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Tokyo: Chevron, faced with falling oil output, and its partners may be forced to delay the start of a $2.8 billion oil project in Brazil by three months because a platform and rig will be delivered behind schedule.
Chief executive officer David O'Reilly has postponed eight major developments in the past two years due to equipment failures and escalating costs, and may struggle to fulfil his pledge to boost production by three per cent annually through 2010. The second-largest US oil company said on August 1 it may miss this year's output target.
Production at the offshore Frade field in Brazil may only begin in March and reach a peak of about 100,000 barrels a day in two years, said officials at one of the project partners, who asked not to be identified before an announcement. "If there are any more delays, March sounds right,'' said Luis Felipe Reis, Chevron Brasil's communications manager.
Demand for deepsea rigs and platforms has increased order backlogs at shipyards in Asia to record levels, with deliveries stretching into 2012. Crude oil's 64 per cent gain in a year and depleting reserves in shallower waters are prompting oil companies including Chevron, Exxon Mobil and Total to step up exploration and production.
Bullish cycle
"It's not unusual to have some slippages in this tight labour and materials market,'' said Victor Shum, senior principal at energy consultant Purvin & Gertz in Singapore. Delays in commissioning of new fields are "contributing to the bullish cycle for oil,'' he said.
Frade, operated and 51.74 per cent owned by Chevron, is expected to start in 2009, partner Petroleo Brasileiro said in a written reply to questions. Brazil's state-controlled Petrobras owns 30 per cent of the project and Japanese investors led by Inpex Holdings the remaining 18.26 per cent.
The field, discovered in 1986, was expected to start pumping oil by December this year, Chevron Brasil's Reis said. A floating production, storage and offloading vessel, or FPSO, that is being built in Dubai and is delayed, as is a drill rig from Singapore, Reis said in an interview.
The FPSO ship being built in Dubai is due to arrive in Brazil in September, Petrobras's press office said. Inpex's Tokyo-based spokesman Kazuya Honda said the field will start some time next year, declining to elaborate.
Frade is located in the north of the Campos Basin, a region responsible for more than 80 per cent of Brazil's oil output.
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