Chevron Corp. will spend 15% more on exploration in 2008, setting aside about 44%, or $4.8 billion, for its U.S. upstream program, which includes deepwater Gulf of Mexico (GOM) projects and natural gas development in the Piceance Basin of Colorado.
Overall, the producer said last week it plans to spend $22.9 billion worldwide. About $2.6 billion has been set aside for spending by Chevron’s affiliates, which do not require cash outlays by the company’s consolidated companies. About 75% of the spending program is for upstream oil and gas exploration and production projects worldwide. Another 20% is dedicated to the company’s downstream businesses. The total budget for expenditures in the United States is about $8 billion.
The “portfolio of projects” provide “the foundation for our company’s future growth,” said CEO Dave O’Reilly. “Much of our 2008 spending continues to be on large, multiyear projects aimed at increasing energy supplies to meet growing global demand and also improving efficiency and reliability.”
In the upstream, Chevron plans to spend $17.5 billion worldwide on exploration, production and natural gas-related projects. A “significant” portion relates to development projects that build on the company’s exploration results in recent years, including opportunities in the deepwater GOM and western Africa. Funding also is earmarked for further appraisal and evaluation of other prospective areas in the world’s major hydrocarbon basins.
“Our upstream investments are aimed at finding and developing oil and gas resources to increase production and help supply the increasing energy needs of world markets,” said George Kirkland, executive vice president of upstream and gas. “Production start-ups of major projects in 2008 are expected to include Blind Faith in the Gulf of Mexico and Agbami offshore Nigeria. We also anticipate significant production increases at the Tengiz Field, Kazakhstan, as facilities become fully operational in 2008.”
Houston-based ConocoPhillips said Friday it will set aside about 22% of its total worldwide exploration budget to bolster North American development in the coming year, with $3.3 billion targeted for the U.S. Lower 48 states, $1 billion for Alaska and $2.2 billion for Canadian development. Worldwide, the major said it plans to spend $14.3 billion in 2008, which is about 13% more than it budgeted for 2007. Loans to affiliates and contributions to its oilsands venture with EnCana Corp. in Canada will add an additional $1 billion, with the total authorized capital spending of $15.3 billion.
“The business environment remains challenging, with inflation in materials and services impacting both project investment and day-to-day operating costs,” said CEO Jim Mulva. “We have, however, built a strong foundation of assets that enables us to generate competitive investment opportunities. We will continue to exercise capital discipline and selectively invest in projects that add production and increase our capability to add value over the long term.”
Almost 80% of the total budget will be allocated to ConocoPhillips’ Exploration and Production (E&P) segment. In the U.S. Lower 48, the company intends to spend about $3.3 billion, primarily on its ongoing development programs, including those in the Bossier and Lobo trends and the San Juan, Permian, Barnett and Piceance basins. Funds also will be spent on the development of new projects, including the Rockies Express Pipeline, its joint venture with Sempra Energy and Kinder Morgan Energy Partners.
Another $2.2 billion is slotted for Canadian exploration to fund ongoing development programs in the Western Canada gas basins and “progression of heavy oil projects” including those associated with the EnCana business venture. In Alaska, ConocoPhillips plans to spend around $1 billion, which would primarily be invested in development of Alpine satellites and the West Sak heavy oilfield, as well as continued development within the existing Prudhoe Bay and Kuparuk areas.
In addition to the research and development funds already dedicated to projects as part of the 2008 capital program, ConocoPhillips said it once again will allocate more than $150 million for research efforts focused on the development of unconventional oil and gas resources and the development of new energy sources, such as alternatives and renewables.
“ConocoPhillips believes a number of energy sources are necessary to meet the demands of consumers,” said Mulva. “We are committed to diversifying our energy resource development and improving energy efficiency, and doing so in an environmentally responsible manner.”
This year, Mulva said ConocoPhillips’ asset sales are expected to generate proceeds of about $3.1 billion. “In 2008, we anticipate completing the disposition of our U.S. retail assets, and we will continue to evaluate additional opportunities to optimize and strengthen our asset portfolio.”
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