Chevron sets $39.8B capex for 2014
Chevron Corp. announced plans to spend roughly $39.8 billion on its 2014 capital and exploratory investment program. Included in the 2014 program are $4.8 billion of planned expenditures by affiliates, which do not require cash outlays by Chevron.
The 2014 budget is approximately $2 billion lower than expected total investments for 2013. For the current year, total investments are estimated at $42 billion, including expenditures of approximately $4 billion for major resource acquisitions not included in the original budget.
"We expect 2013 will be a relative peak year for investments, as we completed several attractive resource acquisitions. We also anticipate 2014 will represent the peak year for spending on our Australian LNG projects as we move them closer to first production," said Chevron chairman and CEO John Watson.
Approximately 90% of the 2014 spending program is budgeted for upstream crude oil and natural gas exploration and production projects. Another 8% is associated with the company's downstream businesses.
Almost 75% of affiliate expenditures are associated with investments by Tengizchevroil LLP in Kazakhstan and Chevron Phillips Chemical Company LLC (CPChem) in the United States.
Upstream
Investment of $35.8 billion is planned for exploration and production activities. Major capital investments include developments in Australia, Nigeria, the US deepwater Gulf of Mexico, the US Permian Basin, Kazakhstan, Angola, and the Republic of the Congo.
Planned capital spending is also directed toward improving crude oil and natural gas recovery and reducing natural field declines from existing producing assets. About 30% of the upstream capital program is allocated to profitable development wells and other projects associated with current producing assets. The 2014 base program includes an increase in activity across several producing regions of North America as well as in Thailand and Indonesia.
In Australia, the Gorgon project has been under construction for four years and is almost 75% complete. The current estimate for the cost of the foundation project is US$54 billion (AU$55 billion), with plant startup and first gas planned for mid-2015.
"Gorgon project economics are attractive," said vice chairman George Kirkland. "We continue to make steady progress against key project milestones and are applying lessons learned to our Wheatstone development which is almost 25% complete. Approximately 75% of our combined LNG offtake from the two projects is committed under firm, long-term sales and purchase agreements. These LNG developments are two of our most important future legacy assets, representing approximately 400,000 barrels a day of net production at full capacity. They will be substantial contributors to our cash flow for decades to come."
In the Gulf of Mexico projects under development include Jack/St. Malo, Big Foot, and Tubular Bells. The Jack/St. Malo hull has been moored at the offshore location and is on schedule for a 2014 startup. The Big Foot project is forecasting a 3Q14 tow to location and a 2Q15 start-up.
Upstream spending in 2014 also includes:
- Kazakhstan/Russia – advancement of the Tengiz Future Growth and Wellhead Pressure Management Projects and the Caspian Pipeline expansion.
- Nigeria – further development of the Usan and Agbami deepwater fields
- Canada – Hebron offshore development and advancement of Kitimat LNG
- Angola, Republic of the Congo – development of Mafumeira Sul and Moho Nord
- Argentina – advancement of the YPF arrangement for the development of the Vaca Muerta shale
- UK – advancement of the Clair Ridge and Alder projects
Global exploration funding is expected to be $3.2 billion in 2014. Planned spending includes initial appraisal of new acreage acquired over the past two years, including Australia, the Kurdistan region of Iraq and Morocco. The program also supports continued exploration and appraisal activity in Western Australia, the Gulf of Mexico, West Africa, and in shale gas regions around the world.
Noble Energy, partners make GOM sub-salt discovery
Noble Energy and its partners have made a sub-salt oil discovery at the "Dantzler" exploration prospect in the Deepwater Gulf of Mexico. The well is located on Mississippi Canyon block 782 in 6,580 feet of water and was drilled to a total depth of 19,234 feet. Wireline logging data indicates approximately 120 feet of net pay in two high-quality Miocene reservoirs which are primarily crude oil.
The Dantzler discovery is located roughly 12 miles west of previous discoveries at Big Bend and Troubadour in the Mississippi Canyon 698 and 699 blocks. Noble provided discovered gross resource estimates at Dantzler of between 55 and 95 million barrels of oil equivalent.
Noble Energy operates Dantzler with a 45% participating interest. Additional interest owners are entities managed by Ridgewood Energy Corp. (including Riverstone Holdings LLC and its portfolio company ILX Holdings II LLC) with 35% and W&T Energy VI LLC (a wholly owned subsidiary of W&T Offshore Inc.) with 20%.
While resource estimates were brought down from 220 MMboe to 95 MMboe, analysts at Global Hunter Securities are still "very encouraged" by Noble's Rio Grande development area successes. Going forward, Noble anticipates drilling at least two additional Miocene trend prospects in the deepwater Gulf of Mexico in 2014.
Total enters Papua New Guinea gas fields
Total has completed a farm-in agreement with InterOil Corp. that gives the company a 61.3% interest in Petroleum Retention License (PRL) 15 in Papua New Guinea. The Elk and Antelope gas fields, two of the biggest finds in the Asia-Pacific region in recent years, were discovered in the license in 2006 and 2009, respectively.
Total and InterOil retain the flexibility to farm-down an aggregate of up to a 19.3% interest (before any election by the government to exercise its option to join the project with a 22.5% interest) to a strategic partner.
The objective of Total, the project operator, is to complete the delineation of the two discoveries and to continue to explore for new resources in the license area. Depending on the results, a final investment decision could be made by 2016 for the development of the fields and the construction of a liquefaction plant located onshore on the Gulf of Papua.
In addition, Total has an option to take an interest in the petroleum prospecting licenses (PPLs) 236, 237 and 238 in the same area.
Total will pay $470 million for a 42% interest (32.5% if the government executes its option to join the project) with a contingent payment estimated by Total at $590 million. The transaction remains subject to the approval of the Papua New Guinea government.
Statoil makes fifth natural gas discovery offshore Tanzania
Statoil, with co-venturer ExxonMobil, has made its fifth natural gas discovery in block 2 offshore Tanzania. The discovery of an additional 2-3 Tcf of natural gas in place in the Mronge-1 well brings the total of in-place volumes up to 17-20 Tcf in block 2.
Mronge-1 is drilled by the drillship Discoverer Americas, and the site is located 20 km (13 mi) north of the Zafarani discovery, and at 2,500-m (8,202-ft) water depth.
The Mronge-1 well discovered gas at two separate levels. The main accumulation is at the same stratigraphic level as proven in the Zafarani-1 well in block 2. The Zafarani-1 discovery was made in 2012 and was a play opener for the block. The secondary accumulation was encountered in a separate, younger gas-bearing reservoir, in a play that had previously not been tested.
Previous related gas discoveries include the Tangawizi-1, Zafarani-1, and Lavani-1 wells, and a deeper discovery in a separate reservoir in Lavani-2.
VAALCO to proceed with Offshore Angola drilling program
Houston-based VAALCO Energy Inc. has received written confirmation from The Ministry of Petroleum of Angola that the available 40% working interest in Block 5, offshore Angola, has been assigned to Sonangol EP, the National Concessionaire. The Ministry of Petroleum also confirmed that Sonangol EP will assign the aforementioned participating interest to its exploration and production affiliate, Sonangol P&P. With this confirmation, VAALCO is looking to secure a semi-submersible rig to commence the exploration phase of the pre-salt / post-salt Kwanza Basin program.
Following the assignment, Sonangol and its affiliates will hold a 60% working interest in Block 5, comprising a 20% carried working interest and the newly assigned 40% participatory working interest. VAALCO, as operator, continues to hold a 40% operating working interest.
Briefs
ConocoPhillips reports deepwater GoM discovery
ConocoPhillips has made a significant oil discovery at its Gila prospect in the deepwater US Gulf of Mexico. The company holds a 20% working interest in the Gila well, operated by BP.
The Gila discovery was made by an exploration well on Keathley Canyon Block 93, about 300 miles southwest of New Orleans, Louisiana, in approximately 4,900 feet of water. The well was drilled to a depth of 29,221 feet, penetrating multiple Paleogene-aged reservoir sands.
Further drilling will be required to determine the ultimate size of the discovery and to test the potential for material additional pay in deeper zones not penetrated in the discovery well.
Far East extends exploration for Shouyang block Area B
Far East Energy Corp., the US-listed company operating the Shouyang block coalbed methane (CBM) production sharing contract in Shanxi Province, People's Republic of China, has negotiated with Chinese partner, China United Coalbed Methane Corp. to extend the exploration period of the portion of the Shouyang block identified as "Area B" until June 30, 2016. Far East will drill at least 39 additional wells in Area B by June 30, 2016.
Far East has reported a large increase in gas production, with gas production now exceeding 1 million cubic feet per day.
Area B is significantly larger, at 1,103.1 sq km (272,581.95 acres), than the company's 1H core production area, which contains 64.7 sq km (15,987 acres).
