Report to Stockholders

By Peter J. Robertson, Vice Chairman
ChevronTexaco Corporation

2004 Annual Meeting of Stockholders

San Ramon, California, April 28, 2004

Also see a press release regarding this speech.

Good morning to all of you.

In my time today, I want to briefly describe some of the projects we're pursuing to grow the profitability of upstream. Then I'll talk about our global gas business and describe some of the milestones we've reached.

Let me begin by giving you a sense of the depth and breadth of our upstream business.

Our portfolio is global. We have oil and natural gas interests in virtually every region of the world.

ChevronTexaco is the top crude oil and natural gas producer in Angola and Kazakhstan and the top crude oil producer in Indonesia.

We are one of the largest crude oil and natural gas producers in the United States, west Africa, Asia Pacific and Latin America.

We are the No. 1 holder of natural gas resources in Australia.

And we are the only international company allowed to operate on behalf of the Kingdom of Saudi Arabia in the Partitioned Neutral Zone of Saudi Arabia and Kuwait.

We also have one of the best records in the industry for replacing production. In 2003, we added approximately 1 billion barrels of oil-equivalent net proved reserves, or 108 percent of the volumes we produced.

As usual, the additions came from a broad range of activities:

  • our drilling activities here in the United States;
  • the application of improved recovery techniques in Indonesia and the United States;
  • reservoir studies of our fields in Kazakhstan, principally the Tengiz Field;
  • the conclusion of successful contract extension negotiations in Denmark and Colombia.

Exploration Successes

In 2003, we continued our series of exploration successes with major discoveries in the deepwater U.S. Gulf of Mexico and Nigeria.

Our drilling program also confirmed the size and scale of two other major discoveries, both of which will lead to significant developments:

  • the Io-Jansz discovery offshore Australia, so far the largest natural gas discovery in those waters;
  • the Usan discovery offshore Nigeria.

We're now beginning exploration activities on new acreage that we've acquired in the Gulf of Thailand, Venezuela, offshore Canada and Nigeria.

And we've just been awarded a 51 percent interest in the premier deepwater block of the joint development area shared by São Tomé and Príncipe and Nigeria. We expect to begin drilling operations there this year.

In 2003, we completed several major developments that are now adding to our production profile.

In Africa, the Chad-Cameroon project came onstream, and sales of crude oil began. Before the middle of this year, production will reach the target rate of 225,000 total barrels of crude oil per day.

In Canada, we completed the start-up of our integrated operations at the Athabasca oil sands. Our current production is nearing the facility's capacity of 155,000 barrels of bitumen per day.

And in Kazakhstan, we completed the 400-mile (644-kilometer) pipeline that connects our Karachaganak Field to the Caspian Pipeline. In the past few days, we began moving processed liquids into the pipeline and to world markets.

I might add that 2003 marked our company's 10th year of partnership with Kazakhstan. Tengizchevroil was Kazakhstan's first petroleum joint venture with a foreign oil company.

Let's look now at some of the major projects we're pursuing.

In Angola, we expect to begin producing condensate from the $1.9 billion Sanha-Bomboco development late this year. And in 2006, we expect to bring the Benguela-Belize development onstream, followed shortly by Lobito-Tomboco.

In Nigeria, we've reached agreements that enable us to develop the giant deepwater Agbami project. We expect to see first production from that development in 2007.

In Kazakhstan, we're expanding operations in the supergiant Tengiz and Korolev oil fields. By 2006, we expect to increase production capacity to between 430,000 to 500,000 barrels of oil per day.

Late this year we expect to complete upgrading facilities for the Hamaca heavy-oil project in Venezuela. This will enable us to increase production to the target rate of 190,000 barrels of heavy oil per day.

We also have begun engineering work on the Tahiti development in the U.S. Gulf of Mexico. Tahiti is estimated to contain between 400 million and 500 million barrels of ultimate recoverable reserves.

Upgrading Our Portfolio

We are aggressively working to upgrade our asset portfolio. Last year, we established a new-business-development group to assess large growth opportunities in resource-rich areas. These areas include North Africa, the Middle East and Russia.

Also last year, we divested a number of lower-value, nonstrategic assets.

To date, we have announced or completed sales of properties in the United States, Canada, Papua New Guinea, the United Kingdom, Bangladesh and Kazakhstan.

Let me turn now to our global gas business.

The primary focus of this business is to commercialize our large natural gas resource base, targeting North American and Asian markets. Again, we have the size and scope to be a major player, as demand for natural gas continues to grow.

We have the largest natural gas resource position in Australia, and we have significant holdings in west Africa, North America, Kazakhstan and Latin America.

2003 was an excellent first year for Global Gas. We re-established a natural gas marketing presence in the United States and quickly became a major player. And we reached milestones on key liquefied natural gas (LNG) and gas-to-liquids projects.

Atlantic Basin

In the Atlantic Basin, we are moving forward to deliver LNG to the United States from our holdings in west Africa and Latin America.

Late last year, we received regulatory approval to construct the Port Pelican LNG facility offshore Louisiana. When completed, Port Pelican will be capable of handling up to 1.6 billion cubic feet of natural gas per day and will be the first offshore terminal of its type in the United States.

In the Pacific Basin, we're moving forward to develop the Greater Gorgon Area fields offshore Australia. Gorgon gas is destined for markets in Asia and North America.

Last year, Western Australia authorities granted in-principle approval to construct an LNG facility at Barrow Island, a world-class nature reserve. Their decision speaks volumes about our company's long history as a responsible oil producer on Barrow Island.

This was followed by a letter of agreement with the China National Offshore Oil Corp. to purchase a significant volume of Gorgon LNG as well as to purchase an equity stake in the development.

We have now filed permits to build an LNG import and regasification terminal offshore Baja California, Mexico, to move Gorgon gas to North American markets.

Global Natural Gas — Sasol Chevron

In addition to LNG, we're also aggressively pursuing gas-to-liquids (GTL) opportunities. The GTL process converts natural gas into ultraclean, high-quality transportation fuels.

In Nigeria, we expect to award construction contracts this year for a GTL project that will use Sasol Chevron technology. And we're pursuing another much larger GTL project in Qatar.

In our brief time today, I hope I have given you a sense of the accomplishments of the past year as well as of the tremendous opportunities we see ahead.

Read full text of Chairman David O'Reilly's remarks to 2004 Annual Meeting of Stockholders

Read full text of Executive Vice President Patricia Woertz's remarks to 2004 Annual Meeting of Stockholders

Updated: April 2004