PERTH (miningweekly.com) – US energy major Chevron announced spending cutbacks as it completed construction on a number of its projects.
Speaking at a security analyst meeting overnight, Chevron chairperson and CEO John Watson noted that with low oil prices persisting, the company was managing spend at the lower end of the $25-billion to $28-billion range previously predicted for 2016, with Chevron targeting some $26.6-billion.
As projects currently under construction were completed, spending would reduce further in future.
“Our new guidance range for 2017 and 2018 is $17-billion to $22-billion. We're also reducing operating and administrative expenses. Operating expenditure was down over $2-billion in 2015 and we expect a similar reduction in 2016.
“Savings are coming from procurement actions to get better pricing, efficiency improvements from work process reviews and payroll reductions as we size the organization for the amount of work we expect to have. Our company payroll was down 3 000 in 2015 and we expect another 4 000 reductions in 2016. As we implement organizational change, we're taking care to preserve capability that will be needed in future years,” Watson said.
As spending decreased, Chevron planned to increase production as projects were brought on line and ramped up.
One of the projects contributing to the increase in production was the Gorgon liquefied natural gas (LNG) project, which produced its first LNG on Tuesday this week, with first cargo expected to ship next week.
The Gorgon project included the construction of a three-train, 15.6-million-tonne-a-year LNG plant on Barrow Island with the capacity to supply 275-million standard cubic feet a day of natural gas to the Western Australian market.
“We have two more trains to come on line this year and next. We will see first gas from Angola LNG restart within a few weeks. Mafumeira Sul is expected to begin in the second half of this year. Wheatstone, Sonam, Hebron and Clair Ridge are planned to start up next year. Stampede and Bigfoot are expected to come on line in 2018. These are long-lived assets with benefits for years to come,” Watson said.
“As the spend from these projects winds down, we're very well-positioned to ramp up spending in our shale and tight portfolio where investments are economic at moderate prices. Our cost in the Delaware and Midland basin are very competitive and our learnings and improvements are being shared and realised in the Marcellus, the Duvernay, in Canada, and Vaca Muerta in Argentina.”