speech

Chevron's Worldwide Success Story

By James N. Sullivan, Vice Chairman of the Board
Chevron Corporation

Annual Meeting of Stockholders

New Orleans, Louisiana

Also see a press release regarding this speech.

Thank you, Ken. And good morning. It's a pleasure to be in New Orleans.

I know this area pretty well because I lived in Pascagoula twice -- for a total of more than five years. But I've been gone long enough to have lost my accent.

Using New Orleans as our base, I'd like to take you on a tour of Chevron's worldwide operations. To start, this map will give you an overview of where we do business . . in about 90 countries.

The yellow dots mark the areas where we explore for and produce crude oil and natural gas. That's the "upstream" side of our business. The orange dots show our many marketing and refining -- or "downstream" -- operations. The green dots indicate other important operations, such as chemicals and coal mining. Finally, the lines show our major transportation routes -- pipelines or shipping.

I think you'll agree that Chevron is a major, international company.

Let's stop in the United States for a look at refining, marketing and transportation operations. Financially, they were among our star performers last year, more than doubling their 1996 operating earnings.

Although the U.S. market is extremely competitive, Chevron's retail gasoline volumes climbed last year. We're now the number 1 or 2 marketer in 14 key metro markets.

Over the past few years, you've probably noticed that the familiar red and blue "chevron" means more than top-quality gasoline. More and more, you'll find many other features under the Chevron sign. About 75 percent of our stations now have convenience stores -- including our new "Grand Entrance" stores.

Many Chevron stations now have another familiar sign -- the "Golden Arches" of McDonald's. By year-end, we should have 100 in operation.

Never one to rest on its laurels, Chevron has a brand new convenience entry. We call it -- "Foodini's Fresh Meal Market" -- and here's the first one. It opened last month near San Francisco. At Foodini's we offer our customers an "escape from cooking" with freshly prepared, pre-packaged breakfasts, lunches and dinners to go.

Chevron, of course, continues to take excellent care of cars -- large and small . . . very small.

Did you know that we had the top-selling car line in the U.S. last year? I'm referring, of course, to the stars of Chevron's award-winning TV commercials -- our toy cars. We've sold nearly 5 million of these extremely popular -- and profitable -- little vehicles.

In June, these new models will be coming out. I introduce Danni Driver and Leslie LX. Then in November -- in time for the holidays -- you'll be seeing Kelly Kompact and Tina Turbo. That will bring the number in our fleet to 13.

Outside North America, most of Chevron's refining and marketing operations are through our highly successful Caltex joint venture. In more than 60 countries, Chevron's operations are identified by the Caltex logo.

Many of the Caltex operations are in the Asia-Pacific region, which has been going through a period of economic turmoil. We don't expect this to last, and Caltex is well-positioned for the future, as well as the present.

Now, let's tour our worldwide exploration and production operations. And what better place to start than here in the Gulf of Mexico, where Chevron has been a successful player for many decades.

We have two deepwater projects under way. The first is "Genesis." We're using a mammoth "floating spar" structure to reach the field. It was built in Finland and towed across the Atlantic to Corpus Christi, where the sections are being joined. The topsides are being built at Morgan City and will be added later. The whole production platform -- which will look like this -- will be in place by the end of the year.

The second project -- called "Gemini" -- is smaller and will use a subsea system. We're expecting production to start the middle of next year.

By the way -- there are drawings of both Genesis and Gemini in the lobby, if you'd like to take a closer look.

We'll be very busy in this area for some time. We've identified about 60 "drillable" prospects. We have three rigs under contract, including the Glomar Explorer, a recently re-outfitted deepwater drillship that can operate in water nearly 8,000 feet deep.

While we have our feet wet -- figuratively speaking -- let's tip the globe and look at the area about 200 miles offshore Newfoundland, where our massive Hibernia Platform started producing oil last November. This field lies in what is called "Iceberg Alley."

Some of you recently may have seen a movie about what can happen when a ship runs into an iceberg. That's why we built Hibernia to rebound a 12-million-pound iceberg. This platform is as tall as a 75-story building and weighs 1.2 million tons.

Let's stay on this side of the Atlantic and move onshore -- to Venezuela, where we have our main activities in South America. Chevron's recognized expertise in heavy oil production and our excellent environmental record won us an innovative alliance with the state oil company of Venezuela to operate the giant Boscan Field.

Then last June, we won a contract to produce another giant field in Lake Maracaibo. We take over operation of the LL-652 Field next week.

We can cross the Atlantic now -- to the North Sea, where our activities continue to grow. Our current project is Britannia, the largest undeveloped gas field in the U.K. North Sea. The platform has been installed -- you see the jacket being launched here -- and we're expecting first production in August.

In January, we produced the 100 millionth barrel of oil from our Alba Field, which sits on top of the Britannia Field.

Now, let's continue our whirlwind tour by dropping down to Africa.

Offshore western Africa is an exploration hot spot now -- especially the deepwater areas offshore Angola and the Republic of Congo -- as Ken has mentioned. The fields lie -- as we say -- "on trend" along the coast.

Farther north -- in Nigeria -- we started production about two weeks ago from the Gbokoda oil field in the western Niger Delta. This is the second of four new fields in the area to start production this year.

Onshore, phase two of our Escravos natural gas project is under way. In addition, we've recently announced plans for a new plant to convert natural gas into synthetic crude oil and then into high-quality diesel and naphtha products.

Now, let's give our globe another spin and land in the Caspian region -- which is exactly what I did last month. I spent several days visiting Kazakhstan, Azerbaijan, Turkey and Georgia.

This is a region of great importance to Chevron and to the petroleum industry.

We consider this area so important to our future that we've added a new strategic intent to our list of 8. This new strategy calls for accelerating the growth of our earnings in this area and goes beyond exploration and production. We've set up a Caspian Action Team of 10 people who represent every function in the company. It will be their job to find ways to accelerate Chevron's total growth in the area.

The countries in the region are in a period of rapid economic growth. We have a wonderful opportunity to expand our business and -- at the same time -- help generate wealth and greater well-being for the people of the area.

Chevron is the dominant company in the region, and we want to remain so for a long time.

Right now it seems that every major international oil company -- and a lot of the Mom-and-Pop oil companies -- have a representative in Baku, the capital of Azerbaijan. You could hold an American Petroleum Institute convention in the Baku Hyatt with just the hotel guests.

But, Chevron has more than a presence. We have the exploration rights for a deepwater block called Absheron -- a huge, well-defined geologic structure with great potential.

I visited the Republic of Georgia because of the latest agreement we've signed to use its pipeline and rail terminal facilities to transport crude oil from the Caspian to the Black Sea. As you can see, Georgia is an important transportation corridor for our Tengiz project, which lies on the other side of the Caspian.

A real highlight of our trip was participating in the fifth anniversary celebration of Tengizchevroil, our joint venture to produce oil from the giant Tengiz Field in the Republic of Kazakhstan.

I was one of about 450 people -- community leaders, representatives of the government and employees of the partner companies -- who gathered in Atyrau on April 6 to mark this very significant occasion.

Tengizchevroil was the first major joint venture between a U.S. company and a country from the former Soviet Union. There were many skeptics at the time.

But you've heard from Ken how successful this project is and the enormous potential it holds.

Another spin of the globe, and we come to Indonesia -- a country with a long history for Chevron. We started exploring there before World War II, and Indonesia has been a major part of our upstream operations since the 1950s.

Today, giant fields such as Minas and Duri are helping increase production to 765,000 barrels a day. Our Indonesian operations account for nearly 16 percent of our total, worldwide net liquids production.

Traveling north brings us to China, where Chevron has been producing oil since 1990. Until last year, all our operations had been offshore. Now, we have exploration rights beneath the onshore Shengli Field, which is China's second largest. We'll be looking for oil in deeper geologic zones that lie beneath existing production. Meanwhile, our offshore production continues to thrive.

Turning southeast brings us to Papua New Guinea. We're now producing oil from three areas -- Kutubu -- our first discovery -- and from Gobe and Moran.

We're also exploring the possibility of building a pipeline that will enable us to move the natural gas now stranded in Papua New Guinea to markets in Australia.

Our final stop -- before returning home -- is Australia, another major Chevron success story. Not only are we doing very well now, but we also see many opportunities for future expansion.

We hold interests in both oil and gas fields offshore Western Australia. The oil fields are in green and the gas fields are red.

As you can see, a major potential for expansion lies in these huge natural gas fields. Much of this gas is turned into liquefied natural gas -- LNG -- at our North West Shelf plant at Dampier and sold to customers in Japan. Right now, we're selling every possible ton of LNG that we can squeeze out of the plant.

We're working with our partners to develop a plan to expand production.

After a long trip across the Pacific, we're back home. As you can see, Chevron has highly successful operations all around our globe. And, we have excellent opportunities to continue building on these successes.

I said we were home, but I do have a couple of more stops I'd like to make. There are two other Chevron companies with worldwide operations that I'd like to tell you about.

One is Chevron Chemical. This map lists the company's major marketing areas. The chemicals industry is a very cyclical business. Although we're at the low end of the cycle now, we're making major investments that will pay off -- both over the span of the cycle and at the top of the next one.

Last year, we completed expansions of plants in Texas and Ohio. Two other expansions -- one at Pascagoula and one in Orange, Texas -- will be completed over the next year.

Projects also are under way in Saudi Arabia and China . . . and in Singapore, where Chevron is building Asia's first fuel additives plant with a complete line of products. This new facility will start up by the end of the year.

Finally, I'd like to praise the outstanding environmental and safety record of our shipping company, which each year moves about 500 million barrels of oil around the world. Over many years, it has earned and maintained the well-deserved reputation as the top shipping company.

To ensure this exemplary record, Chevron Shipping has ordered four new double-hulled tankers, each equipped with the latest technology. These new VLCCs will join our fleet by 2000.

That concludes our tour.

All the success stories I've described this morning are the direct result of the hard work and creative energy of Chevron's employees. They continue to amaze me. They are our future. My thanks for another year of outstanding accomplishments.

Also, my thanks to all our stockholders for their continuing support. And thank you for coming along on my global tour.

Updated: April 1998