Chevron expects reserves to rise 5% but not offset fall in 2007

New York: Chevron, the second-largest US oil company, said on Tuesday it expects its oil and gas reserves to increase about five per cent over the next three years, but the growth won't offset a seven per cent decline in 2007.

The company expects proved oil and gas reserves to be about 11.3 billion barrels of oil equivalent (boe) at the end of 2010, which is just slightly higher than levels before its 2005 purchase of Unocal.

Its year-end reserves were 10.78 billion boe for 2007 and 11.62 billion boe at the end of 2006. With the exception of 2005, which was boosted by Unocal, Chevron's reserves have dropped every year since 2003.

Like most large oil firms, Chevron has struggled to replace production in recent years due to project delays, restricted access to new fields, and contracts that give a larger share of reserves to host countries at higher oil prices.

Chief executive Dave O'Reilly, speaking to analysts in New York, said Chevron's falling reserves can be traced back to the company's 2001 acquisition of Texaco.

"We had a dearth of projects coming on line - both Chevron and Texaco - as we were combining the companies," O'Reilly said.

"I think you're seeing a transition in the portfolio from that period. But it's a good thing because we re-evaluated the projects... and we have a very, very strong queue," he said.

O'Reilly said he was optimistic about the company's prospects for reserves growth beyond 2010.

The company sees near-term growth, helped by projects in Kazakhstan, Nigeria, Australia, Brazil, China, the United States and Angola.

Production is expected to increase to 2.92 million boe per day in 2010 from 2.62 million boe per day in 2007, helped by 11 projects it plans to start up over the next two years.