Spending big
Chevron, BP projects get green light, but securing ventures is still difficult
Chevron and BP are moving ahead on projects worth $50 billion.
Chevron and B Ph ave decided to act on plans for two separate energy projects that together will cost nearly $50 billion, a sign of growing confidence in energy markets.
Chevron and its partners, including ExxonMobil, last week approved a $36.8 billion expansion of the gigantic Tengizoilfi eldin Kazakhstan, an effort to pump more crude from a region that produced its first barrels more than two decades ago.
BP sanctioned plans for an $8billion project expanding its Tangguh-liquefied natural gas facility in Indonesia, an addition that will annually convert natural gas into 3.8 million tons of liquid energy to be shipped to buyers overseas.
The two multi billiondollar projects join just a handful of other big oil ventures that have received the green light this year, such as Italian oil company Eni’s Zohrgas field off the coast of Egypt and Ta los Energy’ s Tornad ofield inthe Gulf of Mexico, according to Houston investment bank Tudor, Pickering, Holt & Co.
Still, even though big oil companies are moving ahead, it has become much more difficult in recent years to avoid major hurdles in assembling oil projects.
After Saudi Arabia, Iran and other Middle Eastern countries nationalized big oil assets in the 1970s, “all the reserves available to oil companies now are either technologically or politically very challenging,” said Pr ave en Kumar, a University of Houston finance professor and executive director of the Global Energy Management Institute.
“It’ s a double whammy. Simply getting big isn’t going to solve this problem.”
Expanding the Tengiz oil field could boost oil production there by260,000 barrels a day, Chevron said, bringing output to more than 1 million barrels a day. Thefirst oil from the project is expected to come in 2022.
The project “has undergone extensive engineering and construction planning reviews andis well-timed to take advantage of lower costs of oil industry goods and services,” Jay Johnson, executive vice president of upstream at Chevron, said in a statement.
It’s the industry’s largest project launch since the oil market crashed two years ago.
Chevron has a 50 percent stake in the Tengiz. Exxon Mobil owns a quarter of it.
BP’s plan is to build a third gas-cooling facility at its Tangguh LNG facility at a cost of $8billion to $10 billion.
The expansion, which the company says would require 10,000 new workers, includes drilling more than a dozen new well sand connecting them to new two offshore platforms to feed the facility with natural gas.
It’s all expected to come online in 2020.