March 12, 2013 / 9:54 PM / 5 years ago

UPDATE 3-Chevron projects on target for 25 pct growth by 2017

* Says 98 pct of 2017 target producing or being developed
    * Base business decline rate at 3-4 pct, half of 4 years ago
    * Negotiating to add 3 mln acres of shale in Central Europe

    By Braden Reddall
    NEW YORK, March 12 (Reuters) - Chevron Corp, 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
 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 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 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.
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