(Reuters) - Chevron Corp (CVX.N) aims to grow output by a fifth by 2017, driven by big Australian projects moving gas to energy-hungry Asian markets, while it also tries to squeeze another $150 million in cost savings out of its refining arm.
Closer to home, in the Marcellus shale, the second-largest U.S. oil company said reservoir outcomes were exceeding expectations, although it was investing there at a “measured pace” in light of depressed North American natural gas prices.
After getting $850 million of savings from a multi-year restructuring of its refining and chemicals division, compared with $700 million originally planned, Chevron said it was now looking for a total of $1 billion in savings.
“We’ve been able to meet and exceed those targets within two years,” Mike Wirth, head of Chevron’s refining and chemicals operations, told Reuters.
“We’re looking for ways to squeeze a little more yield out of every barrel through the flexibility of our operations.”
Chevron has been reducing the number of countries served by its marketing operations. It sold its UK refinery last year as well as a New Jersey terminal last month.
George Kirkland, executive vice president for upstream and gas, saw ample demand for its coming flood of Australian liquefied natural gas (LNG) since it will be sold in Asia, which does not have the same glut as North America.
“LNG is a replacement energy for coal or oil or nuclear and it really doesn’t have any direct gas-on-gas competition, apart from other LNG,” Kirkland said at a meeting with analysts in New York. “All these markets are different.”
A new Angolan LNG project with peak capacity for 175,000 barrels of oil equivalent per day (bpd) should start shipping next quarter and, while contracts with Angola’s government are not finalized, Chevron expects the gas to go to Europe and Asia.
New onshore gas sources, opened up through new drilling techniques and hydraulic fracturing, have been found in other countries. Chevron started an initial well this quarter in China, where it is exploring 940,000 acres with Sinopec 600028.HK, and in Poland, where it just started up a second shale gas well.
Larger rival Exxon Mobil Corp (XOM.N) had cast some doubt on Polish shale gas prospects after its first two wells there did not find commercial quantities.
In Rio De Janeiro, the Brazilian energy regulator said on Tuesday that Chevron’s drilling rights there will remain suspended but those rights could be restored within months if the company gave it additional information about a November leak from its offshore drilling project.
That leak, which has been put at 2,400 to 3,000 barrels, prompted prosecutors to lodge a 20 billion real ($11.2 billion) lawsuit against Chevron and threaten staff there with criminal penalties.
Brazil has attracted intense interest from energy companies who are eager to explore for what some believe could be some of the world’s biggest untapped oil fields.
Hours before that statement, Chevron Chief Executive John Watson told reporters the company had been very forthcoming with information about the accident to Brazilian authorities.
“We regret the incident, but there wasn’t damage, and we expect to be treated as Petrobras (PETR4.SA) or other companies would be treated in a similar circumstance,” Watson told reporters after the presentation to analysts.
The Brazilian energy regulator said its investigation showed a different conclusion about the cause of the accident than Chevron provided, and it was seeking to clear up the different views before reinstating Chevron.
Overall, Chevron stuck with its production target of 3.3 million barrels per day by 2017, assuming oil prices of $79 per barrel, up from its anticipated output of 2.68 million bpd this year.
The start of its investment-heavy projects would allow the company to reduce cash on its balance sheet, Chevron said, as analysts sought clues on potential dividend increases.
Chevron also said it planned to hold onto its West Coast refineries at a time when others are pulling out, including rival BP Plc (BP.L), which has put its Southern California refinery up for sale.
Chevron shares closed 1.1 percent higher at $111.19, their highest so far this year.
Reporting by Matt Daily in New York and Braden Reddall in San Francisco; Additional reporting by Jeb Blount in Rio de Janeiro; Editing by Andre Grenon, Gerald E. McCormick, Gary Hill