Jason Gabelman: I’d like to go back to the Permian detail for a minute, if I could, and kind of two questions on this. First, has CapEx in the Permian deviated at all from that $4 billion budget that you highlighted at the Analyst Day. And the second part, on the Permian inventory over the five year plan and long term, what percentage of those locations would you categorize as tier one?
Michael Wirth: Jason, Permian CapEx is up a little bit this year. Primarily three things. Number one, we’ve actually seen our drilling performance continue to improve and completions performance continue to improve. So out of the same fleet of rigs and completion spreads, we’re getting more work done, which means you consume more tubulars, more sands, more water, et cetera. So, that’s kind of a good thing. We’re seeing some longer lead times on some of the critical elements in facilities. And so, we’ve actually had to make some long lead purchases for next year’s program that we didn’t anticipate as we were lining up this year’s program. And then, we’ve increased facility scope for water handling in some areas of the Permian, particularly as we’re trying to manage some of these induced seismicity issues.
We’re being more and more careful removing more water. And so, that has all led to some increase in CapEx. Not a lot of inflation there. The inflation has been largely in line with what we had expected and the rig fleet is being activated in line with what we expected. Your second question on inventory, we haven’t broken our portfolio into tiers. There’s not a very clear definition of that and a way to kind of do that on a standard basis. So when we’ve outlined the drilling locations and the long term guidance there, it’s really based on economics. And we’ve got locations that are economic at our price view for the future, which has historically not been a super aggressive price view. It’s based on today’s technology. And as indicated, we’ve got more than 6,000 locations in that outer time window that are economic based on those assumptions.
By the time we get to that window, we may or may not see a different price environment. I fully expect we’ll see a different technology environment, which can allow that number to grow even further. So we look at it more in terms of the economics of the development than tiers.
Jason Gabelman: My follow-up, just going back to TCO, you made some comments on kind of maintenance effects over the next four quarters. And I know you showed it graphically, but are you able to quantify the actual impact to our production over the next four quarters from all these turnarounds and startup activities?
Pierre Breber: Jason, we do it quarterly. Like, it’s included in the third quarter guidance that we provided. And we’ll continue to do that quarterly and you’re seeing sort of annually. We’re giving annual guidance on TCO. So it’s all embedded in there. I think we showed it relative to 2022. But there’s just a lot of moving parts. But we’ll continue to give that guidance each quarter and you have annual guidance that incorporates all of that.
Operator: We’ll take our next question from Irene Himona with Société Générale.
Irene Himona: My first question is on the Downstream, please, if you can talk around the performance of your chemicals affiliates, in particular in Q2 and then what you’re seeing so far in the third quarter. And then, also what you would expect in terms of refining margin evolution in the second half of the year, given the weakness in Q2.
Michael Wirth: The chemicals business is cyclical, as everybody knows. We’re certainly in a period now where we’re seeing some length in supply due to newbuild facilities. There’s some length there that’s weighed on margins in the olefins chain. And in the short term, we think we’re going to continue to see that be a pretty tough sector. Longer term, as you get out to mid-decade and beyond, demand will continue to grow. And we expect demand and supply will come into better balance, and we’ll see those margins recover out towards the middle and second part of this this decade. Your second question, I’m sorry I was thinking about chemicals there. Refining margins, yeah. Certainly, we’ve seen refining margins come off the very strong levels that they were at last year.
There’s been some new capacity come into the system around the world, some big new refineries that have begun to start up or major projects that have come online, and so margins have softened year-on-year. Certainly, the West Coast in our portfolio is important. West Coast margins, both in the refining and the marketing part of the value chain, have held up a little bit better because it’s a market that is a little bit more cut off from the rest of the world than the Gulf Coast or Asia. And so, demand continues to be pretty strong out there. Our gasoline demand is strong. Jet demand continues to come back. Diesel demand has maybe flattened out a little bit, but certainly holding. And so, we’re in an environment where I would expect inventories towards the lower end of the products in a number of parts of the world.
I think refining margins for the second half of this year are likely to be as good as they were in the first half of the year at least.
Irene Himona: Based on that, following your FID for the pipeline in Israel, I was wondering, is that it for the time being for Leviathan? Or do the partners continue to examine other options like FLNG, for example?
Michael Wirth: Yes, we continue to evaluate other options. In fact, we’re working towards a concept select for the next expansion of Leviathan, ideally, at the end of this year, and floating LNG is one of the concepts that we continue to look at.
Operator: We’ll go next to Ryan Todd with Piper Sandler.
