Replies to post #1846 on The Rising Influence of Rising Affluence

[DewDiligence]

Big Oil Cranks Up Cap Ex

http://online.wsj.com/article/SB10001424052970204467204576047701034685310.html

›Big Jump in Capital-Expenditure Budgets for 2011 Signals Rising Demand

DECEMBER 29, 2010
By RUSSELL GOLD

The global oil industry—far from chastened by the catastrophic U.S. Gulf of Mexico spill—is planning record spending next year, including a large amount for deep-water development.

From giants Saudi Aramco and Exxon Mobil Corp. to five-person wildcat outfits, the industry plans to spend nearly a half-trillion dollars next year to find and extract oil and natural gas, according to a new survey by investment bank Barclays Capital.

For the first time in several years, large Western oil companies are leading the industry's charge, increasing their budgets faster than the state-run national oil companies that have dominated spending in recent years.

"This is being driven by the appetite to find more oil, comfort that today's oil prices will be sustained and companies getting out of a hunker-down, recession mode," said James West, an energy analyst with Barclays, who co-authored the survey, which has been produced every year since 1982.

Barclays estimates spending on new wells, producing platforms and other energy infrastructure will total $490 billion next year, up 11% from 2010. The figure is based on a survey of 402 companies. In part, the planned spending increases reflect the higher costs for finding and extracting oil in harder-to-access areas.

The price of crude oil closed above $90 per barrel on the New York Mercantile Exchange last Wednesday for the first since October 2008 and has held above that mark in the days after the Christmas holiday break.

The largest producers, a club that includes Exxon, Royal Dutch Shell PLC, Chevron Corp. and BP PLC, are expected to increase spending by 16% to $108.6 billion, according to Barclays. A decade ago, these companies were slow to ramp up spending after an oil-price slump and ended up paying more for drilling rigs and other services. This time, they appear committed to not making the same mistake.

Chevron, which announced a 29% increase in spending earlier this month, cited a desire to develop several large, offshore projects in Western Australia, the South China Sea and the Gulf of Mexico, despite a slowed regulatory-permitting process in the U.S. after the April 20 explosion of the Deepwater Horizon drilling rig. Some other large producers have yet to disclose 2011 spending plans.

The gulf oil spill—from a well operated by BP—hasn't dented Chevron's belief it can drill deep-water wells safely. "It doesn't slow us down because the demand is there and we need to harness the resources available to us," said spokesman Kurt Glaubitz.

Deep-water drilling is expected to swallow an ever greater portion of oil companies' spending. A couple years ago, as oil prices soared above $100 a barrel, the industry was emboldened to order many new drilling rigs capable of operating in thousands of feet of water.

Twenty five new deep-water rigs came out of shipyards this year—and another 35 are expected in 2011. A moratorium stopped deep-water drilling in the Gulf of Mexico for five months and new drilling is still slow to get approved. But activity in other parts of the globe continues largely unabated.

Rio de Janeiro-based Petroleo Brasileiro SA is expected to budget $28.2 billion for capital costs—the most of any company, according to Barclays. The lion's share is slated for development of its recently discovered deep-water oil fields off Brazil's Atlantic coast.

Oil companies are emboldened by the slowly rising crude prices. The Organization for Petroleum Exporting Countries, meeting earlier this month in Ecuador, showed no desire to increase production, a move the group would typically consider if it felt that high oil prices could stymie economic growth.

And a recent survey of oil companies indicated an increasing confidence that prices in 2011 will be robust. Many analysts now expect crude prices to move above $100 a barrel next year.

As the global appetite for energy rises, led by Asian economies, the increased spending for new supplies is being seen as a good sign.

"Higher investment now will mean lower prices than they would otherwise be in the future," said Michael Levi, a senior fellow for energy and the environment at the Council on Foreign Relations. "I am more worried about low capital investment than high capital investment."‹

[DewDiligence]

CVX finds deepwater oil at Republic of the Congo:

http://finance.yahoo.com/news/Chevron-Confirms-Discoveries-bw-3356744968.html?x=0&.v=1

[DewDiligence]

Chevron Presents Investment Case

[CVX held its annual Investor Day webcast on Mar 15, which includes hundreds of slides available on the company’s website. By 2017, CVX expects upstream production to increase from 2.8M boe/d currently to 3.3M boe/d in 2017 as mega-projects such as Gorgon come online while annual attrition in base projects is held to 4-5%. Gorgon and Wheatstone alone are expected to produce 420K boe/d of volume for CVX on a net basis when both projects are fully operational in 2017. From an investment standpoint, what’s attractive about these LNG mega-projects is that the supply contracts are tied to the global price of oil rather then the regional price of NG (#msg-41374691).

Not mentioned here is the degree to which CVX is cutting back in the downstream arena. In the next few years, CVX’s downstream operations will pull out of many countries and global refining capacity will shrink to 2.5M bbl/day (from 2.9B currently), about ¾ of the planned upstream volume on a b.o.e. basis.]

http://online.wsj.com/article/SB10001424052748704893604576200703612059740.html

›MARCH 15, 2011
By MATT DAY And ISABEL ORDONEZ

Chevron Corp. said it plans to increase drilling for unconventional gas and oil reserves in the U.S. and elsewhere, and it plans to raise total production 1% this year [net of volume adjustments to PSC’s caused by price changes].

In a meeting with analysts, Chevron said Monday that its production in 2011 is expected to be 2.79 million barrels of oil equivalent per day, driven by the start-up of the Tahiti Phase 2 project in the Gulf of Mexico, Agbami 2 in Nigeria and Platong 2 in the Gulf of Thailand.

Chevron, the second-largest U.S. oil company by market value after Exxon Mobil Corp. also confirmed it plans to increase by 20% its capital expenditure budget this year to $26 billion [as previously reported in #msg-57601893], with a big portion devoted to the development of large natural gas projects [i.e. LNG] world-wide.

Speaking to reporters after the meeting, Chevron Chief Executive John Watson said he is unsure if natural gas resources in the U.S. will be sufficient to result in a significant export business for the nation. "There are tremendous opportunities to use gas more fully in the U.S. first," he said.

Separately, Mr. Watson said the company will exhaust all the legal appeals available in Ecuador to fight a recent ruling that ordered the company to pay more than $8.6 billion in damages, in an 18-year-old lawsuit over alleged oil contamination in Ecuador's oil-rich Amazon rain forest. He said the company will also continue to defend itself in courts outside of the South American country as well.

Meanwhile, Chevron said its massive liquefied natural gas projects offshore Australia—Gorgon and Wheatstone, will help the company increase production to 3.3 million barrels of oil equivalent per day in 2017, or 19% above its 2010 production levels. "Natural gas will drive our long-term growth," Chevron's Vice Chairman George Kirkland said.

Gorgon is confirmed to start production in 2014 [#msg-41374691], while Wheatstone is expected to see a final investment decision in the second half of this year and start production in 2016.

The company has already secured more than $25 billion in contracts for the Gorgon project, which is estimated to cost $37 billion, said Jim Blackwell, an executive vice president for Chevron.

Chevron, based in San Ramon, Calif., said it is planning to drill its first deep water wells in Liberia and China this year. It will also start drilling this year for shale gas in Poland and Canada, where the company recently acquired large acreage positions.

In the U.S., Chevron expects this year to drill 70 wells in the Marcellus Shale [#msg-56610359], a giant rock formation underlying Pennsylvania, New York and other states that has become a prolific source of natural gas in the U.S. The company gained access to the area after it acquired natural-gas producer Atlas Energy last month [#msg-56505666].‹