Chevron, Exxon Mobil To Invest In Tengiz Expansion Project
Zacks Investment Research | Jul 06, 2016 09:52PM ET
Leading U.S. oil behemoths Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) , along with their partners, announced plans to invest around $36.8 billion to boost oil output in a Kazakhstan oil field.
Tengizchevroil will continue with the development of its Future Growth and Wellhead Pressure Management Project. Chevron owns 50% of the entity, while 25%, 20% and 5% is held by Exxon, Kazakhstan's KazMunayGas and Russia's Lukoil, respectively. The project is expected to bolster production in the Tengiz oil field by 260,000 barrels per day. Upon completion, the oil field is expected to generate about 1 million barrels of oil per day, with the first oil production planned for 2022.
Tengizchevroil will spend $27.1 billion in facilities, $3.5 billion in wells and $6.2 billion for contingency and escalation.
In 1993, Chevron was awarded the rights to develop Tengiz. According to the company, the Tengiz oil field's reservoir is located 12,000 feet below ground level, which makes it the world's deepest operating super-giant oil field.
Management believes that with the massive increase in oil production, the Tengiz expansion project will create value for Chevron and its stockholders by generating significant cash flows for the company. Moreover, the investment is viewed as a profitable one based on the optimism raised by the recent improvement in oil prices from the multi-year low touched in February.
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