Chevron’s $39.8 billion 2014 capital budget lower than 2013

Dec 16, 2013 12:00 AM

Chevron Corp. reported plans to spend $39.8 billion on its capital and exploratory program for 2014, including $4.8 billion of planned expenditures by affiliates that do not require cash outlays by Chevron. The 2014 budget is $2 billion lower than expected total investments for this year, which are estimated at $42 billion, including expenditures of $4 billion for major resource acquisitions not included in the original budget.

"We expect 2013 will be a relative peak year for investments, as we completed several attractive resource acquisitions,” said John Watson Chevron’s chairman and chief executive officer, adding, “We also anticipate 2014 will represent the peak year for spending on our Australian LNG projects as we move them closer to first production.”

Ninety percent of Chevron’s spending program in 2014 is budgeted for upstream oil and gas exploration and production projects. Another 8% is associated with the company's downstream businesses.

Investments in Tengizchevroil LLP in Kazakhstan and Chevron Phillips Chemical Co. LLC (CPChem) in the US comprise 75% of affiliate expenditures.

Upstream activities

Chevron said it plans to invest $35.8 billion for E&P activities in 2014, of which $7.9 billion will be spent in the US and $27.9 billion internationally.

Notable major capital investments include developments in Australia, Nigeria, the US deepwater Gulf of Mexico, the Permian basin, Kazakhstan, Angola, and Congo (Brazzaville).

Thirty percent of Chevron’s upstream capital program will be allocated to development wells and other projects associated with current producing assets. The 2014 base program includes an increase in activity across several producing regions of North America as well as in Thailand and Indonesia.

The $54 billion Gorgon project in Australia has been under construction for 4 years and is three-quarters complete, with startup and first gas planned for mid-2015. Chevron in November expressed doubts on the fourth train expansion of the Gorgon LNG project in Western Australia.

“We continue to make steady progress against key project milestones and are applying lessons learned to our Wheatstone development, which is almost 25% complete,” said George Kirkland, Chevron’s vice-chairman.

In October, the company signed a binding, 20-year agreement with Tohoku Electric Power Co. for the supply of LNG from Wheatstone.

“Approximately 75% of our combined LNG offtake from the two projects is committed under firm, long-term sales and purchase agreements,” Kirkland said, adding, “These LNG developments are two of our most important future legacy assets, representing approximately 400,000 b/d of net production at full capacity.”

Kirkland said the company is focused on increasing shareholder value by increasing activity levels to develop shale and other tight resources in Canada’s Duvernay, Argentina’s Vaca Muerta, and the Permian basin.

Chevron in October reported the successful conclusion of the initial 12-well exploration drilling program by subsidiary Chevron Canada Ltd. in the Kaybob area of the liquids-rich portion of the Duvernay.

Two month earlier, the company expanded its exploratory lease position in the Duvernay to more than 250,000 acres by acquiring 67,900 net acres from Alta Energy Luxembourg SARL and affiliates.

Projects under development in the Gulf of Mexico include Jack and St. Malo, Big Foot, and Tubular Bells. The Jack-St. Malo hull has been moored at the offshore location and is on schedule for a 2014 startup. The Big Foot project is forecasting a third-quarter 2014 tow to location and a second-quarter 2015 start-up.

Upstream spending for major capital projects includes the advancement of additional projects in Kazakhstan and Russia, Nigeria, Canada, Angola, Congo (Brazzaville), Argentina, and the UK.

Global exploration funding for 2014 is expected to reach $3.2 billion, including initial appraisal of new acreage acquired over the past 2 years. The program also supports continued exploration and appraisal activity in Western Australia, the Gulf of Mexico, West Africa, and in several shale gas regions around the world.

Last February Chevron reported its Kentish Knock South-1 exploratory well in the Exmouth Plateau area of the Carnarvon basin offshore Western Australia encountered 246 ft of net gas pay in Triassic Upper Mungaroo sands.

An oil discovery was made a month later at the company’s Coronado prospect in the deepwater gulf Lower Tertiary Trend.

Chevron reported in March that its scheduled 2017 production target of 3.3 million boe/d is attainable because 98% of its targeted production already is in design, construction, or production.

Downstream activities

Chevron has allocated $3.1 billion for 2014 downstream operations, of which $1.8 billion will be spent in the US and $1.3 billion internationally.

Expenditures in refining will be geared toward enhancing reliability and energy efficiency, feedstock flexibility, and production of cleaner transportation fuels. Planned capital spending will also be directed toward expanding Oronite additives production in Singapore.

Company affiliates will fund chemicals projects managed by the company’s 50%-owned CPChem, which will be investing in the construction of a 1.5 million tonne/year ethane cracker along with two polyethylene facilities on the US Gulf Coast, each with an capacity of 500,000 tpy. A 2017 startup date is slated for the facilities.

The company in October let an engineering, procurement, and construction contract to Gulf Coast Partners, a combine of Technip USA Inc. and Zachry Industrial Inc., for the polyethylene plants at Old Ocean, near its Sweeny complex.

Chevron has budgeted $1 billion for technology, power generation, and other corporate activities in 2014.

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