth profile depends on the
timely development of upstream projects, almost all of which have
inherent risk factors. Time and cost overruns on these programs
may lead to lower returns going forward.