By ISABEL ORDONEZ and CHRISTIAN BERTHELSEN
Chevron said Tuesday its oil and gas
production will inch up this year but it expects output to
jump 20% in five years as massive liquefied natural
gas (LNG) projects in Australia commence operations.
During the company's annual meeting with analysts in New
York, Chevron executives said production will rise 0.26% to
2.68 million bpd of oil equivalent this year, and to 3.3
million bpd of oil equivalent by the end of 2017.
Those estimates are up from 2.67 million bpd of oil
equivalent it produced in 2011. The 2017 projection is based on an oil price
average of $79/bbl, the company said.
Chevron, based in San Ramon, Calif. and the second largest US
oil company by market value after ExxonMobil, said annual
production could vary depending on oil prices.
The company has in place several share production sharing
contracts with foreign governments that give more production to
national oil companies - and less to international oil
companies - when oil prices rise.
Light, sweet crude oil for April delivery on the New York
Mercantile Exchange was 30 cents lower, at $106.04/bbl, in a
range of $105.85 to $107.13/bbl.
Chevron's future growth will be driven by a handful of large
oil and gas projects worldwide. The
liquefied-natural-gas Gorgon project in Australia is on track
to start production in 2014 and still expected to cost $37
billion, the company said.
Construction of development wells is
expected to start this year.
Chevron's $29 billion Wheatstone LNG
project, also in Australia, is scheduled to start production in
The first shipment of Chevron's LNG
project in Angola is expected in the second quarter and the
project is expected to reach peak production of 175,000 bpd of
Asked about the possibility that company could use some of
its abundant cash - $15 billion - to increase dividends or make
acquisitions, Chevron CEO John Watson said the company's
priority is to fund a string of capital projects.
The executive, however, hinted things could change once
these projects advance.
"I don't want to pile up cash on the balance sheet
indefinitely," Watson said. "As we get closer to those projects on line, our need to carry
cash on our balance sheet will diminish."
Chevron also answered questions about its outlook for
Brazil, where it is facing legal actions from authorities
related to an offshore oil spill in November.
"It remains to be seen what the future holds for our
business there," Watson said. "We need to be treated fairly and
we need to be treated consistently. The rhetoric has been very
Chevron, which has already been fined more than $50 million
for the spill, said it believes its employees reacted timely
and responsible to the incident.
Chevron also said that outside the US, it is trying to
develop shale gas in countries where there is a market for natural
gas, such as Poland, Argentina and China.
It said it has begun drilling for unconventional oil and gas
resources in China as part of a joint study with China Petrochemical Corp., known as
Sinopec Group, which covers 940,000 acres.
In Argentina, the company plans to start exploratory
drilling this year in the 110,000 acres it has in El Trapial,
while it plans to start its second well in Poland this quarter.
The company plans to begin exploration drilling in Romania this
Company executives, however, warned global shale gas
exploration is nascent and still uncertain.
Unlike the US, where companies have already drilled many
wells allowing them to understand shale formations,
international drilling is beginning and the performance of the
formation is basically unknown, executives said.
Speaking to reporters on the sidelines of the meeting,
Watson said low natural gas prices "have surprised everyone"
and that he believes the supply glut caused by the development
of shale gas in the US will continue "for some time."
gas prices fell to a fresh decade-low last week below $2.40
per British thermal unit.
Watson attributed high oil prices to "financial money moving
into commodities", international events and a "tightness" in
the global supply-demand equilibrium.
The company confirmed that its capital expenditure budget
for this year is expected to be $32.7 billion.
Dow Jones Newswires