HOUSTON/SAN FRANCISCO (Reuters) – Chevron Corp (CVX. N), the second-largest u.s. oil company, will increase spending by a fifth to A $ 26 billion in 2011, with 85% will exploration and production industry seeks out new sources of growth.
Extended budget, announced on Thursday, is a big step for Chevron as it enters a period of low net production growth while it ramps up for natural gas. Massive rival Exxon Mobil Corp (XOM. N) budgeted expenditure for 2010 30 billion dollars.
Spending by oil companies is expected to rise across the Board now that global oil demand has recovered and seems likely to grow needs of major growth markets.
"All look at the oil, and it will go up--you were China and India. My guess is these guys to do very well, "says Mark Coffelt, Chief Investment officer at empiric Advisors in Austin, Texas.
-I am not surprised that capital budgets, and perhaps surprising is that they do not come up even more. "sa Coffelt, which does not currently hold Chevron shares.
Chevron offers a glimpse of the challenges that the oil majors face to bring about new production that existing fields decline. Its annual GDP growth is expected to be 1% until 2014, followed by 4-5% over the three years after the new liquefied natural gas projects are going on line.
"We are entering a period of higher capital expenditures we finance new older projects, including significant investments in our LNG mega projects," George Kirkland, Chevron, vice President and head of global upstream and gas, said in a statement.
These include the Gorgon and Wheatstone projects of Western Australia, LNG processing facilities to serve them; they eat only up well over 50 billion dollars over the next half-decade or so, even if half of the cost of the Gorgon will be shared with partners Exxon and Royal Dutch Shell Plc (RDSa. L).
EXPENDITURE IN ACCORDANCE WITH
Gorgons, specify that cost about $ 37 billion, will start in 2014, followed by Wheatstone two years later. Their combined peak production, corresponding to 710,000 barrels per day, compared with Chevrons latest worldwide oil and gas output 2.74 million barrels per day.
With these two new crude oil in the mix and more difficult to obtain, estimated Chevron gas will be 41% of its production by 2017, compared with 31 percent now. And the estimate came before it went to buy u.s. natural gas producer Atlas energy (ATLS. O) in November.
Gåsögons total budget of EUR 21.6 billion in 2010, $ overshadowed by its 2011 exploration and production spending, estimated at US $ 22.6 billion at 31 percent.
Containing investment Atlas, although acquisition itself is not included in the budget, "said a spokesman for Chevron. Exxon's $ 30 billion plus 2010 budget covers the expenses for its large natural gas acquisition, XTO.
Gåsögons refining budget is $ 2.9 billion, down from $ 3.4 billion budgeted for this year. A decline in the sector has led the company to slash downstream costs.
Included in 2011 budget expenditure at refineries in Mississippi and California which aims to improve yield.
Shares in San Ramon, California-based Chevron was up 30 cents to $ 86.44 in afternoon trading on the New York Stock Exchange.
(Reporting by Anna Operates in Houston and Braden Reddall in San Francisco, editing by Gerald e. McCormick, Dave Zimmerman and John Wallace)
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