Chevron on Track for 20% Output Growth by 2017

--Chevron aims to produce 3.3. million barrels of oil and gas in 2017

--Chevron expects to expand North American onshore operations

--Chemical sales in Asia to grow faster than those for fuel

NEW YORK--Chevron Corp. ( CVX ) remains in talks with Venezuela to possibly increase its footprint in the oil-rich nation, the oil company's chief executive said Tuesday.

Chevron has been having "ongoing discussions" with Caracas about trying to commercialize production at the Carabobo 3 heavy oil project, an initiative Chevron and Caracas have been negotiating since the late 2000s.

Chevron has been in Venezuela since the 1920s and as of the middle of 2012 participated in six onshore and offshore production projects in the country, according to the company's website. The Venezuelan government is in transition since the death last week of longtime President Hugo Chavez, with oil companies generally waiting to see whether a new government will be more friendly to outside, private investment in the country's huge oil reserves.

"The ongoing issues have been with commercial terms, but we continue to have those discussions," Chevron CEO John Watson said in an interview with reporters after the company's annual investor conference. "There's a lot Chevron can bring to Venezuela, including jobs."

Chevron, the second-largest U.S. energy company behind Exxon Mobil Corp. (XOM) in terms of capital, also said Tuesday that it expects to increase its oil and natural-gas production by more than 20% by 2017.

Chevron is in the midst of completing a number of expensive, large-scale projects meant to raise production around the globe, including a massive natural gas project in Australia and new oil wells in the ultradeep waters in the U.S. Gulf of Mexico. The company hopes to boost its daily oil and natural gas production to 3.3 million barrels in 2017 from the nearly 2.7 million barrels it averaged in the fourth quarter of 2012.

Global oil companies have scouted the globe for new production fields as such countries as China and India increase their energy appetite. The two countries are expected to increase their natural-gas imports by 10% a year for the next decade, Mr. Watson said. Chevron is spending $36.7 billion in 2013 alone to search for and develop fields in nearly every continent.

"Spending in 2014 and 2015 will be higher," Mr. Watson said. "Any legacy-sized asset will be expensive."

Chevron expects to export natural gas starting in early 2015 from its Gorgon project and the following year from its Wheatstone project, both in Australia, the company said. The two projects are expected to have a combined capacity of nearly 25 million metric tons a year.

Cost pressure at the Australian LNG projects has eased, Mr. Watson said. Chevron announced in December that increased costs for parts and labor helped drive up the price by $15 billion for its 15.6 million metric ton a year Gorgon project, to $52 billion.

Now that those very same costs have caused some competitors projects to scale back or fail, there has been "some abatement in cost," Mr. Watson said.

After new projects come online, Chevron expects to generate $50 billion in cash in 2017, up more than $10 billion from 2012, said Patricia Yarrington, Chevron's chief financial officer.

Chevron last month said it started test production at the St. Malo well in the relatively undeveloped Lower Tertiary trend far out in the Gulf of Mexico. Oil production from the well, more than 20,000 feet under the sea floor, was more than 13,000 barrels a day despite being constrained by the use of test equipment, the company said.

Chevron expects St. Malo and its twin well, Jack, to ultimately produce 177,000 barrels a day.

Chevron, of San Ramon, Calif., also may expand its operations in unconventional onshore fields in North America, including the Permian Basin in Texas and New Mexico and the Marcellus gas field in Pennsylvania, the company said. Hydraulic fracturing, or fracking, and other recent innovations in drilling techniques have yielded growing amounts of oil and natural gas from those and other shale rock formations.

Chevron plans to drill 400 wells in the Permian Basin in 2013, said George Kirkland, head of the company's upstream business. Wells in some parts of the basin are showing initial production of more than 100,000 barrels of oil and gas a day, Mr. Kirkland said.

Chevron plans to "selectively pursue growth" in petrochemicals and lubricants production, the company said. Demand for chemicals and lubricants is expected to outpace that for motor fuel in Asia, said Mike Wirth, Chevron's head of refining operations.

Chevron also is investing in its California refineries to run more varieties of crude oil in a push to drive down operating costs. Its refinery in Richmond, Calif., has started processing crude oil from North Dakota and will use discounted crudes from a variety of sources, Mr. Wirth said.

"Our bread and butter is optimizing our operations by using different feedstocks," Mr. Wirth said.

Write to Ben Lefebvre at ben.lefebvre@dowjones.com

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  03-12-131025ET
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