It's my tremendous pleasure to introduce Chevron's EVP of Oil Products and Gas, Nigel Hearne, as our next speaker. Nigel started at Texaco and has effectively been with Chevron, and including its predecessor, for over 30 years, and has held roles across upstream, downstream, and strategy. In his current role, he's responsible for the entire value chain, ensuring an integrated approach to capital allocation and value chain optimization. Nigel will start with some prepared remarks, and then we get into fireside chat. Nigel, thank you for being here, and the stage is yours.
Thank you, Betty. Good morning, everyone. It's a pleasure to be here today. Before we begin, please be reminded this presentation contains estimates, projections, and other forward-looking statements. Please take a moment to review the cautionary statement on the screen. Our strategy is straightforward and consistent: to safely deliver higher returns and lower carbon. We apply capital and cost discipline to a focused portfolio of advantaged assets as we aim to sustain strong financial performance and provide superior cash returns to shareholders in a lower carbon future. Because the world's demand for energy is growing, we intend to grow both traditional and new energy supplies, focused on businesses and regions where we can leverage our strengths. We aim to remain among the lowest carbon intensity producers.
Our 2022 upstream methane intensity was 64% lower than the U.S. average, and our renewable fuels production capacity is increasing, building off our position as the country's second-largest bio-based diesel producer. We continue to advance foundational projects in hydrogen and carbon capture, with plans to drill a stratigraphic well to further assess the storage potential of our Bayou Bend CCS project on the U.S. Gulf Coast. We just delivered our eighth consecutive quarter of return on capital employed above 12% and another quarterly record in cash return to shareholders. Over the next 5 years, at $60 Brent, we expect to grow free cash flow over 10% per year, in part from the assets that I'll provide an update on over the next few slides.
We completed the acquisition of the PDC Energy, of PDC Energy in early August, making our Colorado business one of our, one of Chevron's top five assets in terms of production and free cash flow. We continue to be impressed by the PDC team and are excited to have them join Chevron. Our teams are working to evaluate well spacing and frac designs to build a development playbook focused on optimizing returns and delivering $400 million in annual CapEx efficiencies. With a deep inventory of permitted locations already approved, we're confident in our ability to deliver on our plans in the DJ Basin for years to come. We're also on track to deliver $100 million in annual OpEx synergies, including early wins, like already paying off some high-cost debt. We're always looking to add high-quality resource at good value.
This acquisition is accretive to all important financial metrics, adds approximately 10% to our approved reserves base for a little more than 2% of our outstanding shares, and is expected to add $1 billion in annual free cash flow at $70 Brent. Capital discipline always matters in a cyclical commodity business. In our company-operated assets in the Permian, we're improving drilling and completions efficiency. For example, we have reduced non-productive time using new bottom hole assembly designs and digital tools to optimize drilling parameters. In completions, we're improving cycle time with simul-frac, and we have reduced frac crew mobilization time. We're also reducing lost production and workovers through optimized gas lift design. We are getting more out of our rig and frac fleet. We are drilling and completing more lateral feet with fewer rigs.
This leads to more wells put on production while maintaining flat unit costs in an inflationary environment. We expect to average 13-14 company-operated rigs in 2024, fewer than previously anticipated, but up on average from this year. Higher activity levels, increased water handling facilities, and lower inflation are expected to lead to a CapEx budget next year of around $5 billion. We still expect to hit 1 million barrels of oil equivalent per day in 2025 as we continue to focus on execution efficiencies to deliver higher free cash flow. TCO generates strong cash and has paid large dividends to Chevron over its history. Over the last several years, the base business cash flow, supplemented with partner loans, has been used to invest in the Wellhead Pressure Management Project, WPMP, and the Future Growth Project, FGP.
We've already started to see higher dividends as CapEx levels have declined and expect the base business cash flow and the higher oil production from FGP to further contribute to distributions in the coming years. TCO continues to deliver base business production while we remain focused on safe, reliable startup of both projects. The project is forecast to be mechanically complete this quarter. Recent commissioning progress has been slower than expected due to technical challenges on the utility systems and lower productivity rates. We're taking actions to mitigate schedule pressure, including making resource adjustments. We'll assess the impact of these actions on project progress over the next few months. In summary, these are just some of our key assets driving growth in free cash flow.
In Q&A, I hope we'll get the chance to cover some of our other growth assets, like our upstream projects in the Gulf of Mexico and in the Eastern Med, and downstream projects in petrochemicals and renewable fuels. With that, I'll turn it back to Betty, and welcome her to the stage.
Thank you for the prepared remarks and setting the stage for strategy and some of the key assets. I want to start with, on the strategy side. Do you think that Chevron's model of higher return, lower carbon, should apply to everyone in the energy sector? And it really reflects the essence of what shareholders and stakeholders are asking the sector to do. But I think you have to deliver that with increasing volatility in the commodity market. There's a lot more government regulations. The operating environment that you are in today may be different from what it was years ago. Just your thoughts on, do you think energy companies have to operate differently today than they did in the past decade to adapt to the changes that you see facing the market?
Well, our company has been around for almost 150 years, and I would say over that time, we've constantly been evolving and changing, and I actually don't think that's gonna change anytime soon. Energy companies have had to deal with price volatility, geopolitical risk, demand uncertainty. The complexities of running our business mean we have to manage and operate our strategies and our execution across a whole range of business cycles. We're in a long-term business, and we've got to be able to adapt and flex to do that. For Chevron, we're playing to our strengths. We're gonna play to our strengths and leverage our strengths to safely deliver lower carbon energy to a growing world, a world that desperately needs that energy.
We use our financial priorities to guide how we think about our investments. They've been consistent for decades. If you don't know what they are, I'll remind you that they're about delivering superior shareholder return through predictable dividend growth, through investing in long-term competitive returns, maintaining a strong balance sheet, and then buying back across the cycle. So those guide how we think about how to allocate our capital. Our company, given the discipline that we do have, has upside leverage and downside resilience. So at $50 Brent, we cover both our dividend and our capital program. We have a very strong balance sheet with net debt less than 10%. That positions us really well to work in a volatile and uncertain space. We are gonna be cost and capital discipline.
So, your comment around where we've been historically, we are going to be cap cost and capital discipline and remain so. We'll invest in the highest return opportunities. We'll continue to grow our traditional oil products and gas business and our new energy business. We think the world is gonna need more affordable, lower carbon energy. Why? Because the world is gonna need economic prosperity, energy security, and environmental protection. In Chevron, we've been around for 143 years, and we're gonna be around for many decades to come, and I'll be proudly part of that journey.
Proud to follow that. It's so... The answer is not or, but and.
You have to do it all.
Yes, exactly. And so in your prepared remarks, you touched on a number of things that's important for Chevron, and really ranging from your unconventional development to major capital projects and that you see in Kazakhstan, and then including M&A as well. So I wanted to ask about capital allocation. How do you between short cycle versus long cycle against that, you know, volatile commodity environment?
... So two principles, we work on a long-term view of commodity price. It's very difficult to react and respond to short-term changes in commodity price. So we're gonna, we're gonna take a long-term view on commodity price, and quite simply, we're gonna invest in the highest return opportunities. We have more opportunities to fund than we're going to fund. That's a good place to be in as a company. We're gonna allocate our capital to the highest returns, lowest carbon intensity projects, to help deliver our free cash flow growth that we're focused on. So that's, you know, if you look at our diverse and advantage portfolio, it has, it has scale, it has materiality, it's long-lived. We have a low decline rate in our company at less than 2%, so that affords us the opportunity to invest in those high return opportunities.
To take a specific example, in upstream, where most of our capital will be invested, about two-thirds of our capital is going to shale and tight. If you look at our five-year forward look of capital up to 2026, about two-thirds goes into shale and tight assets. I would have said Permian and Argentina, now I'll add the DJ Basin, and the acquisition through PDC, PDC. About the balance of the other third goes into long-term projects or MCPs like Gulf of Mexico, like TCO, our base business and our exploration program. So, it happens that they go into shale and tight because they're short-term, higher returns. But if you look at our portfolio and the opportunities we have, what we're investing in is the highest return opportunities. The short cycle project also gives us flexibility.
So, I like the way we've invested our portfolio. We have lots to choose from, lots to invest in, and I think we've got the right balance. As to M&A, specifically, we've spent a lot of money in the M&A over the last three years. It's been people often don't talk about that as part of our capital program and, and internally with the tension between, could we have more capital? How would we use it? You've got to remind people we spent a lot of money in some really good investments. I would say, I like our portfolio. We don't need to do anything in our portfolio. We can grow our, our enterprise value through our existing portfolio mix.
We don't need to do a deal, but we're always looking, and we're always looking in a way that creates value, where we can create an advantage, either scale up an existing business or add accretive value to an acquisition. We have a high bar. We set a high bar. We're disciplined about how we think about those things. And I think we've shown discipline around that. We've financial priorities, particularly around our strong balance sheet, allows us to be opportunistic when we see value created, and there's an opportunity there. But we don't need to do a deal. I think we've demonstrated discipline in the acquisitions we have made, like Noble, PDC, and the Renewable Energy Group, and we've also shown discipline in the acquisitions we didn't make, like Anadarko.
Mm-hmm.
That will continue.
Has definitely showed discipline there. So with the wealth of projects, so it's not for the lack of opportunities within the portfolios. Portfolios are more capital-constrained, more than anything else. Then the output, the growth that you have projected, that's 3% CAGR by 2027. How did you lend to that production growth rate? Why is that the right number? If there's more opportunity, why not higher? And then I'm sure that you also get pushback on why grow at all.
Yeah, there's a whole range of viewpoints. I guess the first thing I would say is production growth matters when it's profitable. That's when it really matters. So if you think about our advantage portfolio and our capital-efficient investments, our ability to choose where we think the most capital efficient, highest return investment opportunities, given our scale and advantage portfolio, means we have a rich choice of where we could spend our capital. We will continue to use our financial priorities to guide how we allocate our capital. So again, I come back to predictably growing shareholder return, investing in long-term returns for decades, competitive long-term returns, maintaining a strong balance sheet, and then buying back across the cycle. We feel we have the right level of capital investment in our portfolio.
We're growing both our traditional oil products and gas business and our new business, new energy business. We're confident in our 3% CAGR, because we have line of sight to where the opportunities are, 3% over the five-year period. We've got a low decline rate, and our growth is gonna be driven by projects like in shale and tight, the Permian and DJ Basin, completion at TCO and FGP, other shale and tight and our Gulf of Mexico assets. So we have line of sight to where our growth is. Could we do more? Yeah, but I think with this maintaining our focus around our capital discipline and our financial priorities, and our production outcome, production growth rate at 3% is an outcome of those-
Mm-hmm.
Principles and discipline that we've brought to our business.
Mm-hmm. Mm-hmm. All right, so let's get into some assets. I do wanna talk about East Med. But before we get into LNG, I wanted to ask specifically about your role as the chairman of... Let me get this right, Asia Natural Gas and Energy Association. And that's more of a recent advocacy group that I believe has formed. The reason I wanted to ask is because Asia is so important for the future of energy demand and gas demand in particular, and this is a group that's combining suppliers, buyers, and working with the government to help them with energy policy.
So would love to hear more about that, and then through that work, how sort of what, where are you seeing that Asia, the energy policy moving?
Well, if I'd known you were so interested, you could have joined my board meeting at 4 A.M. this morning. We actually had an ANGEA board meeting. That's the Asia Natural Gas and Energy Association. For those who don't know, actually, Chevron took a really lead and instrumental role in setting that up. It's an organization of about two years old, that I chair. We actually recruited a CEO who's actually celebrating his first-year anniversary on the first of September. What really came is we saw a need for the role of natural gas as part of the energy transition, whether that solution be part of LNG, ammonia to hydrogen, part of a hydrogen value chain, or even part of a LNG, hydrogen, ammonia, and CCS value chain.
What you see is a lot of the resource-rich countries weren't necessarily the countries that had the demand need. After spending a lot of time talking to customers in the LNG business, and folks don't know, I used to work in Australia in our Gorgon and Wheatstone assets. It was really understanding some of the policy changes that were going on in Australia and in Asia, and the demand for resource. It goes back to the fundamentals of the business. Long-term, Asia is gonna need a lot more natural gas. A lot of the countries that need it don't have some of the resource positions that they require, and they're looking to import or rely on the countries that do have advantage natural gas to export.
We felt there was a unique position to bring both suppliers or resource holders with customers to start advocating more effectively for what's the right policy to enable and support an appropriate and effective energy transition. Too often, I've seen many people talk about the first few chapters of the energy transition, and people talk about the last few chapters, each thinking the other one is wrong, when the reality is they're probably both right, and the emphasis needs to be on how do we get those middle chapters put together. You know, what that enabled was a business-to-business relationship, a business-to-government advocacy, and then a government-to-a-government advocacy. It's starting to put together a little bit more definitive framework around the role of each asset or country or company can play in that energy transition.
Because I'm confident not one company, not one industry, and one country is gonna solve the energy transition or the energy mix of the future for Asia. So that's what ANGEA has done. It was a different but very small and targeted advocacy group. I feel proud of what we've done in the first couple of years of getting going. More to come. We just set our priorities out for the next 12 months, particularly around 3 policy areas we wanna impact. And the harder thing is saying what you're not gonna do. We've got lots of good things to go work on, so.
That's great. And does that, does that give you confidence that—the bottom line, did that give you confidence that the, the gas demand, is, is there and then is going to show up in a meaningful way?
I, at the end of the day, there's got to be policy that develops resources, so it can access the market that needs it the most. And, I'm getting more confident, but if you don't try these things and try and educate people, you won't... You know, local policy is not gonna create the right policy for the region. So it's about setting the right policy framework across the region to both export low cost, low carbon natural gas to the markets that need it the most.
Got it. So on the supply side, East Med, it's an exciting new opportunity for Chevron there. So talk to us about the growth potential, what's the plan, and is that gonna be the next LNG hub to watch there?
So maybe I'll start with what we have in our portfolio today. We have 127, 175 TCF of natural gas in our portfolio. The world is gonna need more natural gas. We just talked about why that is, particularly as you say, it's Europe today, it's Asia of tomorrow. So we have a great natural gas position. Our advantaged assets are really in Australia and North America, where we produce low-cost natural gas.
And as you think about our overall natural gas position that we have, first and foremost, as we think about playing to our strengths, we can compete in both the Pacific Basin from Australia, and we'll have a growing position in the Gulf Coast as our advantaged Permian associated gas, and we take some export capacity in 2026 and 2027. We'll be able to grow our position in the Atlantic Basin. Both of those are very complementary. We also have positions in West Africa. So in our current portfolio, our emphasis is on keeping our existing infrastructure full in a cost-effective way. So in Australia, it's about the backfill projects, developing future fields, getting to high utilization rates at Gorgon and Wheatstone.
Same in West Africa, around keeping those facilities full, a key part of underpinning our LNG portfolio. As you start to go to Eastern Med, then it's about taking advantage of the growing position. So how do we grow an advantage position of scale? We have producing assets, we have resource positions, and we have an exploration play. It's about bringing those together to create, like I talked about earlier, a scaled and advantaged position where you can compete. Today, we, we're supplying, we're supplying gas in the region to Jordan, Israel, and Egypt. We've got presence in Israel, Egypt, and Cyprus. So it's about bringing that mix together to create a competitive position. What are we doing today? We're expanding at Leviathan, so we've added a third trunk line from the gas gathering field.
It's a highly accretive project to the platform to go from 1.2 to 1.4 BCF a day. Again, there's a lot of demand in the market there locally. At Tamar, we've done our- we FID'd, sanctioned our first phase of that optimization project late last year to optimize the platform. We're gonna do the same with some midstream infrastructure, either late this year or early next year, which will see that asset go from around 1.1 BCF a day to 1.6 BCF a day. Then the question is, with the remaining resource in the position we're taking to develop and strengthen that region, is evaluating LNG opportunities. Floating LNG, primarily, is our current focus, where you can actually take the resource position we have, with an LNG position.
It doesn't have to be floating LNG, but that looks to be the most likely concept. We're in concept development. We're not there yet. We'll probably be early part of next year, and then thinking about additional LNG resources that would complement our other LNG portfolio assets.
Shifting gear to Gulf of Mexico, it's a growth area. So where is the growth coming from? There's always the perception of, it's not, it's not onshore, it's not unconventional, it's perhaps less, repeatable, but, but clearly the portfolio, there's a lot of opportunity in there. So tell us about, about that.
I like our Gulf of Mexico assets. It's a growing business. We're gonna be growing about from 200 to 300 thousand barrels a day. We've got a proven track record of strong performance. We've got a great resource position. We're one of the largest acreage holders. We added 73 new blocks of exploration opportunity. We've got some infrastructure already in the Gulf. We've got a mixture of brownfield and greenfield projects developed that underpin our growth. And the focus, actually, as you say, it's not onshore and it's not shale and tight, but a lot of our emphasis is about driving to returns.
One of the ways you do that is to take the similar factory approach that you have in the shale and tight, apply it in the Gulf of Mexico. So it's about, you know, where we can, short-cycle tiebacks, leverage existing infrastructure, standard designs, shortening cycle times, getting a mixture of new and greenfield and brownfield development, and then a standard of application of technology to scale and replicate quickly. So it's a different model than perhaps when we were in the Gulf of Mexico 10 or 15 years ago. It's much more returns-focused. It's much more focused on driving value. And again, it's about creating a scale and advantage position, in the basin. I'm excited about the opportunities that comes. It is part of our growth story. We have projects coming online.
We had a Mad Dog project come online this year. We have two projects coming on next year in Anchor and Whale. And then we have a Ballymore project, which is a tieback, short-cycle tieback, which is a brownfield, come online in 2025. So these are all good things to be excited about and all part of our underpinning our growth story.
Right. It's really interesting to see the cross-pollination of knowledge from onshore to offshore, and then how it's offshore is no longer the offshore that we've known in years past. So, you know, excited to see these opportunities there. Maybe shifting to low carbon, and just have a few minutes left. It's been a little over a year since passage of the IRA, which was an incredibly powerful legislation in the U.S., providing incentives for a lot of new energy business that are that where energy sector can make a difference. That's carbon capture, hydrogen, renewable fuels. So since the passage of that bill, how has Chevron reevaluated any opportunities? Your portfolio where have things becoming more interesting? Has the opportunity set really expanded?
Yeah, just, what has the last year brought for new energy for Chevron?
Yeah. So I'll go back to we're leveraging our strengths to safely deliver lower carbon energy. So what does that look like? We're lowering the carbon intensity of our base operations, reducing flaring, energy management, methane reduction. I said earlier, we've one of the lowest methane. We benchmark extremely well against our competition in the United States, with 62% lower methane emissions on average. We're also doing some new things. As you start to think about what we're doing in our traditional business, integrating new products and new solutions into our existing business. So we've added a new liquid fuel business in Renewable Energy Group. We're now the second largest producer of bio-based products.
We're still working to secure feedstock as we start to grow our, we intend to grow our renewable natural gas or renewable, renewable or bio-based diesel, and the sustainable aviation fuels to around 100,000 barrels a day by 2030. What does that require? New capabilities, new technology, feedstocks. So we've acquired REG. We've got a joint partner with, partnership with Bunge, where we're securing feedstocks, which is a key part of actually the future value chain of the renewable fuels integrated into our traditional hydrocarbon value chains. We've got partnerships with CalBio and Brightmark, where we're getting dairy feedstock to build out our renewable natural gas stations. We've got 58 renewable natural gas points now in our CNG network. And then you start to think, well, what's the new solution, you know, the new technologies?
We're thinking about what solutions can we bring? How can you apply them at scale, and how can you apply them at speed? The IRA helps. It really helps with some of that investment. So some of the things we're looking for is in the CCS space, how do we take, you know, a core acreage position that has the ability to store carbon dioxide? It has policy that supports it, and it's near emitters where you have customers. So an example of that is in the Bayou Bend, where we've got 140,000 acres. Believe that we could store up to 1 billion tons of carbon dioxide. So when you say, as you start to evaluate those opportunities, the IRA is helpful. I think it's helping enable some lower carbon solutions.
But in Chevron, we believe we need a robust set of policy to enable more energy forms to come to market. We're all gonna need more, more diverse, more complex, and more energy solutions to come to market domestically. So the IRA plays a role, but it's not the only thing. Policy is gonna be important. Infrastructure is gonna be important. Believe it or not, markets and customers are gonna be important. As you create new products, you have to have markets and customers to do that. So as I think about the broader energy transition, the IRA is helpful. It's a good start. I don't think it fundamentally changes how we think about our business going forward in the long term. I know one thing, the energy system of the future is gonna look...
We need more of it, but it's gonna look more complex, and it's gonna be more diverse, and it's gonna require energy companies like ours to integrate those solutions to create the most effective, affordable, reliable, and lowest carbon intensity solutions for the future.
That's a perfect end and wrap. Can't think I can say any better, but thank you so much.
Thank you.
-Nigel, for being here. It's really been a treat.
Thank you.