ChevronTexaco Announces 2002 Spending Budget

ChevronTexaco Corp. announced a $9.4 billion capital and exploratory spending program for 2002 including $1.6 billion in non-cash affiliates' expenditures.

The 2002 program is 22 percent lower than 2001 spending of about $12 billion. After adjusting for major acquisitions, divestitures and lease buy-backs, underlying spending in 2002 is about 9 percent lower than in 2001.

"ChevronTexaco's 2002 capital and exploratory program is smaller than the combined 2001 programs due to merger-related capital efficiencies, including high grading of opportunities, increased use of best practices, and procurement integration," said Chairman and CEO Dave O'Reilly. "While smaller, this program continues our long-term strategy to pursue high-return upstream growth projects, while improving our competitive position and returns in global downstream."

About 65 percent of the total spending, or about $6.1 billion, will be invested in worldwide exploration and production, with $1.8 billion of that expended in the United States. This is 14 percent lower than the $7.1 billion spent last year. Significant one time items in both years are largely offsetting: the purchase of an additional 5 percent of Tengizchevroil in 2001 and a lease buyback associated with the Captain Field in the North Sea in 2002.

The 2002 exploration program is expected to deliver $300 million lower exploration expense than pre-merger levels. Over 50 percent of the exploratory spending will be in the most promising prospects in the deepwater Gulf of Mexico, Brazil, and West Africa. The balance will be spent on exploration opportunities in areas such as Nova Scotia, Alaska, Norway, and China's Bohai Bay in addition to exploratory activities near our existing core production areas.

"The larger and more diverse upstream portfolio of the merged company allows us to high-grade our exploratory program and focus our capital on those developments that best improve overall returns," said Peter Robertson, ChevronTexaco's vice chairman of upstream. "We are also working hard to ensure we have the right people skills, excellent teamwork and knowledge sharing, and world class processes, for selecting the best projects and executing them successfully," he added.

The worldwide upstream program includes significant longer-term growth projects in:

  • Kazakhstan, where continued development of the Karachaganak and Tengiz fields will lead to next phase production increases in 2003 and 2005, respectively;
  • Chad, where ongoing development of the Doba Field and associated Cameroon pipeline will come onstream in 2004;
  • Nigeria and Angola, where investment continues in near-shore producing fields, deepwater development, and for facilities to commercialize associated gas and further reduce routine flaring;
  • Venezuela, where further development of the Hamaca Field and associated crude upgrading facility are expected to reach full commercial production in 2004;
  • Western Canada, where construction continues on the Athabasca Oil Sands project with expected bitumen production start up in late 2002 and synthetic oil production shortly afterwards.

ChevronTexaco will also continue to develop its existing, diversified U.S. upstream portfolio with the goals of maximizing long-term cash flow and value.

About $1.7 billion, or 18 percent of total spending, will be invested in global downstream. This is about $200 million less than in 2001 excluding Equilon and Motiva, affiliates to be divested pursuant to an order of the U.S. Federal Trade Commission. ChevronTexaco plans to invest about $700 million in U.S. refining and marketing and about $700 million in international refining and marketing. About $300 million will also be invested in transportation, which includes pipelines to support expanded upstream production. "The downstream capital program is focused largely on improving safety, reliability and efficiency in existing facilities while growing with local markets where appropriate," said Pat Woertz, executive vice president of worldwide downstream.

Investments in chemicals will be about $400 million. Almost half of this is ChevronTexaco's share of a new, world-scale petrochemical complex being constructed in Qatar by its Chevron Phillips Chemical Co. affiliate. Investments in power and related businesses (including Dynegy) will total about $800 million, down from about $2.3 billion in 2001, which included acquisition of $1.5 billion in redeemable, convertible preferred shares of Dynegy. The remaining $400 million will be invested primarily in emerging technologies and improvements in information technology infrastructure.