Report to Stockholders

By George L. Kirkland, Executive Vice President for Upstream and Gas
ChevronTexaco Corporation

Overview of Upstream and Gas

San Ramon, California, April 27, 2009

In my time today, I will 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. We have a strong portfolio of oil and gas producing assets covering many of the world's key hydrocarbon rich basins.

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

We are a top oil producer in Angola and Nigeria and the largest foreign oil producer in Venezuela.

We are a top producer in the United States, as well as across Asia Pacific. In Australia, we are the largest holder of natural gas resources.

And we are the only international company producing oil under a concession for the Kingdom of Saudi Arabia in the Partitioned Neutral Zone.

In 2004, we continued our series of recent exploration successes, with major discoveries in the deepwater U.S. Gulf of Mexico, Western Australia, Venezuela, Thailand, Atlantic Margin, West of the Shetlands, offshore Nigeria, and in the deepwater area between the Republics of Angola and Congo.

Last year, our exploratory program achieved a 57 percent success rate, compared with a 10-year industry average of 32 percent.

Our exploration activities are primarily focused on key basins in the deepwater U.S. Gulf of Mexico and West Africa.

We are the largest holder of deepwater acreage in Nigeria, and among the top in the deepwater Gulf of Mexico.

We acquired new acreage in the Gulf of Mexico, Nigeria, Venezuela, Norway and in the Atlantic Margin west of the Shetland Islands.

Now let's move to our major project start-ups.

In 2004, we commenced several major upstream projects which are now contributing to our production profile.

In Angola, we achieved first oil from the Bomboco Field offshore Cabinda, and we started up the Sanha project, which when fully operational, is expected to produce 100,000 barrels per day.

In China, we announced the start of oil production from a field in Bohai Bay, beginning operations in record time with less than two years between project commencement and first oil.

In the U.K. North Sea, we commenced oil production from the Alba Extreme South Field, completing the first phase of the project under budget and on schedule.

And in Latin America, we completed the Hamaca crude upgrading facility in Venezuela. This upgrader processes extra-heavy oil from the Orinoco Belt and transforms it into high-value synthetic crude.

Let's look now at some of the major projects we're pursuing. The largest of these projects are called the "Big 5." These are legacy developments and are key to bringing on new production -- and new reserves -- during the next five years.

Three of these are deepwater projects, Agbami offshore Nigeria, Tahiti in the U.S. Gulf of Mexico, and the Benguela Belize-Lobito Tomboco development in Angola.

In Kazakhstan, we are moving forward with a major expansion of operations at the giant Tengiz field, where we are expected to nearly double production there.

In Australia, we are pursuing world-scale projects in the Greater Gorgon Area to develop one of the region's largest undeveloped natural gas resources.

These projects, when combined with our other capital projects, are expected to produce approximately 850,000 barrels per day of production capacity by 2009.

Let's now turn to our Natural Gas business.

We've made significant progress in building a high-impact natural gas organization and achieved a number of significant milestones.

Given our resource base and our long history in natural gas, we have the size and scope to be a major player in this business and are well-positioned to meet the growing global natural gas demand.

The Global Gas organization brings together all the key businesses involved in natural gas activities, linking production, liquefaction, shipping, regasification, marketing, pipeline, power generation and gas-to-liquids technology.

Our natural gas activities are guided by two major strategies.

  • regionally focused liquefied natural gas (LNG) initiatives designed to move natural gas to growing markets in North America and Asia;
  • a gas-to-liquids (GTL) strategy in which we're developing a global business converting natural gas to ultra clean and high-performance transportation fuel.

As our LNG supply projects advance, we're similarly advancing efforts to deliver and market LNG in Asia and North America.

In North America, we're developing a portfolio of options for import terminals.

We've received the three necessary permits from the Mexican government for an LNG regasification terminal offshore Baja California, Mexico.

And we entered a 20-year agreement, securing 700 million cubic feet of regasification capacity at the Sabine Pass LNG terminal in Louisiana, which will provide access to key Gulf Coast natural gas markets.

We're also exploring an opportunity for a terminal near our Pascagoula, Mississippi, refinery, as well as a number of other opportunities on the East, Gulf and West Coasts of North America.

In the Asia-Pacific, we continue to advance our LNG strategies, enhancing our strong position in this region.

And earlier this month, we reached a framework agreement with the joint venture partners for developing the Greater Gorgon Area, offshore Western Australia.

Our GTL business will produce and market high-performing, environmentally friendly liquid fuels from natural gas.

Through our Sasol Chevron global joint venture, we are developing GTL projects in Nigeria and Qatar and exploring opportunities in Australia.

In Nigeria, the Escravos GTL facility will produce high-quality diesel fuel and naphtha, primarily for export to Europe.

In Qatar, we are evaluating opportunities with Qatar Petroleum for the feasibility of expanding the Oryx GTL plant, pursuing development of an upstream/downstream integrated GTL project and examining GTL base-oil opportunities. The combined plan represents an investment of over $6 billion.

Now I will turn the program over to Dave, for his concluding remarks.

Read the Summary Remarks by David J. O'Reilly

Updated: April 2005