UPDATE 4-Chevron seeks UK refinery sale, to cut 2,000 jobs

* Chevron to cut 2,000 downstream jobs in 2010

* To seek bids for UK refinery, other downstream ops

* Targeting 1 pct oil/gas production growth through 2014

* Shares fall 0.5 pct (Adds context for CEO quote, closing share price)

By Braden Reddall

NEW YORK, March 9 (Reuters) - Chevron Corp (CVX.N), the second-largest U.S. oil company, put some of its downstream operations up for sale, including its Pembroke refinery in the UK, and said it would eliminate 2,000 jobs this year.

As it concentrates increasingly on extracting oil and natural gas, Chevron expects 1 percent annual production growth through 2014, and 4 percent to 5 percent growth in the three years after that, driven by two big Australian gas projects.

John Watson, in his first full presentation to analysts since becoming chief executive this year, affirmed his support for refining and marketing on Tuesday, even as that downstream side of the business undergoes wrenching changes.

U.S. and European refiners have been hit hard as the economic slump left them with too much capacity while demand for fuel declined, hammering their profit margins.

Mike Wirth, Chevron's executive vice president for global downstream, expects the tough market conditions to last several years and said growing competition from refineries in Asia and the Middle East will threaten U.S. and European operations.

"Good refineries, competitive refineries in those markets will continue to exist, but the refineries at the margin and the weaker ones are the ones that are under the most pressure and the most vulnerable," he said at the meeting in New York.

"The less competitive facilities over time are likely to drop out of the market."

Watson told reporters after the meeting that he did not expect to have to close any refineries, as France's Total SA (TOTF.PA) said on Monday it is doing in Dunkirk. [ID:nLDE6270B1]

"Our refineries are competitive. The issue for us has been the industry conditions are very difficult right now," he said. The company will seek bids for some downstream operations in Europe, the Caribbean and Central America, and review operations in Hawaii and Africa outside South Africa.

Asked about the Hawaii refinery, already under review since May, Watson said that after making some improvements, Chevron does not plan to shut it or convert it to a fuel terminal.

Chevron had already received unsolicited expressions of interest in the Pembroke refinery in Wales, which has capacity to refine about 210,000 barrels per day.

But the refineries up for sale will join many others already put on the market by rivals, including Royal Dutch Shell Plc (RDSa.L) and Total. [ID:nLDE62025X]

Chevron said it ultimately wants its downstream business to be in fewer than 40 countries, versus 93 last year, and to own 1,900 filling stations, down from 3,200 in 2009.

Along with 1,900 jobs already cut, the downstream workforce will be reduced by a fifth by the end of 2010. Wirth expects after-tax severance charges of $150 million to $200 million this quarter, and Chevron will continue to cut jobs into 2011.

STEADY SHIFT AWAY FROM REFINING

Watson, a 30-year Chevron veteran who became vice president in charge of mergers and acquisitions in 1998, said the company had been reducing its downstream exposure for the past decade, selling off nearly $1 billion in assets per year on average.

He said Chevron has been reshaped, with capital employed in upstream rising to a 65 percent share from about half in 1999, and that share should grow further in the years ahead.

Watson told reporters that oil prices will rise eventually as supply dries up. "We don't expect sharp spikes in the near future; but in the years ahead when that surplus capacity diminishes, the potential for an increase in prices is there."

Like its rivals, Chevron sees natural gas as a growing part of its future. Liquid reserves fell to 62 percent of its total in 2009, down from 66 percent a year before. [ID:nN25119144]

Chevron said on Tuesday it expects natural gas to represent 41 percent of production by 2017, up from 31 percent now.

The company highlighted two huge gas projects off the coast of Western Australia: Gorgon, which should start up in 2014 and hit peak production of 450,000 barrels of oil equivalent per day (boepd), and Wheatstone, starting two years later and expected to reach peak production of 260,000 boepd.

In the next three years, Chevron is set to approve or start 25 upstream projects that cost at least $1 billion. One, due to begin early engineering work in 2011, is an expansion of the Tengiz project in Kazakhstan, which should grow production by 250,000 to 300,000 barrels per day to about 900,000.

Chevron shares fell 0.5 percent to close at $74.30.

Larger rival Exxon Mobil Corp (XOM.N) will outline its 2010 plans for analysts at a meeting in New York on Thursday. (Reporting by Braden Reddall; Editing by Gerald E. McCormick, Dave Zimmerman and Gunna Dickson)