NEW YORK (AFX) -- Chevron Corp. said Tuesday it would spend 36% to 46% more on capital projects from 2006 to 2008 in an effort to meet its own target of more than 3% average annual growth in production through 2010.
However, the second-largest U.S. oil company behind Exxon Mobil Corp. doesn't see 'significant growth' until 2010.
Chevron spent about $11 billion on its capital budget in 2005 and expects spending of $15 billion to $16 billion each year for three years.
Chevron , like other oil majors, has found it difficult to increase production, what with declining output from mature fields and the length of time it takes for big projects to come to fruition.
Indeed the highly-anticipated $11 billion Gorgon gas project isn't expected to start up until 2010 to 2011.
Chevron owns a 50% operating interest in Gorgon, which is off the northwest coast of Australia. Exxon Mobil and Royal Dutch Shell each hold 25% project interests. The gas produced there will be turned into liquefied form for export across the world.
Notwithstanding the kind of money it takes to fund large-scale projects, they are more difficult to carry out and there is a lot more at stake, as Deutsche Bank analyst Paul Sankey said in a note about Chevron this week.
For example, Sankey is concerned that Gorgon, which is to be developed on a nature reserve, could be met with some opposition from environmentalists.
In addition to Gorgon, Chevron expects production growth from projects in the Caspian; the Gulf of Mexico, where it is the largest leaseholder; Asia-Pacific, which was significantly boosted by the assets Unocal brought to the table in the merger; West Africa and Latin America.
Chevron Chairman and CEO Dave O'Reilly wouldn't comment on future acquisitions.
At year-end 2005, the company had production capacity of 2.7 million oil-equivalent barrels per day.
According to George Kirkland, the executive vice president of Chevron's upstream and gas business, the company is developing more than 20 projects at a net total capital cost of more than $1 billion. The company will have to deal with the continuing rise in the cost of drilling rigs and other oil-service equipment and services
Most recently, the Benguela-Belize Lobito-Tomboco project offshore Angola has produced its first oil. Construction on the $3.5 billion Tahiti project in the deepwater U.S. Gulf has begun, and the $5.6 billion Tengiz sour gas injection/second generation plant in Kazakhstan is 80% complete.
In regard to its exploration program, Chevron had a 60% success rate on 31 discoveries in 2005 - outperforming its peers.
Chevron shares closed Tuesday with a 53-cent loss at $55.32. This story was supplied by MarketWatch. For further information see www.marketwatch.com.