Chevron Corp. has backed off an earlier commitment to increase worldwide natural gas and oil production by 3% in the long-term because of the “uncertain point in the global economy,” but 2009 output should jump 4% from 2008 levels because of the slate of new projects nearing completion, CEO Dave O’Reilly said last week.

Chevron held an analyst meeting in New York City last Tuesday, and the management team detailed the San Ramon, CA-based major’s plans over the next few years. O’Reilly was asked if Chevron had set any new long-range forecasts for the company, but the CEO admitted that it was difficult to make forecasts today.

“We have been very careful not to try and put out a number because there are just so many moving parts,” O’Reilly said.

Despite the economic downturn, Chevron kept its capital expenditures for 2009 flat versus 2008 levels at $22.8 billion. Of that amount, $17.5 billion is to be spent on upstream projects. Some of the company’s existing energy projects were deferred this year to wait out low commodity prices and high service costs.

“We believe we’ll get better economics by holding back,” O’Reilly said. “Our long-term view hasn’t changed. We never got caught up in $140 oil. You could already tell when oil got to $140 that demand was falling.”

Even if projects are deferred, Chevron’s “barrels associated with the base business do not go away,” said George Kirkland, executive vice president of upstream and gas. “They will still be there when conditions improve.”

Chevron plans to drill more than 50 exploratory wells this year, Kirkland told analysts. In the next couple of years Chevron estimates that output from its major project start-ups and new developments will grow to 650,000 boe/d from 153,000 boe/d. The company, he said, has more than 140 Tcf of equity natural gas resources worldwide, with an estimated 36 Tcf combined in North and South America.

Nine major projects were ramped up in 2008, but only one was in North America — the Blind Faith development in the Gulf of Mexico (GOM), which is currently producing 65 million boe/d. The Tahiti project in the GOM is scheduled to begin production in 2Q2009, and at maximum capacity it would produce 70 MMcf/d of gas and 127,000 b/d of oil. Estimated recoverable resources are 400-500 million boe.

Besides its deepwater projects, Chevron also is nearing completion on a gas project in Colorado’s Piceance Basin, said Kirkland. The project, in which Chevron holds a 100% stake, would have peak production of 70 million boe/d, he said. Chevron has a substantial leasehold in the basin, but it cut back plans to add four more rigs to its two-rig program late last year as gas prices dropped and the economy went into a tailspin (see NGI, Nov. 24, 2008; Nov. 19, 2007).

New details about Chevron’s high-profile Jack and St. Malo discoveries in the Lower Tertiary trend of the deepwater GOM also were revealed by Kirkland. The company, which shares stakes in some of the Tertiary discoveries with Devon Energy Corp. and StatoilHydro ASA, has begun front-end engineering and design for a production facility that would have a capacity of between 120,000 boe/d and 150,000 boe/d (see NGI, Feb. 9). The facility would co-develop the Jack Field and the nearby St. Malo Field, which have combined recoverable resources “in excess of 500 million boe,” Kirkland said.

Chevron had $9.3 billion in cash and total debt of about $9 billion at the end of 2008, CFO Pat Yarrington told analysts. If oil prices remain at $40-50/bbl in the coming months, the company will be in a “good balance sheet position” through 2009, she said.

“It’s a very fluid environment,” said the CFO. Revenue is falling, but he said service costs are coming down “quite rapidly as well.”

If oil prices were to fall below $40/bbl, Kirkland said Chevron would adjust.

“You have wells that get squeezed when prices come down to $30 to $40/bbl,” and “we’ll defer them,” Kirkland said. Besides low commodity prices, “we’re going to get the cost of doing business back down.”

For the “longer term,” said O’Reilly, “we believe global energy demand will rise as economic growth resumes. We have more exposure to some of the top growth regions in the world. Shorter term, our portfolio is relatively less exposed to sectors that are most sensitive to an economic downturn.”

Like Anadarko Petroleum Corp. CEO Jim Hackett (see related story), O’Reilly criticized the Obama administration’s intentions to raise taxes on the U.S. energy industry. “Raising taxes on domestic production is the wrong thing to do,” he said.

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