Chevron Corp reduces 2010 refinery budget

San Francisco: Chevron Corp set out on Thursday a 2010 budget that is five per cent smaller, with $900 million (Dh3.3 billion) less for refineries, while natural gas company El Paso Corp will spend more to polish off some projects.

Both US companies' budgets will be helped by this year's drop in raw materials and service costs in the industry after years of steady inflation, though a leading consultancy said last week that the downward pressure on costs had eased.

Chevron, the second-largest US oil company, set a $21.6 billion capital and exploratory budget, of which $1.6 billion will be spent by affiliates. It allocates $17.3 billion for exploration and production, and $3.4 billion for downstream.

Chevron shares rose 0.5 per cent to $77.42 on Thursday, in the middle of a $75 to $80 range where they have been stuck for two months. Meanwhile, sector leader ExxonMobil fell 0.5 per cent.

The refining business remains down in the dumps due to weak demand for products and overcapacity, and Chevron is spending accordingly, while ramping up a series of upstream projects that have already helped it produce more oil and gas than expected this year.

The San Ramon, California-based company cited Australia's Gorgon gas project and opportunities in the Gulf of Mexico, among others.

"Much of our 2010 spending continues to be on large, multi-year projects consistent with our upstream growth strategies and on improving operating efficiency and reliability," said Dave O'Reilly, who will step down later this month as chief executive after a decade. Chevron spokesman said 2010 spending would effectively grow because about a tenth of the $22.8 billion budget in 2009 was for bonuses for concessions in China and the Middle East.

Last week, smaller rival ConocoPhillips detailed plans to spend 10 per cent less in 2010 as it sharpens its focus after a volatile year for the sector.

Quicksilver Resources Inc, which ranks among the top 25 US independent oil and gas producers by market value, said on Thursday it had trimmed its 2010 budget by 10 per cent.

But natural gas pipeline and production company El Paso said on Thursday it plans to spend $4.1 billion in 2010, up about 30 per cent from this year. The sharp jump is needed to fund a backlog of pipeline projects.

Consultant IHS Cambridge Energy Research Associates said the costs to build oil and gas production facilities appeared to be reaching a bottom after declining sharply this year.

• $4.1b is the amount El Paso will spend in 2010
• 30% expected rise in El Paso's spending in 2010