Chevron sees a 20 percent increase in production by 2017

Closer to home, in the Marcellus shale, the second-largest U.S. oil company said reservoir outcomes were exceeding expectations, although it was investing there at a "measured pace" in light of depressed North American natural gas prices.

George Kirkland, executive vice president for upstream and gas, said the company saw plenty of demand for Australian liquefied natural gas (LNG) given it would be sold in Asia, which does not have the same glut as North America.

"LNG is a replacement energy for coal or oil or nuclear and it really doesn't have any direct gas-on-gas competition, apart from other LNG," Kirkland said at a meeting with analysts in New York. "All these markets are different."

A new Angolan LNG project with capacity for 175,000 barrels of oil equivalent per day (bpd) would start shipping next quarter and, while contracts with Angola's government were not finalized, CHEVRON (CVX.NY)expected the gas to go to Europe and Asia.

New sources of onshore gas, opened up through new drilling techniques and hydraulic fracturing, have been found in other countries. In Poland, Chevron started up a second shale gas well this quarter and it also started an initial well in China, where it is exploring 940,000 acres along with Sinopec <600028.HK>.

Larger rival Exxon Mobil Corp had cast some doubt on Polish shale gas prospects after its first two wells there did not find commercial quantities.

Chevron has set a production target of 3.3 million bpd by 2017, assuming oil prices of $79 per barrel, up from its anticipated output of 2.68 million bpd this year.

The start of its investment-heavy projects would allow the company to reduce cash on its balance sheet, Chevron said, as analysts sought clues on potential dividend increases.

Chevron also said it planned to hold on to its West Coast refineries at a time when others are pulling out, including rival BP Plc , which has put its Southern California refinery up for sale.

Chevron shares were more than 0.3 percent higher in midday trading at $110.40, less than a dollar off their record high reached in January.

(Reporting by Matt Daily in New York and Braden Reddall in San Francisco; editing by Derek Caney and Andre Grenon)