Chevron Looks Past Brutal End to 2019 Toward Big-Ticket Projects in Permian, Gulf

Researched by Industrial Info Resources (Sugar Land, Texas)--Chevron Corporation (NYSE:CVX) (San Ramon, California) saw a rough end to 2019 as oil demand declined worldwide and $10.4 billion in write-offs, largely from shale gas production, obliterated its bottom line. With commodity prices unlikely to see any strong increase in the near term, the oil and gas giant is turning to the Permian Basin and other high-growth areas. Industrial Info is tracking more than $52 billion in global projects involving Chevron, nearly 70% of which is attributed to projects under construction.

Click on the image at right for a graph detailing Chevron's active projects worldwide, by industrial sector.

The Permian is driving a substantial portion of Chevron's projected capital spending for the coming year. "In [Chevron's] 2020 budget, approximately $5 billion is allocated to our upstream base business, $4 billion to [the Tengiz] Future Growth Project-Wellhead Pressure Management Project [in Kazakhstan], another $4 billion to Permian development, $3 billion for downstream and chemicals, and the remainder goes to other major capital projects [for] exploration and other projects," said Mike Wirth, the chief executive officer of Chevron, in a quarterly earnings-related press release.

At least $8 billion of investment is attributed to one of the largest project proposals in the domestic Chemical Processing Industry: the U.S. Gulf Coast II (USGC II) Petrochemical Project on the Gulf Coast, which Chevron Phillips Chemical Company LLC, a collaboration between Chevron and Phillips 66 (NYSE:PSX) (Houston, Texas), is planning with Qatar Petroleum (Doha, Qatar). The major components would be an estimated 4.4 billion-pound-per-year ethylene cracker, a 1 million-ton-per-year high-density polyethylene (HDPE) unit, and an offsite facility for support. Chevron Phillips is eyeing the Gulf Coast for its proximity to abundant shale resources, including the Permian Basin.

Chevron Phillips will have a controlling interest in USGC II and is expected to oversee construction and, following completion, all operations. No site has been selected for the facility, although an existing complex in Orange, Texas, which sits on the border with Louisiana, is considered a top candidate. For more information, see Industrial Info's project reports for the ethylene cracker, polyethylene unit and offsite facility.

In December, Chevron announced it would move forward with one of its largest drilling projects in the deepwater Gulf of Mexico: the massive Anchor Floating Production Unit (FPU), roughly 140 miles off the coast of Louisiana. The project, which is expected to begin construction in third-quarter 2021, will involve drilling seven production wells that will tie back to a semi-submersible FPU with the capacity to produce 75,000 BBL/d of crude oil and 28 million cubic feet per day of natural gas.

Chevron says the Anchor project represents a technological step forward for the company, as it is the first deepwater high-pressure development for Chevron and could pave the way for continued development of nearby high-pressure resources. For more information, see Industrial Info's project reports on the production wells, FPU and related subsea infrastructure.

Later this year, Chevron expects to begin a major expansion at a project south of Anchor in the Gulf: the Jack/St. Malo field, where the company plans to enhance oil production by drilling new wells and injecting water into existing wells. The project will include drilling five wells, including two for production and three for water injection; installing subsea infrastructure, including wellheads, injection and production flowlines and control umbilicals; and modifications to the existing platform that include a water-injection module.

Chevron believes these additions will add 175 million barrels of oil-equivalent to production, bringing the total output to roughly 675 million barrels of oil-equivalent over about 30 years. For more information, see Industrial Info's project reports on the wells, subsea infrastructure and topsides modifications.

"We expect production to be up to 3% higher than last year, excluding the impact of any 2020 asset sales," Wirth said. "Our projected growth is largely driven by the Permian, partially offset by ordinary base declines and the effects of prior year asset sales."

Chevron's total earnings for full-year 2019 fell 80% from last year, to $2.9 billion.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.