By Dow Jones Business News, March 12, 2013, 10:25:00 AM EDT
--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
"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
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 email@example.com
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