DECEMBER 17, 2010.

Chevron To Pump $4 Billion Into Field

By ISABEL ORDONEZ

HOUSTON—Chevron Corp. said Thursday it will invest $4 billion over several years to develop an oil field that lies 5,200 feet, or about 1,500 meters, beneath the Gulf of Mexico.

The decision follows Chevron's October move to invest $7.5 billion to develop two other oil fields in the area, showing the oil giant still sees the Gulf of Mexico as a key driver of its long-term production growth, despite uncertainty over fallout from the BP PLC oil spill.

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Associated Press

Chevron's new project will be its sixth in the Gulf. Above, an oil platform off New Orleans in 2008.
.Despite stricter operating rules, the U.S. Gulf remains an attractive bet for U.S. oil companies as one of the only remaining spots world-wide where state-run firms don't have first crack at major new discoveries. The new rules were imposed for offshore drilling in the aftermath of the deadly explosion and sinking of a drilling rig in April.

Chevron said the field is expected to produce up to 75,000 barrels of oil and 25 million cubic feet of natural gas a day when fully operating. Production is expected to start in 2014. The field is located approximately 225 miles south of New Orleans.

"We have a fundamental belief that the industry and the government will work through permitting issues and safety regulations and that the energy business will continue in the Gulf of Mexico after this process," Steve Thurston, Chevron's vice president for deepwater exploration projects, said in an interview. Stopping investment in the Gulf is not "acceptable" either for companies or for the government, he said.

The field, called Big Foot, will be Chevron's sixth operated project in the Gulf of Mexico's deepwater. It is located in a region of the Gulf known as the ultradeep Miocene formation, where the energy industry has made several large finds in recent years, including the ill-fated Macondo field discovered by BP, which leaked millions of barrels of oil into the Gulf.

Chevron will focus next year on the manufacturing of Big Foot's producing infrastructure. Drilling activity will restart only at the end of 2011, by which time Chevron expects the permitting process, currently slowed by an onslaught of new regulation, to have returned to normal. "We certainly believe we will have all the bumps on the road around the permitting handled by that," Mr. Thurston said.

Chevron holds a 60% interest in the project, while Norway's StatoilHydro ASA and Japan's Marubeni Corp. have stakes of 27.5% and 12.5%, respectively.

Chevron had said in 2009 that it held talks with China National Petroleum Corp. to sell a stake in Big Foot in order to share costs of development. The talks were not successful.

Chevron, the second-largest U.S. oil-and-gas company by market value after Exxon Mobil Corp., has been spending heavily in the last five years to increase its production. The company last week said it plans to increase its capital expenditure budget by 20%, to $26 billion in 2011, with 85% going to exploration and production.

Write to Isabel Ordonez at Isabel.ordonez@dowjones.com

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