Watch CBSN Live

Chevron's 2010 Capital Budget: Downstream Declines; Funds Funneled to Hunt and Production of Gas and Oil

Chevron Corp., the second-largest U.S. oil company, will scale back spending in 2010 in its downstream segment by about $900 million, a reflection of a refining sector still struggling with weak demand and too much supply.

The company announced its 2010 capital spending budget will be $21.6 billion, about 5 percent lower than last year. The vast majority of its capital budget -- about $17.3 billion -- will fund a slew of upstream crude oil and natural gas exploration and production projects. Its upstream budget declined a bit more than 1 percent from $17.5 percent in 2009. However, the share of the company's budget aimed at exploration and production has risen from 75 percent in 2009 to 80 percent next year.

"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 Chairman and CEO Dave O'Reilly, who will leave the company at the end of this year.

Chevron's major upstream spending will include the development of its massive Gorgon liquefied natural gas project and its Wheatstone project, both in Western Australia; continued deepwater exploration and development in the U.S. Gulf of Mexico; as well as deepwater fields in Brazil, Nigeria and Angola. Chevron also has earmarked funds for construction of LNG facilities in Angola; development of the offshore Platong Gas II project in Thailand; build up of the Chuandongbei natural gas project in China; and an expansion if its Athabasca oil sands operation in Canada.

Chevron's 2009 budget contained bonus payments for concessions in the Middle East and China. Meaning, that despite the 5 percent decrease in its total capital budget, more money will go directly towards its operations in 2010.

Chevron's downstream budget is $3.4 billion, down 21 percent from $4.3 billion in 2009. The decrease is in response to declining downstream markets, Chevron spokesman Justin Higgs wrote in an e-mail. The company is still making sizable investments to increase the reliability and efficiency of our downstream operations, he added.

Chevron's announcement follows ConocoPhillips' plan to spend $11.2 billion in 2010, a 10-percent drop from 2009. Conoco, the third-largest U.S. oil company, scaled back its spending in it refining and marketing segment by 35 percent to $1.3 billion in 2010.

View CBS News In