Chevron Corp. is targeting a production goal of 3.3 million boe in 2017, fueled by the start-up of massive natural gas projects in Australia and new wells in the ultra-deep waters of the Gulf of Mexico, executives said Tuesday.

The integrated producer held its annual investor conference in New York City, where CEO John Watson outlined the big global growth plans. Production has declined since 2010’s mark of 2.76 million boe, with output of 2.61 million boe in 2012 and 2.67 million boe in 2011. The company averaged nearly 2.7 million boe in 4Q2012. Output will edge higher as more major projects come online.

“Our key development projects remain on track,” Watson told investors. “Spending in 2014 and 2015 will be higher…Any legacy-sized asset will be expensive.”

Capital spending this year is set at $36.7 billion this year to build its arsenal. By comparison, ExxonMobil Corp., the only other integrated U.S.-based major, plans to spend about $38 billion for its capital programs this year, or about $1 billion more than it did in 2012 (see Daily GPI, March 8). Once its new projects have ramped up, Chevron should generate about $50 billion in cash in 2017, compared with $10 billion in 2012, said CFO Patricia Yarrington.

Liquefied natural gas (LNG) projects are among the top contenders for investments, based on a bet by Chevron that new projects will fail to keep pace by 2025, with global demand surpassing supply by more than 100 million metric tons/year (mmty). In light of that, the company is helming the $54 billion Gorgon LNG export development in Australia, which would be capable of producing 15.6 mmty when it’s completed; it’s more than half-way done. Chevron also is partnering in Australia’s Wheatstone LNG project. According to a 2011 estimate by the U.S. Energy Information Administration, Australia holds 396 Tcf of technically recoverable shale gas, or about 6% of the global total.

The producer late last year also bought out stakes held by Encana Corp. and EOG Resources Inc. in the Kitimat LNG export planned for British Columbia; it now is a full partner with Apache Corp. (see Daily GPI, Dec. 26, 2012).

According to Chevron’s estimates, LNG demand is forecast to increase at an estimated average rate of 15 mmty through 2025, led by growth in Asia Pacific nations that include Japan, South Korea and Taiwan. China and India alone are expected to increase their LNG imports by 10%/year over the next decade. The supply gap by 2025 may be equivalent in size to “10 Gorgons,” Watson told analysts.

Natural gas exports from Gorgon are set to begin in early 2015; Wheatstone exports would follow in 2016, said upstream chief George Kirkland. The two projects together would have a combined capacity of more than 15 mmty, he said.

Tests began last month on the St. Malo well in the Lower Tertiary Trend of the deepwater GOM (see Daily GPI, March 1). Production from the test well, more than 20,000 feet under the sea floor, was more than 13,000 b/d even though it was constrained by the test equipment. St. Malo and the Jack project, which are being developed together, ultimately are to produce 177,000 b/d beginning in 2014, Kirkland said.

In the Permian Basin, about 440 wells are scheduled to be drilled this year. Most of the drilling is to target the Permian’s Midland Basin, where up to 340 wells are planned, up from 300 in 2012. The plan is to drill about 100 wells in the Delaware Basin, up from 40. Rig activity is to be increased, and more acreage could be added. Last year Chevron added to its 700,000 net acres in the Permian’s Avalon Shale and Bone Spring sands by acquiring some properties in the Delaware Basin from Chesapeake Energy Corp. (see Daily GPI, Sept. 13, 2012). Acreage included in the agreement was producing about 7,000 boe/d net.

Chevron should make an investment decision this year about whether it will invest in a petrochemical expansion on the Gulf Coast, said Mike Wirth, who heads refining operations. The company’s California refineries are being retooled to run more crude oil refineries, he said. The Richmond, CA-based refinery now is processing Bakken Shale crude.

“Our bread and butter is optimizing our operations by using different feedstocks,” Wirth said. The company also plans to “selectively pursue growth” in petrochemicals and lubricants.

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