Capital budgets for 1996 look conservative

U.S. petroleum companies will keep 1996 capital spending conservative, if early indications are a guide.

A sampling of companies reporting 1996 plans in mid-December shows, with only two exceptions, about flat or slightly lower capital spending next year compared with 1995.

Amoco

The early tallys most noteworthy exception in the trend of flat or lower capital spending for 1996 is Amoco Corp. Amoco plans to jump capital and exploration outlays to $4.7 billion from $4.2 billion projected to be spent in 1995.

Thats still not as big a jump as the companys year to year hike in capital spending for 1995. Capital outlays in 1994 totaled $3.2 billion, in line with an average $3.4 billion/year during 1990-94, when Amoco was undergoing a major restructuring.

The continued growth in our spending is a clear indication of the success of Amocos 1994 restructuring, said Chairman H. Laurance Fuller. That restructuring has allowed us to reduce costs, accelerate decisionmaking, and empower our business groups to more quickly bring forward projects we believe will provide profitable growth.

In fact, additional funds above the $4.7 billion level could be made available to take advantage of other opportunities.

Amoco has earmarked about $2.8 billion of its 1996 budget for worldwide exploration and production. Its 1996 upstream budget reflects an acceleration of the trend toward shifting E&P spending outside the U.S.

Among major non-U.S. projects are a gas development and liquefied natural gas project in Trinidad, start-up of oil production in China and gas production in Colombia, and continuation of successful programs in Egypt and the North Sea. and natural gas production projects in China and Colombia.

Fuller noted Amocos more focused exploration effort enables it to realize improved results from its exploration spending.

Just a few years ago, we were exploring in more than 100 countries. Today, it is just a couple dozen. Our success rate is up, and we have more than replaced our reserves the past 3 years.

Amoco also plans to spend $525 million to bolster its petroleum products unit, mainly by upgrading gasoline marketing operations.

Outlays of $1.25 billion have been approved for chemical projects that offer strong short and long term returns. Among them are expansions of plants producing purified terephthalic acid (PTA) and its precursor paraxylene in Indonesia, Malaysia, Singapore, Belgium, and the U.S.

Shell

Shell Oil Co. proved the second exception in this small sampling when it hiked its capital and exploration budget for 1996 by $400 million to $3.7 billion.

It has earmarked about $2.4 billion for exploration and production in 1996, an increase of $600 million from expected 1995 levels. This reflects Shells plans to accelerate production from Gulf of Mexico discoveries.

Shell Pres. Philip Carroll said, Through 1998, our anticipated average annual growth rate is about 14% for oil production and 16% for gas production, compared with earlier objectives of 4% and 11%, respectively.

The E&P outlays include funds to begin development of the Ursa project using a tension leg platform in 3,950 ft of water in the gulf (OGJ, Nov. 13, p. 29). That is expected to cost as much as $1.45 billion.

Shell also plans to spend $800 million in its oil products unit and $500 million in its chemical products unit in 1996. That represents, respectively, a drop of $300 million and a rise of $100 million from projected 1995 levels.

Chemical outlays in 1996 reflect plans to hike spending in expansions of base chemicals and PTA capacities. Shells cut in oil products outlays reflects an expected completion of a clean fuels project at its Martinez, Calif., refinery (OGJ, Dec. 11, p. 21).

Phillips

Phillips board approved a 1996 capital budget of $1.4 billion. Thats the same as it budgeted for 1995 but less than estimated outlays this year of $1.465 billion.

Seventy-four percent of the projects included in next years budget are payout projects, said Phillips Chairman Wayne Allen. As a result, we will see growth in oil and gas reserves, chemicals and plastics volumes, and retail marketing.

Phillips earmarked 67% of the 1996 budget for upstream projects, 30% downstream, and 3% corporate and other.

Its exploration and production budget is $855 million, compared with 1995 estimated spending of $856 million. The focus is on strategic growth in improved oil recovery projects outside North America and liquefied natural gas opportunities.

Phillips plans next year to spend $539 million on production related projects outside North America compared with $468 million in 1995. Included are the Ekofisk II redevelopment project off Norway and Britannia and Armada field developments off the U.K.

About $212 million is targeted for North American development drilling and production projects, including the Mahogany subsalt development in the Gulf of Mexico.

Of $104 million in spending planned for exploration in 1996, the budget is split 51-49 between projects outside North America and those in North America. Total Phillips exploration outlays in 1996, including geophysical/geological studies and general corporate and administrative costs associated with exploration but excluded from the capital budget, are estimated at $250 million.

Exploratory wells under this program are slated in Algeria, Australia, China, Norway, and the U.K.

In gas gathering, processing, and marketing, Phillips plans to spend $80 million in 1996 compared with 1995 outlays of $278 million that included major acquisitions completed in 1994-95.

Phillips jumped its 1996 capital budget for natural gas liquids, chemicals, and plastics to $240 million from $155 million expected to be spent in 1995. Of that total, 58% is allocated for projects to increase volumes of ethylene, polyethylene, polyethylene pipe, aromatics, and specialty chemicals.

In refining, marketing, and transportation, Phillips earmarked capital outlays of $175 million in 1996 compared with $146 million in estimated spending for 1995. The 1996 budget reflects a 13% drop in refining outlays and a 140% jump in marketing, with an emphasis on construction of more retail outlets.

Sun

Sun Co. plans a 1996 capital spending program of $460 million, up $10 million from expected 1995 outlays.

The 1996 program includes $140 million for income growth projects, mainly in chemicals, branded marketing, logistics, and international production.

The largest growth project is expansion of propylene production at Suns U.S. Northeast refineries, expected to be complete by yearend 1996. Other growth projects include continued investment in Sunoco products marketing, expansion of pipelines and terminals, and further development of oil reserves in the U.K. North Sea.

About $320 million is destined for legally required and base infrastructure spending, essentially the same as projected 1995 spending.

Suns projected 1995 spending of $450 million doesnt count $106 million in outlays by Suncor prior to its divestment last June. Suns 1995 capital spending budget, excluding Suncor, was $455 million.

CNG

Consolidated Natural Gas Co. (CNG), Pittsburgh, budgeted $455.2 million in capital spending for 1996, a drop of $13.8 million from the level it expects to spend on capital projects in 1995.

The budget includes funds for CNGs Neptune development, the companys second deepwater oil and gas project in the Gulf of Mexico. It is slated for start-up early in 1997.

CNGs budget also focuses on storage and pipeline expansion projects, an offshore oil and gas gathering system, funds for major computerization projects, and other improvements in the companys local utility and interstate pipeline operations.

CNGs capital budget for 1996 breaks out as exploration and production $179.7 million, down from $180 million to be spent in 1995; natural gas transmission $88.4 million, down from $93 million; natural gas distribution $144.4 million, down from $165 million; and energy services $33.1 million, up from $28 million. In addition, plans call for spending $9.6 million for corporate and system projects compared with $3 million in 1995. Copyright 1995 Oil & Gas Journal. All Rights Reserved.