Chevron Delays Three Nigerian Projects By At Least One Year, Doubles Cost Estimates

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Feb. 26 (Bloomberg) -- Chevron Corp., the world’s fourth- largest energy company, delayed the start of production at three Nigerian projects and raised cost estimates as much as 103 percent on some of its biggest new sources of output.

A trio of Nigerian developments will begin producing at least a year later than planned, San Ramon, California-based Chevron said today in a public filing. A plant refining Nigerian natural gas into motor fuels will cost $5.9 billion, more than double the previous estimate, and the expansion of a Canadian tar-sands operation will cost an estimated $13.7 billion, 36 percent more than expected.

Chief Executive Officer David O’Reilly is grappling with drilling and equipment costs that remain near their 2008 peaks even after oil prices plunged more than $100 a barrel from the all-time high reached in July. The $60 million a day O’Reilly spent last year to search for untapped fields and expand plants failed to prevent a 3.4 percent drop in production. “For Chevron, 2009 really is the year to put up or shut up,” said Robert Sweet, who helps manage $130 million, including Chevron shares, at Horizon Investment Services LLC in Hammond, Indiana. “If Chevron cannot deliver production growth this year, people are going to start losing confidence.”

The postponements in Nigeria affect projects that are expected to produce the equivalent of 320,000 barrels of crude a day, equivalent to 13 percent of Chevron’s worldwide output. O’Reilly, 62, is targeting global production growth of 3.5 percent this year to an annual average of 2.63 million barrels a day.

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