More E&P focus of U.S. companies' budgets

Workers position a 900-ton hydrocracker reactor at the 100,000 b/d refinery being built near Melaka, Malaysia. The complex, scheduled for start-up late this year, is a joint venture of Conoco, state-owned Petronas, and Den norske stats oljeselskap AS. Plant will utilize Conoco's proprietary coking technology. The project will absorb a big chunk of Conoco's capital budget for 1997. Photo courtesy Conoco.

Many of the spending plans include record budgets for work planned in and outside the U.S.

In the U.S., the Gulf of Mexico was cited by many companies as a focus of their operations or work programs in 1997, especially exploration and development in deepwater and ultradeepwater areas.

Companies disclosed significant increases in upstream spending, for both U.S. and non-U.S. operations.

Record spending

Texaco Inc. plans to increase total capital spending to about $24.3 billion the next 5 years-an increase of almost 60% from average capital expenditures during 1992-96.

In 1997, it earmarked $4.5 billion in capital and exploratory outlays, up more than 30% from $3.4 billion in 1996. Texaco will nearly double its 1997 spending in the deepwater Gulf of Mexico.

Chevron Corp. plans a $5.9 billion capital and exploratory program, the largest in the company's history, and about $3.6 billion, or 60% of the total, is targeted for worldwide exploration and production. Of the total, $2.3 billion-an increase of 20%-will be spent outside the U.S. Downstream, Chevron plans about $1.4 billion in spending for worldwide refining, marketing, and transportation, of which about $600 million will be spent in the U.S.

Amoco Corp. has earmarked $4.1 billion for capital and exploration spending in 1997 vs. $4.5 billion estimated in 1996. Of the 1997 planned total, $2.7 billion will be used for E&P. The lion's share of E&P-$1.5 billion-will be spent outside the U.S. Another $900 million has been slated for U.S. E&P.

ARCO has approved a $3.4 billion capital budget for 1997, up from $3.3 billion last year. Upstream spending is expected to account for more than 60% of the program, totaling $2.1 billion vs. $1.7 billion last year.

Shell, Conoco, Unocal

Shell Oil Co. plans a capital and exploratory budget of about $3.8 billion for 1997 vs. 1996's $3.4 billion. About $2.5 billion has been set aside for E&P. Spending for 1996 increased $457 million, primarily due to a higher level of spending in the deepwater Gulf of Mexico.

Conoco Inc. will spend about $2.25 billion for capital items and cash exploration expense during 1997, roughly equal to 1996 spending. Of the total, about $1.6 billion will be spent outside the U.S. and $650 million planned in the U.S. Much of Conoco's non-U.S. spending will be directed to two projects: In Malaysia, Conoco will be at peak spending levels for construction of a 100,000 b/d refinery at Melaka. In Venezuela, Conoco will begin development of a 55,000-acre tract in the Orinoco region to ultimately produce 120,000 b/d of heavy crude in a joint venture with state-owned Maraven.

Unocal Corp. said two thirds of its forecast $1.34 billion in 1997 capital expenditures-vs. $1.38 billion in 1996-will be used to fund projects outside the U.S. Of the total, about $1.07 billion has been directed to worldwide E&P, an increase of 19% from 1996.

Unocal is emphasizing work in central and southeastern Asia in a shift in spending from U.S.-focused projects. In 1995, about 70% of its capital spending, or more than $1 billion, was on U.S. projects; for 1997, 67% of capital spending, or about $900 million, is directed to projects in Azerbaijan, Myanmar, Thailand, Indonesia, and Philippines.

BP, Mobil, Phillips

BP's Alaskan outlays will increase to an average $700 million/year from $500 million/year. Total spending of $3.5 billion will include $1.2 billion for EOR projects and development drilling, and $1.5 billion has been earmarked for work associated with new fields, including Badami and Northstar (OGJ, June 10, 1996, p. 71).

BP's spending program in Alaska is part of BP's worldwide push to boost production to 1.8 million b/d by 2000 from the current 1.5 million b/d, as well as ramp up production from its North Slope properties in an effort to add significant Alaskan reserves the next 10 years.

Mobil's 1997 capital and exploration budget, including cash investments in equity companies, is set at $5.4 billion-down from a 1996 estimated spending level of $7 billion, which included nearly $2 billion for the acquisitions of Ampolex Ltd. and a 25% interest in Tengiz field in Kazakhstan. Excluding those unusual outlays, estimated 1996 spending was essentially equal to the 1997 plan, Mobil said.

Mobil said its capital and exploration spending for E&P is projected to be about $3.5 billion in 1997, down $1.4 billion from 1996. Its U.S. E&P spending is expected to be about $500 million, down about $100 million from 1996. Outside the U.S., E&P spending is expected to be about $3 billion, down $1.3 billion.

For marketing and refining, the company plans to spend about $400 million, essentially flat, while Mobil Chemical's spending is projected at almost $500 million, up about $100 million.

Phillips Petroleum Co. approved $1.67 billion in capital projects for 1997, an increase of 3% from the 1996 budgeted level and 6% higher than estimated spending of $1.58 billion in 1996.

Phillips' 1997 E&P capital budget totals $905 million, down from 1996's estimated spending of about $1 billion. The largest portion will go for projects outside North America. The budget includes $150 million for exploration activities, with funding split 54/46% between non-North American and North American projects, respectively.

UPR's $1 billion program

Union Pacific Resources Group Inc. (UPR), Fort Worth, has set its new capital budget at $1.035 billion-the largest budgeted spending level in company history.

Development spending is expected to total $482 million, an increase of about $57 million from 1996; exploration spending-including drilling, lease acquisition, and seismic, $272 million, up 6% from 1996; and other spending of $156 million covering gas value chain assets, including processing plants, pipelines, and marketing.

About 38% of the budget-$390 million-has been allocated for exploration and development in its Austin chalk business unit.

In its East and South Texas business unit, UPR has allocated a budget of about $110 million. A principal focus in 1997 will be the Cotton Valley Pinnacle reef trend in East Texas, where UPR has accumulated 275,000 net acres.

More record budgets

Many other companies are planning significant spending in 1997.

Vastar Resources Inc., Anadarko Petroleum Corp., and Oryx Energy Co. have 1997 capital budgets of $585 million, $560 million, and $520 million, respectively.

Vastar's program begins a 5-year program that totals $3.4 billion through 2001. About $200 million of the 1997 budget will be spent on exploration, roughly 80% designated for work in the Gulf of Mexico, where the company plans to drill more than 20 exploratory wells.

Also, Vastar will embark on a deepwater drilling program in second half 1997, which includes about 30 3D-based drilling prospects, most of which are located in or around existing fields. More than $265 million is earmarked for development of existing properties.

Anadarko's budget represents an increase of 31% from 1996 spending and is the highest level in company history. It plans to double its production from 1996 levels by the turn of the century, and company officials said the investment level is aimed at reaching the goal by 2000.

Oryx's 1997 budget is 30% higher than the $400 million it invested in exploration and development in 1996. The $520 million program is the largest in 5 years, with about 67% invested in the U.S., primarily in the Gulf of Mexico.

Pennzoil Co. plans a $460 million capital budget, including a boost of 8%, or $26 million, in oil and gas spending. Pennzoil said that increase is offset by declines in spending in certain other business segments. As a result, its 1997 capital budget is $105 million less than the estimated 1996 capital expenditures of $565 million and within operating cash flow.

Kerr-McGee Corp. is budgeting $445 million in capital spending for 1997, up about $40 million from 1996. Of the total, $300 million has been set aside for exploration and production, including about $130 million for the Gulf of Mexico.

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