Chevron Corp. replaced only 11% of its proven oil and natural gas reserves in 2007 and total reserves fell 7% from 2006, partly because of "the effect of a conversion of operating service agreements" in Venezuela, the company said last week.

Net proved reserves, including reserves from affiliate companies, dropped to 10.77 billion boe at year-end 2007, down from 11.62 billion boe at the end of 2006, according to a Securities and Exchange Commission 10-K filing. The filing indicated that Chevron added about 103 million boe through exploration or acquisitions last year. Worldwide net boe output last year, including volumes produced from oilsands, averaged 2.62 million boe/d, a decline of about 48,000 boe/d in 2006.

ExxonMobil Corp. in January also blamed problems in Venezuela for some of its reserves losses in 2007, but the energy behemoth still managed to replace more than 100% of its production (see NGI, Feb. 18).

Chevron's net natural gas output averaged 1.7 Bcf/d in 2007, down 6% from 2006 and up 4% from 2005. The producer noted in the SEC filing that it has some long-term natural gas projects under way, including in the deepwater Gulf of Mexico and the Piceance Basin of Colorado. However, most of its upstream investments are "currently being made outside the United States." Chevron estimated that its oil-equivalent production this year would increase to 2.65 million boe/d.

To address the regional imbalance between supply and demand for natural gas globally, Chevron said it "is planning increased investments in long-term projects in areas of excess supply to install infrastructure to produce and liquefy natural gas for transport by tanker, along with investments and commitments to regasify the product in markets where demand is strong and supplies are not as plentiful.

"Due to the significance of the overall investment in these long-term projects, the natural gas sales prices in the areas of excess supply (before the natural gas is transferred to a company-owned or third-party processing facility) are expected to remain well below sales prices for natural gas that is produced much nearer to areas of high demand and can be transported in existing natural gas pipeline networks (as in the United States)."

Among other things, Chevron has a stake in the Sabine Pass LNG [liquefied natural gas] facility, which is nearing completion along the Louisiana coast. The terminal, designed with a peak sendout capacity of 4.3 Bcf/d, is scheduled to ramp up with an initial sendout capacity of 2.6 Bcf/d (see NGI, June 19, 2006). Capacity at the terminal has been contracted under 20-year agreements: 2 Bcf/d by Cheniere Marketing and 1 Bcf/d each by Total Gas & Power North America Inc. and Chevron USA Inc. (see related story). Last year Chevron also said it was actively pursuing existing and new LNG sites on all three coasts of North America (see NGI, March 19, 2007).

Chevron estimated that its capital and exploratory expenditures this year will be $22.9 billion, about 15% higher than in 2007. About three-fourths of the total, or $17.5 billion, is budgeted for exploration and production activities, with about $4.8 billion in the United States.

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