Chevron’s leadership set out the oil major’s plans out to 2020 this week, including eying exploration opportunities offshore Greenland, to maintain its reserves hopper.
Chevron is planning 20% production growth, from 2.6MMboe/d in 2013, to 3.1MMboe/d in 2017, with deepwater the focus offshore.
Its capital spending, which peaked in 2013, will increase in upstream in 2014, to about $36billion, against an overall lower total spend, but flattening out in 2015-2016, +/- $1billion. Spending on business development would be cut completely in 2014.
Setting out the firm’s strategy, John Watson, chairman and CEO (pictured), said Chevron aimed, in its upstream business, to "grow profitably in core areas and build new legacy positions." In addition, the company would "differentiate performance through technology."
Chevron's current production portfolio amounts to 728,000 boe/d in North America, 690,000 boe/d in Asia Pacific, 592,000 boe/d in Africa and Latin America, and 587,000 boe/d in Europe, Eurasia and Middle East, outlined George Kirkland, vice-chairman and executive vice president.
Regionally, production in Asia Pacific is expected to grow the most by 2017, overtaking North America as Chevron's highest producing region. Europe, Eurasia and Middle East will fall marginally, but Africa and Latin America will grow.
Kirkland compared Chevron's 2003-2012 120% reserves replacement to the other majors' rates, with ExxonMobil at 110%, Royal Dutch Shell at 95%, Total at 77%, and BP at 66%.
Chevron's natural base production decline is 14%, but investments in base production has reduced the average decline rate to 3%, said Kirkland. But the firm would also divest assets, as it had done with in Nigeria, and Mariner and Bressay, in the North Sea, and in some early life projects, the Cook Inlet in Alaska, assets in Norway and the Netherlands, and in the Gulf of Mexico.
Chevron's key offshore growth projects up to 2016 include:
Clair Ridge, operated by BP in the UK North Sea, the Gorgon and Wheatstone projects, offshore Australia, Total-operated Moho Nord, offshore west Africa, and, in the Gulf of Mexico, Jack St Malo Stage I (117MMboe/d capacity), Big Foot (79MMboe/d capacity), Hess Corp's Tubular Bells (44MMboe/d capacity), and the Tahiti vertical expansion.
During 2017-2020, there will also be the 150MM boe/d capacity Hebron, offshore Alaska, Rosebank in the North Sea, and, in the US Gulf of Mexico, Hess' Stampede, Jack St Malo Stage 2, BP's Mad Dog II, and Buckskin/Moccasin.
This year, the company will see ramp up on Total-operated Usan, offshore Nigeria, Petrobras' Papa-Terra, offshore Brazil, and Chevron's own Angola LNG project.
Outlining the firm's 2014 exploration plan, Kirkland said offshore Nigeria and Angola, in west Africa, western Australia, and deepwater Gulf of Mexico, would be focus areas offshore.
Beyond 2020, the company is eyeing new regions, including Greenland, Morocco, the Bight basin, offshore southern Australia, offshore Suriname, and Gulf of Mexico.
Watson also outlined Chevron’s market outlook. This includes predicting a 33% increase in energy demand in 2013-2030. Gas would see the greatest increase in demand, at 35%, with oil demand increasing 15%, he said. However, the gap between the existing, maturing, production base and demand was about 200 billion barrels, to meet demand by 2030.
The biggest growth in oil production capacity would be in deep water, followed by supply from OPEC, and then US tight oil. However, deep water will also be some of the most expensive barrels to produce, based on a weighted average price, said Watson.
At the same time, costs have been rising, peaking in the late 2000s, and rising above that peak in 2013, with contractor backlogs tracking that trend, dominated by EPC contractors and construction yards.
LNG demand was highlighted as a particularly bright spot, with LNG demand expected to double by 2025. Most of the demand would come from the Pacific basin, followed by the Atlantic basin.
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