Chevron has scaled back its long-term capital spending plans by up to $8 billion a year on a previous estimate, as the US supermajor follows industry peers in adjusting its business for lower crude prices.

The San Ramon, California-based giant is set for $14 billion in capital and exploratory spending next year, with the vast majority of that in the upstream sector.

“Chevron remains committed to capital discipline with a 2021 capital budget and longer-term capital outlook that are well below our prior guidance,” chief executive Michael Wirth said on Thursday.

“With our major restructuring behind us and Noble Energy integration on track, we’re prepared to execute this programme with discipline," he said, referring to the company's deal in recent months to buy US independent Noble.

Chevron had originally given a capital guidance of between $19 billion and $22 billion per annum for 2022 through 2025 but has now pared back its spending to between $14 billion to $16 billion.

The initial capital guidance also did not include US independent Noble Energy.

For next year, upstream spending is set to hit $11.5 billion, with $6.5 billion on international assets and $5 billion in the US. The total downstream spend will be $2.1 billion.

Of the $11.5 billion in upstream, around $6.5 billion will be allocated to producing assets, including $2 billion in the prolific US shale patch of the Permian basin.

Another $3.5 billion of next year's upstream budget will go on major capital projects that are already under way, with 75% of that total going on the Future Growth Project and Wellhead Pressure Management Project (FGP-WPMP) at the giant Tengiz oilfield in Kazakhstan, where Chevron is the lead partner in the Tengizchevroil joint venture.

"The remaining $1.5 billion is allocated to exploration, early stage development projects, and midstream activities," Chevron said.

The company has also earmarked more than $300 million in 2021 for investments to advance the energy transition.

Chevron's move comes in the same week that ExxonMobil said it will book $20 billion in impairments in the fourth quarter as it looks to let assets go to high-grade its portfolio.

“Chevron is in a different place than others in our industry,” Wirth said.

“We’ve maintained consistent financial priorities starting with our firm commitment to the dividend. We took early and swift action at the beginning of the pandemic to prudently allocate capital, reduce costs and protect our industry-leading balance sheet.

"And we’ve completed a major acquisition and restructuring that positions our company to deliver higher returns and grow long-term value," Wirth added.

'Positive update' - Cowen

Analysts at investment bank Cowen & Co said in a note on Thursday: “We see the update as positive, though wonder if spending plans will be flexible with increasing oil prices."

An earlier note from Norwegian consultancy Rystad Energy pointed out that exploration and production (E&P) players are pulling other levers to weather the market downturn.

“As E&Ps are also speeding up a transition into low-carbon energy, it is possible that this time, too, upstream investments will not return to pre-crisis levels in the long-term, even if they do recover somewhat over the next few years," Rystad's upstream analyst, Olga Savenkova, said in late November.

Finance

Billions bumped off: Chevron slashes capex but upstream keeps lion's share