Chevron to boost project spending

Chevron Corp. on Tuesday raised its cost targets for seven projects by $3.8 billion and indefinitely delayed two others amid record prices for energy services and equipment.

The increases bring estimated costs for the projects to $23 billion, up 20% from previous projections, Chief Executive David O’Reilly told analysts in New York. The company dropped target dates for beginning output at liquefied natural gas projects in Australia and Nigeria.

Chevron plans to spend $50 million a day this year to expand refineries and find new oil fields after the San Ramon, Calif.-based company’s reserves fell to their lowest in at least nine years in 2007. The producer is drilling exploration wells from the Arctic to Australia and is testing new technology to extract more fuel from each barrel of oil.

Competition for rigs and drilling crews has intensified as record crude prices above $100 a barrel stoke exploration spending. Energy companies have struggled to replace output with new discoveries, partly on provisions in production-sharing contracts giving host nations such as Angola and Indonesia bigger stakes in oil fields when prices rise.

O’Reilly attributed the escalation in project budgets to “rising costs for skilled personnel, materials and services.” Chevron expects its average deepwater rig rent this year to jump 36% to $380,000 a day.

The cost increases include a 34% jump in the estimate for Chevron’s Tahiti oil project in the Gulf of Mexico to $4.7 billion, the company said.

Chevron said it planned to boost oil and gas reserves by the equivalent of 500,000 barrels of crude, or 4.6%, to 11.3 billion barrels by the end of 2010. The company had reserves equivalent to almost 10.8 billion barrels of crude as of Dec. 31, down from 11.6 billion barrels a year earlier.

Chevron shares rose $3.43, or 4.1%, to $88.16.