The Zhitong Finance App learned that Chevron (CVX.US) Chief Financial Officer Eimear Bonner said at a conference hosted by Barclays on Tuesday that as part of a $7 billion five-year expansion plan, Chevron plans to more than double the number of oil rigs operated in Venezuela to boost the company's oil production in Venezuela to about 600,000 b/d.
Currently, the total production of Chevron's three joint ventures in Venezuela is about 290,000 b/d, and all of this crude oil is exported to the US. Eimear Bonner said that once Chevron's joint venture in Venezuela achieves 600,000 b/d production, the company expects production to reach the platform level of 600,000 to 700,000 b/d. The CFO said at the conference: “The huge resource base provides us with the opportunity to extend the duration of this platform by 5 to 10 years, and this is only the initial harvesting of reservoirs. There's still a lot of room for growth here.”
Eimear Bonner also said that the new contract clauses signed by Chevron last week also gave the company the right to conduct international arbitration. The ability to resolve potential disputes through the International Court of Arbitration has been a key requirement put forward by other oil producers, including ExxonMobil (XOM.US) and ConocoPhillips (COP.US). The two companies left Venezuela in 2007 due to the nationalization of their assets.
According to reports, Chevron announced at the beginning of this month that it plans to invest 7 billion US dollars over the next five years through a joint venture to more than double its crude oil production in Venezuela. This will be one of the largest investment promises by international oil companies in Venezuela in recent years, and also marks the further consolidation of Chevron's dominant position in the country's oil landscape.
Venezuela has the largest oil reserves in the world, but decades of mismanagement, corruption, and related restrictions have severely weakened the country's fossil fuel industry. Chevron expects its oil production in Venezuela to reach around 600,000 barrels per day by 2031. The company also said that Venezuela's rich oil potential will continue for “decades,” and the total production cost is expected to be less than $20 per barrel.
Chevron has been involved in cooperation in Venezuela's local energy business for more than a century. Although other foreign oil companies such as Shell and Repsol still have a presence in the country, their US rivals ExxonMobil and ConocoPhillips have been forced to exit after their assets were expropriated. Since the country was sanctioned eight years ago, Chevron has been exempted from the US Treasury to continue drilling rich oil resources in mainland Venezuela.
Chevron has four major projects in Venezuela: two in the Orinoco oil belt and two in the Zulia region, the birthplace of the Venezuelan oil industry. Together, these projects account for nearly 25% of the country's total oil production of nearly 1 million barrels per day.
In April of this year, Chevron reached an asset replacement agreement with the Venezuelan government. The agreement will increase Chevron's shareholding ratio in a very large oil field in Venezuela's Orinoco large oil belt to 49%, and give the US company the right to develop a second region.
The war in the Middle East and the risk of Hormuz have boosted the world's attention to the supply of heavy crude oil from Africa to the Middle East, and the Venezuelan Orinoco belt is one of the most important heavy oil resource areas in the world; this deal allows Chevron to further focus its resource allocation on heavy oil core projects, while abandoning small western oil fields and offshore gas blocks to focus more strategically. If international oil prices remain high and the US continues to encourage Venezuela to increase production, then this portion of Chevron's assets in Latin America will not only enhance the flexibility of upstream growth, but also strengthen the safety of its heavy oil supply that is more in line with the US refinery system.