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ChevronTexaco's Start-Ups to Help Expand Annual Output 3%

ChevronTexaco's Start-Ups to Help Expand Annual Output 3%

With major projects around the world scheduled to ramp up in the next few years -- including two in the deepwater Gulf of Mexico -- ChevronTexaco Corp. expects its oil and natural gas production to grow at a compounded average rate of 3% a year over the next five years to reach 3 MMboe/d by 2009.

Some of the improvements will come from increased efficiency, but the bulk of the production growth is expected to come in the deepwater, as well as in Kazakhstan and West Africa, said newly appointed Vice Chairman Peter Robertson at a meeting with securities analysts in New York. Robertson was moved into the Office of the Chairman with CEO Dave O'Reilly earlier this month (see NGI, Dec. 13).

Start-up projects by themselves are expected to contribute almost 850,000 boe/d by 2009, and efforts to reduce decline rates in maturing properties will add another 60,000 boe/d, Robertson said.

However, because of nearly $3 billion in asset sales this year, ChevronTexaco will replace less of its reserves in 2004 than in the past. Reserve replacement is expected to increase as the company begins aggressive development on its new projects, Robertson said.

Proved reserves will almost be cut in half -- to 300 MMboe this year compared with 550 MMboe a year ago because of the sale of mature assets. The sales also will reduce production this year by 125,000 boe/d, Robertson said. Under production sharing agreements overseas, higher oil prices at year-end could lower reserves an additional 200 MMboe because reserves and production have to be adjusted down to reflect fewer barrels needed to recoup the company's investment.

Overall, ChevronTexaco will spend $10 billion for capital and exploratory (C&E) programs in 2005, with about a quarter of the total -- $2.5 billion -- targeted for the U.S. upstream. About 74% of total capital spending, or $7.4 billion, will be invested in exploration, production and global natural gas-related projects.

The C&E budget, which is $1.5 billion more than this year's budget, includes $1.8 billion for the company's share of affiliate expenditures. Actual 2004 C&E expenses won't be known until the end of this year, but ChevronTexaco estimates they will be within the budgeted $8.5 billion.

"In the upstream we intend to grow profitably in core areas and build legacy positions," said O'Reilly. "Our capital program continues to target our strategies to focus on high-return upstream growth projects, to commercialize our company's large natural gas resource base and to enhance the financial returns in our downstream business."

Robertson said major 2005 spending will be targeted on longer-term projects in Angola, Nigeria and Kazakhstan, as well as "continued appraisal and engineering work for deepwater discoveries" in the Gulf of Mexico, including ChevronTexaco's Tahiti and Blind Faith projects.

Next year's program, he said, also includes significant spending to commercialize the company's international natural gas resource base to help meet future demand. The upstream portion of global gas-related investments in 2005 is estimated at $400 million and includes projects in Australia, Angola and Nigeria.

Chevron also plans gas-related investments in the United States and Mexico "to ensure import capability in both the Atlantic and Pacific basins in support of future upstream equity gas production."

About $1.9 billion, or 19% of total spending, is targeted for global downstream. Refining and marketing investments are estimated at about $600 million in the United States and $900 million internationally. Investments are expected to total about $700 million in chemicals, technology and power.

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