Marathon Oil Corp. said that it has set its 2010 budget for capital, investment and exploration at $5.1 billion, a 17 percent decline from its spending in 2009. The majority of those investment dollars will flow into upstream activity where spending increases 24 percent from that of 2009, while downstream spending will shrink by more than half from the 2009 rate primarily due to the completion of the four-year expansion of the Garyville refinery in Louisiana, in the fourth quarter 2009.
"With the completion of our Garyville, La., refinery major expansion, our spending in the Downstream is budgeted to be 53 percent lower in 2010 compared to 2009," said Clarence P. Cazalot, Jr., Marathon president and CEO. “Starting in the second quarter of this year, after the major turnaround of the base facility, we anticipate this world-class, 436,000-barrel-per-day refinery will be a major earnings and cash flow contributor to Marathon.”
The project expanded crude oil throughput capacity at Garyville from 256,000 bpd to 436,000 bpd, making it among the largest refineries in the United States. The entire facility is expected to reach full refining capacity by the second quarter following the planned maintenance activities currently under way at the base refinery.
In 2010, spending for Marathon’s Refining, Marketing and Transportation segment is earmarked at $1.1 billion. Of that total, approximately $400 million is budgeted for the Detroit Heavy Oil Upgrading Project, which is targeted for startup in the second half of 2012. Roughly $300 million is set aside to address Mobile Source Air Toxics II regulations, with the stiffening environmental rules taking effect Jan. 1, 2011. The approximately $400 million remaining will be spread out across Marathon’s downstream operations.
Marathon set its 2010 worldwide exploration and production budget at approximately $2.9 billion. Most of this spending is targeting three key oil projects that the vertically integrated oil company expects to realize big payoffs.
The company has budgeted approximately $670 million for its Oil Sands Mining segment, which is down 32 percent from 2009 “as Expansion 1 of the Athabasca Oil Sands Project (AOSP) approaches completion.” Marathon said the project is on track and anticipated to begin mining operations in the second half of 2010, “with a phased start-up of upgrader operations to follow in late 2010 or early 2011.”
To comply with revised Securities and Exchange Commission regulations, Marathon said it will begin reporting Oil Sands Mining production and reserves in terms of synthetic crude production, which is bitumen after upgrading excluding blendstocks. The company anticipates this production rate in 2010 will be between 22,000 and 28,000 bpd.
“The 2010 forecast takes into account a planned turnaround at the existing AOSP mine and upgrader facilities beginning late in the first quarter of this year and continuing into the second quarter. Production is expected to be curtailed for approximately 60 to 70 days and completely shutdown for two-thirds of that time,” said Marathon.
Marathon estimates 2010 production available for sale will be between 390,000 and 410,000 bpd of oil equivalent, excluding the effect of any future acquisitions, dispositions or exploration success. The company said it still expects an upstream production compound annual growth rate of approximately 4 percent, which includes Oil Sands Mining, for the 2008 through 2011 period, and excludes additional asset acquisitions, divestitures or future exploration successes.
Marathon, based in Houston, Texas, is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing and transportation operations. Marathon is the fourth largest U.S.-based integrated oil company and the nation's fifth largest refiner.
