US oil giant suffers $4bn hit after Democrat laws deter investment

THE US oil giant Chevron has taken a $4bn (£3.2bn) hit after tough rules introduced by Californian Democrats dented investment.

Chevron, which also has extensive interests in the North Sea, said it had faced “continuing regulatory challenges” in the state resulting in “lower anticipated future investment levels in its business plans.”

It follows new laws passed by California’s

Democrat-dominated legislature which have restricted licensing of new oil and gas projects and forced operators to allocate more funding to plug wells nearing the end of production.

Separately, last year the state legislature approved a bill limiting where new oil wells can be drilled, providing buffer zones around homes, schools and other sensitive sites.

Another law, which came into force on Jan 1, gives California the power to fine oil companies that cause major oil spills with penalties of up to $70,000 per day. Chevron has been linked to several such spills.

State regulators have also banned the sale of most new petrol and diesel cars in California by 2035 and voted to make the state carbon neutral by 2045 potentially cutting demand for liquid petroleum by 94pc.

In a letter to state officials in November, Andy Walz, Chevron’s president of Americas Products, said: “California’s policies have made Chevron’s investments in its home state riskier than investing in other states. In the past year, we have cancelled several projects due to permitting challenges.”

However, Chevron said it expects to continue operating the affected assets for many years.

Last year, the company posted global profits of $36bn for its 2022 financial year, more than double the previous year as it benefited from soaring oil prices. Its profits for 2023, expected next month, are expected to be significantly lower. Chevron, which has a 20pc stake in the Clair oil field, west of the Shetlands, one of the UK’S largest, also faces problems over its former oil and gas platforms in the Gulf of Mexico.

It had sold these to Fieldwood Energy, a separate company, which subsequently filed for Chapter 11 bankruptcy, leaving insufficient funds to decommission the wells, pipelines and platforms.

It means the costs of decommissioning will revert to Chevron. Chevron said in a filing: “The company will be recognising a loss related to abandonment and decommissioning obligations from previously sold oil and gas production assets in the US Gulf of Mexico, as companies that purchased these assets have filed for [bankruptcy].

“We believe it is now probable and estimable that a portion of these obligations will revert to the company.

“We expect to undertake the decommissioning activities on these assets over the next decade.”