March 12, 2013 / 2:38 PM / in 4 years

Chevron projects on target for 25 percent growth by 2017

A Chevron gas station is pictured in Encinitas, California July 28, 2011.Mike Blake

NEW YORK (Reuters) - Chevron Corp (CVX.N), the second-largest U.S. oil company, said on Tuesday it had already started nearly all the projects that would deliver 25 percent growth in oil and gas output over the next half a decade.

At its annual New York meeting with analysts, Chevron said 98 percent of its targeted production by 2017 was already in design, construction or production.

Chevron reaffirmed the target of 3.3 million barrels per day of oil equivalent, up from an estimated 2.65 million bpd this year. Looking beyond that, the company highlighted expansion in Kazakhstan, steam-flooded oil production in the Middle East, and even more liquefied natural gas (LNG) from Canada and Australia.

"We feel very good about our 2017 target, and we anticipate continuing to grow beyond 3.3 million barrels per day," said George Kirkland, Chevron's head of exploration and production.

Increasing production has been a serious challenge for the world's big oil companies, a trend underlined by last week's prediction of a 1 percent decline this year by Exxon Mobil Corp (XOM.N) despite its increased budget of $41 billion.

In 2013, Chevron expects to drill about 440 wells in the Permian basin, located in the west part of Texas and New Mexico. The company bought assets in the area from Chesapeake Energy Corp (CHK.N) in September, and Kirkland said that acreage appeared more productive than the initial estimates.

Asked about potential asset sales of its own, Chief Executive John Watson noted the Permian represented an area where the company had a legacy position which became attractive again because of the improvements in shale drilling technology.

"We'll sell assets when it makes sense to do so," he said.

Chevron expects to add four rigs in the Permian this year, bringing the total to 23, and it sees output rising to 200,000 bpd by 2017. Chevron acreage in the Marcellus shale in the northeastern United States is expected to produce the equivalent of nearly 100,000 bpd by then.

To the north, Chevron has just invested in Canada's Kitimat LNG export project, and Kirkland said the company would want to have between 60 and 70 percent of its gas committed to long-term contract before making a final investment decision.

Chevron is spending $9 billion this year on two LNG projects in Western Australia alone - a quarter of its company-wide budget. Spending is expected to remain high for the next few years until they are complete, with first LNG shipping from its Gorgon plant due in early 2015.

The cost estimate for Gorgon recently went up by $15 billion, mostly due to foreign exchange movements, but also because of bad weather and the challenges of making deliveries to the remote location.

"We'll put more emphasis on logistics on the next project," Kirkland said in an interview. "We learned something on that."

As for what Chevron is already producing, Watson said the rate of decline for existing fields was now down to between 3 and 4 percent, nearly half the level of four years ago.

Speaking to reporters after the meeting, he said it was too early to say what opportunities would come out of government changes in Venezuela and Myanmar - two countries where Chevron already has interests.

"One of the reasons that oil is over $100 a barrel is that there are a lot of risks," Watson had told the analysts. "I could alphabetize them."

It was also too early to say how its Chinese shale exploration would turn out. But the company remains firmly committed to shale gas in Central Europe, despite Exxon pulling out of Poland and Talisman Energy TLM.TO saying on Tuesday it might do the same.

Chevron now has 4 million acres in Central Europe, and is negotiating for 3 million more, the company said on Tuesday.

Shares of Chevron fell slightly to close at $118.25, having touched a record high of $119.30 earlier in the day.

Editing by Sofina Mirza-Reid and Matthew Lewis

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