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ConocoPhillips hikes capex spending abroad, in Alaska
Kay Cashman Petroleum News Publisher & Managing Editor
Timing to offset production declines in North America and the North Sea, ConocoPhillips said in early March it will boost its 2004 capital spending for international exploration and production projects by 27 percent and increase its Alaska spending by 15 percent. But despite increasing profits from U.S. operations, ConocoPhillips, the third largest U.S. oil company, plans to cut its Lower 48 budget by 10 percent, including a previously announced phase-out of activity in the shallow Gulf of Mexico.
More than half of its $6.9 billion capital budget for this year will go towards building infrastructure and boosting production in China, the Caspian Sea region and Venezuela, ConocoPhillips said in its annual report filed with the U.S. Securities and Exchange Commission March 2.
The Houston-based major is following in the footsteps of other major oil companies which have chosen to focus on less capital-intensive E&P developments abroad where the cost of doing business is appreciably less than in North America. Last year, ConocoPhillips’ finding and development costs in the United States were $9.30 per barrel of oil equivalent as compared to $7.46 in 2002 and $5.15 in 2001. In 2003, international finding and development costs averaged $4.54 per boe.
Total company production for 2004 is expected to be flat, with increases from Asia Pacific and Latin America offsetting declining output in the United States, Canada and the North Sea.
In 2003, ConocoPhillips’ worldwide production averaged 1.59 billion boe, a 49 percent increase from 1.07 billion boe per day in 2002. During 2003, 674,000 boe per day were produced in the United States, a 15 percent increase from 2002. Production from international E&P operations averaged 916,000 boe per day in 2003, up 90 percent from 2002.
In addition, ConocoPhillips’ Canadian Syncrude mining operations had net production of 19,000 barrels per day in 2003, compared with 8,000 bpd in 2002. Domestic downstream spending to increase ConocoPhillips’ plan for downstream spending is just the opposite from its upstream plan. International downstream capital spending will be slashed by 23 percent to $246 million while domestic refining and marketing investment will be boosted by 21 percent to $1 billion.
The company’s restructuring program, instigated by the merger of Conoco and Phillips in 2002, is expected to be completed by the end of the first quarter of this year. As of the end of 2003, 3,000 ConocoPhillips employees had lost their jobs under the program and another 900 are slated for termination. Major North America projects Major North America projects mentioned in ConocoPhillips’ annual report include the Mackenzie Valley pipeline, which would transport 1.2 billion cubic feet per day of “onshore natural gas” produced from the Mackenzie Delta in northern Canada to existing markets.”
ConocoPhillips said it will hold a 16 percent interest in the pipeline and a 75 percent interest in the development of the Parsons Lake gas field, “one of the three primary fields in the Mackenzie Delta that would anchor the pipeline development.”
Regulatory applications for the project are expected to be submitted in mid-2004 and first gas production is currently targeted for late 2009, ConocoPhillips said.
The company said it still plans to build a liquefied natural gas import terminal in Mexico’s northern Baja California. Despite writing off its investment in the proposed Rosarito LNG terminal, ConocoPhillips continues to work with federal, state and local officials in Mexico to evaluate alternatives, including offshore options.
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