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Chevron projects on target for 25 percent growth by 2017

A Chevron gas station is pictured in Encinitas, California July 28, 2011. REUTERS/Mike Blake
A Chevron gas station is pictured in Encinitas, California July 28, 2011. REUTERS/Mike Blake

By Braden Reddall

NEW YORK (Reuters) - Chevron Corp , the second-largest U.S. oil company, said on Tuesday it had already started nearly all the projects that would deliver 25 percent growth in oil and gas output over the next half a decade.

At its annual New York meeting with analysts, Chevron said 98 percent of its targeted production by 2017 was already in design, construction or production.

Chevron reaffirmed the target of 3.3 million barrels per day of oil equivalent, and highlighted its expansion in Kazakhstan, steam-flooded oil production in the Middle East, and even more liquefied natural gas (LNG) from Canada and Australia. That is up from an estimated 2.65 million bpd this year.

"We feel very good about our 2017 target, and we anticipate continuing to grow beyond 3.3 million barrels per day," said George Kirkland, Chevron's head of exploration and production.

As for this year, Chevron expects to drill about 440 wells in the Permian basin, located in the west part of Texas and New Mexico. The company bought assets in the area from Chesapeake in September, and Kirkland said that acreage appeared more productive than the initial estimates.

Asked about potential asset sales of its own, Chief Executive John Watson noted the Permian represented an area where the company had a legacy position which became attractive again because of the improvements in shale drilling technology.

"We'll sell assets when it makes sense to do so," he said.

Chevron expects Permian output to grow to 200,000 bpd by 2017, while its acreage in the Marcellus shale in the northeastern United States would produce the equivalent of nearly 100,000 bpd by then.

To the north, Chevron has just invested in Canada's Kitimat LNG export project, and Kirkland said the company would want to have between 60 percent and 70 percent of its gas committed to long-term contract before making a final investment decision.

This year, Chevron is spending $9 billion on its two LNG projects in Western Australia alone - a quarter of its budget. Spending is expected to remain high for the next few years until they are complete, with first LNG from its Gorgon plant due in early 2015.

As for what Chevron is already producing, Watson said the rate of decline for existing fields was now down to between 3 percent and 4 percent, nearly half the level of four years ago.

Speaking to reporters after the meeting, he said it was too early to say what opportunities would come out of leadership changes in Venezuela and Myanmar - two countries where Chevron already has interests.

"One of the reasons that oil is over $100 a barrel is that there are a lot of risks," Watson told the analysts. "I could alphabetize them."

It was also too early to say how its Chinese shale exploration would turn out. But the company remains firmly committed to shale gas in Central Europe, despite Exxon Mobil Corp pulling out of Poland and Talisman Energy saying on Tuesday it might do the same.

Chevron now has 4 million acres in Central Europe, and is negotiating for 3 million more, an executive said on Tuesday.

Shares of Chevron were down slightly at $118.51 in afternoon trading, having touched a record high of $119.30 earlier.

(Reporting by Braden Reddall in New York; editing by Sofina Mirza-Reid)

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