Chevron's Portfolio Leaders ... Driving Growth
James N. Sullivan, Vice Chairman of the Board
Annual Meeting of Stockholders
San Ramon, California
Also see a press release regarding this speech.
Today, I have the pleasure of telling you about some of the brightest prospects in Chevron's worldwide portfolio.
These opportunities represent rising production, expanding markets and increasing sales. They also represent significant growth potential for Chevron and span all aspects of our business. Now, the truth is that out of the 100 countries where we operate, there are numerous examples we could talk about. But this morning, I'm going to highlight our Top 10.
Before I get started, I would like to say a few words about Year 2000 (Y2K). As you know, the Y2K bug had the potential to severely hinder our ability to conduct our operations, but it didn't. Chevron made it through both the New Year and Leap Year transitions because of two years of hard work by thousands of dedicated employees. Our operations didn't skip a beat, thanks to their outstanding efforts.
Turning now to our Top 10 ...
At the top of our list are the Tengiz Field and the Caspian Pipeline located in Kazakhstan and the former Soviet Union. I could bring you up to date with what's happening there, but we thought it would be appropriate to hear that from Vice Chairman Dick Matzke, who is in Kazakhstan today.
Moving now to Africa, Chevron is a prominent player in one the hottest areas for oil exploration and production in the world.
Here is the Kuito -- a floating, production, storage and offloading vessel. It's anchored about 50 miles off the coast of Angola in 1,300 feet of water. Right now, it's producing 70,000 barrels of oil a day from Angola's first deepwater discovery.
Chevron is currently producing 460,000 barrels a day in Angola, but that number will increase to 600,000 barrels a day by 2002. We're in the process of developing three other very promising deepwater discoveries. All told, our deepwater fields offshore Angola contain an estimated 3 billion barrels of reserves.
Nigeria is another key growth area for Chevron in Africa. Crude oil production here will increase from 420,000 barrels a day to 600,000 barrels a day in the next three years. The slide you see here represents Chevron's 40 percent interest in that production.
In addition to crude oil, Nigeria also has huge natural gas reserves, which have enormous environmental and economic benefits for Nigeria and Chevron. Much of this gas is "flared" during oil production. Our strategy is to reduce greenhouse gases by turning off those flares and market this abundant clean-burning fuel. We're doing that in three ways:
- First, our Escravos gas plant began gathering and selling natural gas in 1997.
- Secondly, work has begun on a 500-mile pipeline to supply natural gas to electricity -- generation plants in several African countries.
- Lastly, we plan to build one of the world's largest gas-to-liquids plants in partnership with Sasol.
Gulf of Mexico Deepwater
Closer to home, in the Gulf of Mexico, Chevron began producing two deepwater fields last year.
This is a picture of Genesis, our floating-spar platform, which is producing about 50,000 barrels a day.
Our Gemini Field is producing 35,000 barrels a day. Another field -- Typhoon -- comes onstream next year. And we're drilling six exploratory wells this year.
Over the next 10 years, Chevron's goal is to find 2 billion barrels of oil equivalent in deepwater Gulf of Mexico.
In addition to our exploration and production programs, we're also making strategic acquisitions to grow the company and enter high-growth markets.
Last year, we acquired Petrolera Argentina San Jorge, the second largest oil exporter in Argentina. The acquisition establishes a new producing country with significant growth potential.
San Jorge produces 80,000 barrels of oil a day and 40 million cubic feet of natural gas. We're busy developing two new oil discoveries that look very promising.
Also in 1999, we acquired Rutherford-Moran Oil Corporation and became operator of oil and gas fields in the Gulf of Thailand. This move positions us to supply natural gas to growing Southeast Asian markets. Plus, it's a strategic fit with the more than 3 million acres of unexplored acres we already own in the gulf.
Speaking of new markets, Chevron is making a sizable investment to tap into the power generation market in the United States and Europe.
We're doing this through our affiliate, Dynegy.
In February, Chevron invested an additional $200 million in Dynegy, which recently merged with Illinova, a large Midwestern electrical utility company. We now hold a 28 percent interest in a $10 billion company that not only trades natural gas and is in the gas liquids business but is also a major generator and trader of electricity. The combined company has more than $12 billion in assets and $22 billion in projected annual revenues from energy operations throughout North America and Europe.
Chevron Chemical Co.'s Joint Venture With Phillips
Thus far, everything I've talked about is upstream, but we also have some very exciting growth prospects in the downstream.
Earlier this year, we agreed with Phillips to combine our worldwide petrochemicals operations into a 50/50 joint venture. The result is a $6 billion world-scale chemical producer that can compete with the top competitors in an expanding industry. We'll be able to achieve synergies of $150 million a year but, more important, we'll be among the leading producers of chemicals used in lots of familiar products such as plastic food packaging, polyester fibers for clothing, detergents, adhesives, cosmetics and plastic pipe.
U.S. Retail Sales growth
Also in the downstream, our U.S. network of more than 8,000 retail outlets are delivering increased sales growth.
Last year, branded gasoline sales were up 5 percent -- growing at twice the U.S. industry average -- and C-store sales increased about 25 percent.
We're continuing to build on our strategy of combining fuel sales and convenient quick-stop shopping. In 1999, we opened 11 ExtraMile stores in five states. This customer-focused concept offers fresh foods along with other convenience goods.
Finally, I'd like to talk about Chevron's entry into the world of e-business.
Chevron is aggressively merging its traditional oil and gas business with the new "information" economy.
- We're currently supporting our network of 8,000 retailers through an Internet-based system called the Chevron Retailer Alliance.
- We just started Petrocosm Marketplace, a global independent Internet site where buyers and sellers across the energy industry can purchase a range of products and services.
- Coming online this summer will be RetailersMarketXchange, the first Internet trade exchange for convenience store and small business retailers.
E-business is helping Chevron redefine how we do business and is leading us to higher levels of performance and profitability.
That concludes our look at Chevron's brightest prospects. These opportunities represent tremendous potential for growing our company and building stockholder value, and we can all feel very good about that.
I'll turn the podium back over to Dave O'Reilly who will now tell you about our strategies and objectives for the Year 2000 and beyond. Thank you very much.
Updated: April 2000