UPDATE 2-Chevron plans 2009 cost cuts, production growth

* Sees 4 pct production growth in 2009

* Targets 14 pct upstream base business cost cuts in 2009

* Shares up 4 pct, in line with market (Adds details on upcoming projects, share price, bylines)

NEW YORK/SAN FRANCISCO, March 10 - Chevron Corp, the second-largest U.S. oil company, said on Tuesday it expects to increase production 4 percent this year while also squeezing costs to match the sharp drop in oil prices.

George Kirkland, executive vice president for global upstream and gas, said the company aims to cut upstream base business spending 14 percent this year, excluding one-off payments for concessions, by deferring certain projects.

"You have wells that get squeezed when prices come down to $30 to $40 per barrel ... we'll defer them," Kirkland said at the company's annual analyst meeting in New York. "We're going to get the cost of doing business back down (first)."

He also said Chevron expects to drill more than 50 exploratory wells in 2009 and spend $2 billion on exploration, about the same it spent in the last few years.

Among big projects starting in 2009, he said Tahiti in the Gulf of Mexico had estimated reserves of 400 million to 500 million boe, Tombua-Landana in Angola 350 million boe, while Frade in Brazil had 200 million to 300 million barrels of oil.

Looking further ahead, Chevron released an anticipated peak capacity for its Jack/St Malo project in the Gulf of Mexico of 120,000 to 150,000 barrels of oil equivalent (boe) per day, though the start date for production has yet to be determined.

Also in the Gulf of Mexico, the $1.7 billion Caesar/Tonga project will have peak capacity of 40,000 boe after starting up in 2011.

In Australia, Chief Executive David O'Reilly said the "stars are getting aligned" to move ahead with its 50 percent-owned Gorgon liquefied natural gas project, which it expects to sanction in the second half of this year.

Start-up for Greater Gorgon, with potential capacity for 440,000 boe per day, is set for 2014, according to a presentation slide. Chevron expects its overall LNG production to more than triple to about 300,000 boe per day by 2015.

Chevron's refining business will continue to streamline its lubricants product line and exit retail markets, it said, while pushing to get feedstock costs down by $1 per barrel and product costs down by 30 cents per barrel by 2011.

While the company has already abandoned its plan for 3 percent compound production growth between 2005 and 2010, it is still expecting 4 percent growth this year.

Assuming oil priced at $50 a barrel, the San Ramon, California-based company expects to produce 2.63 million boe per day in 2009, up from 2.53 million boe in 2008. Net proved reserves stood at 11.2 billion boe at the end of 2008.

Shares of Chevron, the world's fourth-largest oil company by value, rose 4.3 percent to $60.80 amid a U.S. market rally. The stock is down 17 percent in 2009, versus a 15 percent drop in the Chicago Board Option Exchange's oil index.