Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC spent more than $120 billion in 2013 to boost their oil and gas output--about the same cost in today's dollars as putting a man on the moon.
Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC spent more
than $120 billion in 2013 to boost their oil and gas output--about the same
cost in today's dollars as putting a man on the moon.
But the three oil giants have little to show for all their big spending. Oil
and gas production are down despite combined capital expenses of a
half-trillion dollars in the past five years. Each company is expected to
report later this week a profit decline for 2013 compared with 2012, even
though oil prices are high.
One of the biggest problems: Costs are soaring for many of the new
"megaprojects" to tap petroleum deposits needed to replenish
depleting fields.
Plans under way to pump oil using man-made islands in the
Caspian
Sea
could cost a consortium that includes Exxon and Shell $40 billion, up
from the original budget of $10 billion. The price tag for a natural-gas
project in
Australia
,
called Gorgon and jointly owned by the three companies, has ballooned 45% to
$54 billion. Shell is spending at least $10 billion on untested technology to
build a natural-gas plant on a large boat so the company can tap a remote
field, according to people who have worked on the project.
Finding the next gusher has always been a risky business, sending oil companies
beneath the ocean floor and into unstable parts of
Africa
,
Asia
and
the
Middle East
. Now the pursuit is trickier and more expensive
than ever. The easiest-to-reach oil ran dry long ago, and the most prolific
fields often are controlled by state-owned companies in places like
Saudi
Arabia
and
Venezuela
.
As a result, Chevron, Exxon and Shell are digging even deeper into their
pockets, putting their usually reliable profit margins in jeopardy. Exxon is
borrowing more, dipping into its cash pile and buying back fewer shares to help
the
Irving
,
Texas
,
company cover capital costs.
Exxon has said such costs would hit about $41 billion last year, up 51% from
$27.1 billion in 2009.
As they pursued the big-bet strategy, the three oil giants arrived late to the
shale boom in
North America
, where they missed out on
profits raked in by smaller, nimbler companies that pioneered how to extract
oil and gas from the dense rock.
The news isn't all bad. Combined profits at Chevron, Exxon and Shell totaled
about $70 billion in 2013, according to analysts' estimates. Exxon and Shell
report fourth-quarter and full-year results Thursday, while Chevron announces
its results Friday. In 2012, the three companies earned nearly $100 billion.
Exxon and Chevron are pressing ahead with their megaprojects, confident they
will boost production within three years. "Before we make the first cut
with a saw, we re-measure five times instead of one," says Ken Cohen,
Exxon's vice president of public and government affairs.
By 2017, Exxon will pump a million new barrels of oil per day and the
equivalent in natural gas, showing the company's ability to deliver big
projects on time, executives say. Exxon's output started to rebound in late
2013 after a two-year decline, helped by new crude from a $13 billion oil-sands
project in
Canada
. The
project's cost rose $2 billion since 2011 because of regulatory hurdles and
permit delays.
In a sign of the growing pressure, Shell is reconsidering some investments in
"elephant projects" that cost billions of dollars and were a key part
of the company's growth strategy. Earlier this month, Shell announced its first
profit warning in 10 years and has vowed to focus more on profitability than
increasing its oil and gas output.
Full-year earnings at Shell are expected to total about $16.8 billion, down from
$27.2 billion in 2012. Net capital spending hit $44.3 billion in 2013, up
nearly 50% from 2012.
Oil-industry experts say it will be difficult for the oil giants to spend less
because they need to replenish the oil and gas they are pumping--and must keep
up with rivals in the world-wide exploration race.
"If you don't spend, you're going to shrink," says Dan Pickering,
co-president of Tudor, Pickering Holt & Co., an investment bank in
Houston
that
specializes in the energy industry. Unfortunately for the oil giants, though,
"I don't think there's any way these projects are more profitable than
their legacy production," he adds.
Chevron has been especially aggressive, promising a 25% increase in oil and gas
output by 2017. Last year, the
San Ramon
,
Calif.
,
company poured $42 billion into oil and gas projects, more than double its 2010
total, even though Chevron is half as big as Exxon or Shell by annual revenue. Chevron
plans to spend an additional $40 billion in 2014.
The spending surge has drawn attention from
U.S.
securities regulators, who have demanded more disclosure from Chevron about
whether the jump will get even bigger and affect the company's liquidity. Chevron
told regulators it will provide more details.
Chevron's most gargantuan projects, from
Australia
to
the
Gulf of Mexico
, haven't generated any cash flow yet--and might
not until next year. The lag between the upfront investment in the projects and
their output is pressuring Chevron's bottom line. Analysts expect the company
to report that profits fell about 20% to $21 billion in 2013 from $26.2 billion
in 2012.
The Gorgon natural-gas project is one of the most extreme examples of the
runaway costs that haunt Chevron, Exxon and Shell. The three companies teamed
up in 2009 to build the plant on an island reserve 40 miles off
Australia
's
coast, aiming to tap a natural-gas trove estimated at 40 trillion cubic feet. Gorgon
could be productive for decades and feed energy-hungry
Japan
,
South
Korea
and
China
.
Chevron staked more than $18 billion of its own money on Gorgon, one of the
company's biggest projects ever, owns nearly half of the project and runs it. Exxon
and Shell own a 25% stake each.
Gorgon, also the name of sisters in Greek mythology who had snakes in their
hair and could turn beholders to stone, presents unusually tough challenges. The
gas produced there must be piped 80 miles across a mountainous sea floor to
Barrow Island, home to so many unusual species of plants and animals that
locals call it "Australia's Ark."
Then the natural gas has to be purified and run through giant chillers that
condense it into liquid form so it can be shipped on tankers.
Barrow Island's sensitive ecology meant that much of Gorgon's construction had
to be done elsewhere, with hundreds of thousands of tons of buildings and
equipment disinfected and shrink-wrapped to keep out invasive species.
Chevron executives brushed aside analysts' worries about the project's cost. "We
see a window of opportunity to move forward with Gorgon, timing it to capture
growing market demand while benefiting from a lowering cost environment,"
George Kirkland, now Chevron's vice chairman, said in March 2009.
Costs soon spiked higher. Labor costs rose because of fierce competition for
skilled workers as other companies committed to spending more than $100 billion
in similar gas projects across
Australia
. The
strong Australian dollar inflated the cost of materials. Cyclones slowed work
on Gorgon and forced Chevron, Exxon and Shell to build stormproof camps for workers.
Gorgon was about half-finished in December 2012 when Chevron estimated the
project would cost a total of $52 billion--or 40% over budget. Last month,
Chevron tacked an additional $2 billion to the price tag. The project now is
75% complete, according to the company.
"The economics of the Gorgon project are strong," says Kurt Glaubitz,
a Chevron spokesman. The company has struck deals to sell most of Gorgon's
output under contracts tied to oil prices that are up about 60% since Chevron
committed itself to the project, he adds.
Chevron says it is working hard to keep costs in line. A civil-engineering unit
dedicated to managing expenses and overseeing contractors has tripled to 120
employees since 2008. The company has about 62,000 employees.
Gary Fischer, who leads the unit and started at Chevron as an intern in 1979,
said at an industry conference in November that the company has intensified its
focus on completing megaprojects on time and on budget. Those projects
"are very fragile," he said, "and they're totally
unforgiving."
Διαβάστε ακόμα
Παρ, 26 Ιουλίου 2024 - 16:04
Παρ, 26 Ιουλίου 2024 - 16:02
Τετ, 24 Ιουλίου 2024 - 15:10
Τετ, 24 Ιουλίου 2024 - 15:06
Τρι, 23 Ιουλίου 2024 - 16:51