Chevron touts 'scale, flexibility, and low carbon intensity' ethos for new projects

Chevron will move away from projects requiring long investment cycles in favor of those that evince "scale, flexibility, and low carbon intensity," CEO Michael Wirth said in a Washington Post webinar Aug. 16.

"A decade ago, we had many positions that were categorized by long investment cycles involving tens of billions of dollars of capital investment. Increasingly, we are looking for things that we can do in stages and have more flexibility in capital investments," Wirth said.

Examples of Chevron's long-term capital-intensive projects include developing the massive Tengiz oil field in Kazakhstan and the $54 billion Gorgon LNG export plant in northwestern Australia. Both mega-projects experienced development cost overruns and delayed launches.

Instead, Wirth pointed to the Permian Basin as an example of capital flexibility, efficiencies of scale, and potential for low carbon production.

Chevron has substantial acreage in the Permian Basin spanning both shale and legacy conventional production, with the company targeting an expected production rate of 600,000 b/d by the end of 2021.

The company scaled back Permian production after the onset of coronavirus pandemic, reducing its rig count in the basin to five as of July 30, down 75% from mid-2019 levels.

With NYMEX Henry Hub gas futures prices continuing to flirt with $4/MMBtu and prompt-month WTI crude oil prices back in the neighborhood of $70/b, Chevron plans to add additional rigs and completion crews to the Permian in the second half of 2021, executives said in the company's second quarter earnings call July 30.

The company also plans to turn phase out diesel-powered rig drilling in the Permian in favor of those powered by electricity and natural gas.

Chevron New Energies

While Wirth asserted that demand for traditional oil and gas products will remain in a steady state for the foreseeable future, he also emphasized that "we believe the future of energy is lower carbon."

Company executives announced the creation of a new subsidiary, Chevron New Energies, on July 29, that will invest in renewable natural gas production, wind and solar power generation, hydrogen and renewable diesel and biodiesel.

Wirth maintained that the company is "technology agnostic" when it comes to electric vehicles and adding EV charging infrastructure to fueling stations, citing the difference in fueling times and tendency for EV owners to charge at home or the office as barriers to widespread adoption.

Instead, Chevron has bet on RNG as a low-carbon transportation fuel of the future.

The company has set a goal of opening 30 branded compressed natural gas fueling stations in California by 2025, fueled by a tenfold increase in RNG production on the same timeline. The first of the CNG fueling stations opened in Napa, California in mid-June.