Resources: Chevron Books Massive Wheatstone Resource

US oil major Chevron has booked its first reserves for the Wheatstone LNG project offshore WA which started being developed late last year.

Chevron and CEO, John Watson, told the US market and investors in a briefing that it had expanded its reserves base by 740 million barrels of oil equivalent to allow for Wheatstone, which is now supported by a string of gas discoveries over the past two years.

The extra reserves (which allowed Chevron to more than replace all the oil and gas produced from its other operations around the world last year), are valued at around $US74 billion, and (based on an oil price of $US100 a barrel).

But LNG sells at a much higher price than the oil price, so the project, Chevron's second in Australia after the even bigger Gorgon project in WA, will be immensely profitable.

Chevron owns around 73% of Wheatstone.

The Australian subsidiaries of Apache Corporation (13%), Kuwait Foreign Petroleum Exploration Company (7%) and Shell (6.4 %) have signed deals to become equity participants in the Wheatstone Project.

The first two LNG trains will be supplied with gas from the Chevron operated Wheatstone & Iago fields. Apache and KUFPEC will bring gas to Wheatstone from their Julimar and Brunello fields.

CEO Watson told the investor briefing that the Wheatsone booking was "significant" given Chevron's total reserves at the end of 2010 stood at 7.7 billion barrels and represented the biggest single addition to the company's reserves pool.

Chevron added approximately 1.67 billion barrels of net oil-equivalent reserves in 2011. Chevron said the additions, which are subject to final reviews, equate to 171% of net oil-equivalent production for the year, .

"The Wheatstone Project was the largest component of our reserve adds this year," Mr Watson said.

Chevron gave the green light to the $29 billion Wheatstone project in September of last year, with development of the foundation gas fields to be anchored by two LNG production trains being built near Onslow.

While further trains for Wheatstone are already being explored, Mr Watson said precedence would be given to the expansion of the $43 billion Gorgon project, which is now about 36% complete and on track for a late 2014 start-up.

"It's going very well. Other than a cyclone descending on Barrow Island as we speak. That's one of the things that we deal with. We have hardened facilities there so we'll manage our way through that, but the project is going very well, 36% complete. And I'll just tell you we're on track for late 2014 start up of Gorgon and feel pretty good about the progress that we have made on that flagship project.

"From a cost point of view, and maybe this is what you were getting at, we will -- this will be the first year where we'll have a lot of on-island activity. And so we'll get a good chance to understand labor productivity and the progress that we're making.

"That, coupled with impacts of foreign exchange, for example, will dictate whether there's any change to cost one way or another. At this point, the $37 billion is the target for the project and if we have anything more to say, it's going to be probably more later in the year.

Mr Watson suggested that Chevron could decide to lift output at Gorgon in by 25% in the near future.

"In terms of what is likely to come next, we have three trains at Gorgon; two in the Foundation Project at Wheatstone. The most likely next step is a fourth train at Gorgon. And whether we can get to a fifth train on Barrow Island will remain to be seen. We believe we have the plot space.

"But subsequent trains at Wheatstone will likely then follow the fourth train at Gorgon.

Chevron earned $US24.6 billion in 2011. That was up from $US19 billion for 2010, with higher oil prices offsetting the impact of the company's lowest production levels since 2008. Annual revenue jumped 23.3% to $US253.7 billion.

Higher oil prices saw earnings from Chevron's exploration and production business leap 40% to $US24.8 billion.