Financial Times: ChevronTexaco raises its oil planning price to $20-$30: “Royal Dutch/Shell was the first of the super-majors to break ranks on the planning price, because of extreme pressure to rebuild its reserves.” (ShellNews.net) 15 Dec 04

By Doug Cameron in Houston and James Boxell in London

Published: December 15 2004

ChevronTexaco, the second largest US energy group by revenues, yesterday raised its planning price for oil from $15-$25 (£7.80-£13) a barrel to $20-$30, citing a "structural" change in the global energy market.

The oil giant is the first of the "super-majors" to talk of such a shift in the market. However, there is a widespread recognition in the industry that the oil price companies use for internal decision-making has moved from its long-run average of $20 a barrel. Dave O'Reilly, Chevron-Texaco's chairman and chief executive officer, told analysts the company had concluded "that the world had changed", leading it to raise its price assumption, which it has used for a decade. "We had to take a view on whether there has been a lasting structural change in mid-cycle oil prices," Mr O'Reilly told investors in New York. "We think [market] conditions have changed enough that we've moved up the oil price band for base-case assumptions."

Analysts credit the US group with an excellent exploration record, including big discoveries last week in the North Sea and Venezuela. But it warned that yesterday's announcement would not necessarily trigger a flurry of new development activity, since it uses different prices for different types of projects.

Royal Dutch/Shell was the first of the super-majors to break ranks on the planning price, because of extreme pressure to rebuild its reserves. In September Shell said it would continue to use a $20 benchmark to screen projects, but would assume a price of "$25 and above" when deciding which investments it would pursue.

BP has stuck to $20 a barrel for its planning, and Lord Browne, the chairman, has said he expects oil prices of at least $30 for the next three to four years. BP said anything above $20 a barrel will be returned to shareholders.

Peter Robertson, Chevron-Texaco vice-chairman, said it would focus on organic growth to target annual production growth of 3 per cent from 2008.

Analysts estimated that the company has $15bn in "financial firepower", and its share price has been depressed by speculation over acquisition activity - notably of potential interest in securing access to assets from Yukos, the Russian oil group.