Chevron outlines plans for higher returns, lower carbon emissions

Chevron laid out plans to increase global oil and gas production while reducing the carbon intensity of its fuels in a March 1 presentation to analysts.

"Chevron's executing a straightforward strategy, grounded in capital and cost discipline," said Michael Wirth, chairman and CEO, at the meeting webcast from at the New York Stock Exchange.

"We're aiming to grow cash flow and return more of it to shareholders, leveraging our strengths to deliver lower-carbon energy to a growing world," he added.

Wirth reiterated Chevron's carbon intensity goals, including reducing upstream carbon dioxide intensity by 35% in 2028 and reaching net-zero in 2050.

The company forecasts its global oil and gas production to grow to 3.5 million b/d of oil equivalent by 2026, with most of the increase coming from its assets in the Permian and Kazakhstan. Chevron plans to invest $4 billion in its Permian assets to increase volumes to 1 million boe/d by 2025, above the 608,000 boe/d seen in 2021.

In the Gulf of Mexico, where Chevron has a strong position, the company expects an increase in volumes by over 300,000 boe/d by 2026, as projects like Mad Dog 2, St. Malo and Anchor Whale and Ballymore come online starting in 2022.

Calling the current situation in the Ukraine "tragic," Wirth said Chevron just transits crude through Russia from its Kazakhstan holdings, where Chevron holds a 50% stake in Tengizchevroil (TCO). First-quarter 2021 crude production from TCO was 108 million barrels, which is expected to rise 260,000 b/d when the expansion project is completed. To date, construction is 82% complete and the project is 89% complete, Wirth said.

And despite political tensions, Wirth said "we have not seen any interruption of physical flows of oil or gas." Chevron said it has a vessel offshore waiting to load the CPC crude lifted over the weekend from the Black Sea port of Novorossiysk.

Renewable fuels growth

Chevron's analyst meeting comes on the heels of the Feb. 28 announcement it would pay $3.15 billion for Renewable Energy Group, an established and large US biofuel producer.

Combined with Chevron's joint venture with Bunge, the world's largest oilseed processor, "the concept for Chevron here is to secure soybean oil feedstock or hard seed, crushing capacity, working our way back into that value chain," said Mark Nelson, Chevron's head of downstream and chemicals, on the webcast, so the company "can participate both from the crushing margin, as well as the secure security of feedstock supply for a renewable fuels business."

The deal with Bunge gives Chevron access to seed oils like soy, while REG provides experience with waste oils like used cooking oil and beef tallow, Nelson said, as the company moves toward a goal of 100,000 b/d of renewable fuel production by 2030.

Currently underway is the conversion of the diesel hydrotreater at its El Segundo, California, refinery to have 100% renewable capability by the end of 2022.

Nelson said Chevron has secured all renewable feedstock for the diesel hydrotreater after running tests through the unit as well as the fluid catalytic cracking unit to produce renewable diesel and sustainable aviation fuel. The unit will also be able to toggle between renewable feed and hydrocarbon-based feed, based on market economics and demand.

Chevron is thinking of additional renewable fuel opportunities, given its hydro-processing capacities at its other refineries, including its Richmond, California, facility.

"You could argue that another California unit would likely need to be converted into the next two to five years," Nelson. "I would say ... that likely would be a hydrocracker. The hydrocracker is the one that would produce a sustainable aviation fuel diesel."

Chevron's Pascagoula, Mississippi, refinery is also under consideration for adding renewable fuel production by converting hydro-processing units

"We have a choice to make ... but I would expect over time to have one or two units in the West Coast and one at Pascagoula, and then we'll see how things develop in Asia as well," Nelson said.

Chevron is also considering converting its Pasadena, Texas, refinery into a hydroskimming facility, which would not involve the fluid catalytic cracking unit, which has been experiencing operational issues.

The plant has a link to equity crude, Nelson said, adding there "was a linkage to Pascagoula for intermediates" processing.

"I think we've talked before about the idea of taking it to hydroskimming ,which means you don't need the FCC ... and then expanding our light, tight crude capacity," he said. "it will be a very-capital efficient investment. I expect us to make a decision on that later this year."