Chevron Targets 600,000 BPD in Venezuela With $7B Low-Cost Growth Plan

Key Points

• Chevron plans to invest $7 billion in Venezuela over five years, targeting an increase in production from roughly 280,000 barrels per day to 600,000 by 2031. The company estimates total costs below $20 per barrel and expects production could plateau at 600,000–700,000 barrels per day for five to 10 years.
• Revised Venezuelan agreements provide competitive royalty and tax terms, stability protections and international arbitration rights. Chevron expects to more than double its rig count and achieve its growth target without major new infrastructure.
• Chevron is maintaining its shareholder-return priorities while improving efficiency elsewhere, including completing a $3 billion cost-reduction program six months early. The company continues to target 7%–10% portfolio growth and maintains a $10 billion–$20 billion annual share-repurchase framework.

Chevron NYSE: CVX sees Venezuela as a potentially significant source of low-cost production growth after negotiating revised commercial and legal terms that Chief Financial Officer Eimear Bonner said made the country’s resource base competitive within the company’s global portfolio.

Speaking at the Barclays Energy-Power Conference, Bonner said Chevron is producing about 280,000 barrels of oil per day in Venezuela and expects to raise that volume to 600,000 barrels per day by 2031. The company expects a production plateau of between 600,000 and 700,000 barrels per day that could last five to 10 years, based on primary recovery alone.

“This is an enormous resource base, low cost, total cost less than $20 a barrel, lots of run room,” Bonner said. Chevron plans to invest $7 billion on growth in Venezuela over a five-year period and more than double its rig count there.

Venezuela expansion supported by revised terms

Bonner said Chevron’s expansion is supported by additional acreage, including contiguous acreage obtained through a swap completed in April, as well as the Carabobo-1 and Carabobo-2 blocks announced more recently. She said the company does not expect to need major new infrastructure to achieve its production-growth target.

According to Bonner, Chevron has maintained equipment, conducted turnarounds and continued asset-integrity and process-safety programs since implementing a capital-efficient model for its Venezuelan joint ventures nearly three years ago. Future infrastructure additions are expected to resemble smaller pipeline and utility tie-ins used in “factory-type” shale development rather than major capital projects.

Bonner said the revised agreements include competitive royalty and tax terms, stability clauses intended to protect those terms across changes in government administration, and rights to international arbitration. She described the arrangement as a “win-win-win” for Venezuela, investors and U.S. energy security.

Cash priorities remain unchanged

Bonner said Chevron continues to follow longstanding financial priorities: growing its dividend, investing capital efficiently, strengthening its balance sheet and returning excess cash to shareholders through repurchases.

The company has already increased its dividend this year, continuing what Bonner said was a 39-year record of dividend growth. Chevron is funding projects intended to support 7% to 10% portfolio growth, while excess cash is currently being directed toward balance-sheet strengthening.

Chevron’s share-repurchase framework remains a range of $10 billion to $20 billion, Bonner said. She added that the company generally does not alter its buyback pace during periods of oil-price volatility, noting that oil prices had moved by about $35 over the preceding month.

Shale efficiencies and cost reductions

Chevron has also shifted its U.S. shale and tight operations toward generating more free cash flow at stable production levels. Bonner said the company’s Permian Basin business grew from about 450,000 barrels per day in 2019 to roughly 1 million barrels per day, and its focus at that level is now on operational efficiency rather than volume growth.

The company reorganized its shale and tight operations last year, consolidating assets to share operating practices. Bonner cited improved reliability, artificial-lift optimization, real-time monitoring and faster drilling as contributors to capital efficiency. Chevron is drilling twice as fast as it was two years ago, she said.

Chevron delivered its $3 billion structural cost-reduction target six months ahead of schedule, Bonner said. About 70% of the savings came from efficiency gains, with the remainder tied to portfolio actions and changes to the operating model. The company is continuing to pursue savings through contract optimization, technology and areas of overlapping operations following its merger with Hess.

TCO performance and exploration options

Bonner said Chevron’s Tengizchevroil, or TCO, asset is performing strongly following the startup of its third-generation plant. A turnaround that replaced components in a constrained processing column increased the plant’s oil capacity from 260,000 barrels per day to 320,000 barrels per day, an increase of more than 20%.

Chevron is now looking for incremental optimization opportunities in the field, supported by an integrated operations center using advanced process controls, artificial intelligence workflows and equipment-monitoring tools. Bonner said negotiations regarding TCO are progressing, with no “showstoppers,” though she did not provide a timeline.

On exploration, Bonner said Chevron has made six discoveries over the past two years, increased its acreage by 35% last year and added 10 million acres this year. The company has activity in Guyana, West Africa, the Eastern Mediterranean and the Middle East.

In Iraq, Chevron is negotiating on an exclusive basis around three opportunities: the West Qurna 2 producing asset, the adjacent Nassiriya field and potential participation in a pipeline that could provide an alternate route to market. Bonner said Chevron has a head-of-agreement addendum covering those items and hopes to advance discussions over the next year.

Bonner also highlighted Chevron’s recently announced gigawatt-scale power plant in the Permian. She said the company’s gas supplies in Texas, turbine availability, experience operating power-generation facilities and a 20-year power purchase agreement with a customer differentiate its position in the business.

About Chevron (NYSE:CVX)

Chevron Corporation NYSE: CVX is an American multinational energy company engaged in virtually all aspects of the oil and gas industry. As an integrated energy firm, Chevron's core activities include upstream oil and natural gas exploration and production, midstream transportation and storage, downstream refining and marketing of fuels and lubricants, and petrochemical manufacturing through joint ventures and subsidiaries. The company markets fuels under brands such as Chevron, Texaco and Caltex and supplies a range of products and services to retail customers, industrial users and commercial fleets worldwide.

Chevron traces its corporate lineage to the early petroleum companies that eventually became Standard Oil of California and has evolved through significant mergers and restructurings, including the acquisitions of Gulf Oil and Texaco.

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