press release

Chevron Press Release - Chevron Ceo Cites Far-Reaching Benefits Of Caspian Oil And Pipeline Projects

SAN JOSE, Calif., March 13, 1998 Two large and advanced oil projects in Russia and Central Asia are providing far-reaching economic benefits to the former Soviet Union and serving as a catalyst for the emerging economy of the Caspian region, Chevron Chairman Kenneth T. Derr told a U.S.-Russia trade forum in San Jose yesterday.

"The Tengiz oil-field development in Kazakhstan, now in its fifth year, has returned hundreds of millions of dollars to the Kazakhstan government and is providing more than 3,000 jobs for Kazakhstan citizens," said Derr. "The project has also spent $260 million on Russian goods and services since its inception."

"Meanwhile, the $2 billion Caspian Pipeline Project is moving ahead despite previous delays, and is expected during its construction to provide up to 4,000 jobs and hundreds of millions of dollars in business for Russian contractors and suppliers."

Derr participated in an afternoon forum led by Vice President Al Gore and Russian Prime Minister Victor Chernomyrdin at San Jose State University. The event, part of an all-day Silicon Valley program for the visiting Russians, followed the 10th session of the U.S.-Russian Commission on Economic and Technological Cooperation in Washington D.C.

"The value that these energy projects bring to the Russian and Caspian regional economies particularly the pipeline cannot be overstated," said Derr.

"Over its operating lifetime, the pipeline is expected to contribute $23 billion to the central and regional Russian governments in taxes and dividends alone."

"The pipeline project has had its problems, but Im convinced that it will move forward now based on the revised management agreements reached several weeks ago in Moscow," said Derr.

"On Thursday, representatives of Chevron, the Russian oil company LUKoil and others met in Washington D.C. to confirm those agreements, which call for developing specific plans to meet the October 1 target for project permits set by Prime Minister Chernomyrdin."

"This project, involving eleven companies from six different countries and three governments, will show the world that a complex international partnership can operate a major infrastructure project in Russia," said Derr. "The project will promote a modern management system of teamwork and be a model to other foreign investors in Russia."

Updating the Tengiz development, Derr noted that the project is using Russian oil-and-gas processing technology.

"Tengiz is now in its second year of an alliance with several Russian technical institutes, another example of a positive new commercial relationship in the region," said Derr.

"Beyond that, independent Russian economic experts have estimated that Tengiz operations over the life of the project will contribute $27 billion to Russias gross domestic product $9 billion directly and $18 billion indirectly."

Chevron launched the Tengiz venture with the Kazakhstan government not long after the breakup of the former Soviet Union. Since that time, oil output has increased rapidly and the giant field is currently producing up to 190,000 barrels per day. Peak production is expected to be about 700,000 barrels per day by 2010. Chevrons share of the venture is 45 percent.

Separately, Chevron has been the primary driver for the Caspian Pipeline Project, the most advanced of several different efforts to boost export capacity in the oil-rich Caspian region. Chevron holds a 15 percent share of the pipeline partnership, which includes LUKoil and Rosneft, plus eight other oil companies and the governments of Russia, Kazakhstan and Oman.

The pipeline will move crude oil particularly the growing Tengiz field production from western Kazakhstan through Russia to the Port of Novorossiysk on the Black Sea. In the meantime, much of the Tengiz crude is moving by rail in leased Russian tank cars, making the oil-field project one of Russia's most significant private-sector customers.

"We believe the Tengiz and Caspian Pipeline enterprises are a prime example of how new forms of economic integration are evolving in the former Soviet Union," said Derr.

Updated: March 1998