press release

Chevron Press Release - Genesis Project Anchors Growing Chevron Commitment To 'Deepwater' Gulf Of Mexico

NEW ORLEANS, June 19, 1996 -- Underscoring its commitment to 'deepwater' energy resources and technology, Chevron today announced it is proceeding with the $750 million "Genesis" project to develop a new oil and gas field in Gulf of Mexico waters half-a-mile deep.

"Chevron has long been one of the largest producers in the gulf's mature areas, keeping oil and gas flowing from older fields while also developing new resources," said Bob Herrin, a Chevron U.S.A. Production Co. vice president in charge of Gulf of Mexico operations.

"We feel the go-ahead for Genesis -- along with our expanded inventory of deepwater leases and our new commitment to drilling numerous deepwater exploratory wells -- should help us remain a top participant in the gulf."

Genesis is Chevron's first operated deepwater development. However, the company last year participated in three exploratory wells operated by other companies in other areas of the deepwater gulf. One well, operated by Texaco Inc., yielded the previously announced Gemini oil and gas discovery in which Chevron holds a 40 percent interest.

"As Genesis takes its place alongside similar projects pioneered by others, it reaffirms the deepwater gulf's role as a promising new source of oil and gas," said Herrin.

Besides its Genesis holdings, Chevron has recently built a large portfolio of deepwater prospects in the gulf, said Herrin.

Bidding aggressively with other companies during 1995 and 1996, Chevron was high bidder on 118 new deepwater leases in three federal lease auctions. The effort tripled the company's deepwater targets and created one of the five largest inventories of deepwater exploratory leases in the oil industry (182 tracts in waters ranging from about 1,000 feet to more than a mile deep).

Herrin said Chevron plans to drill exploratory wells over the next three years using the deepwater drilling rig Diamond Ocean Quest. Chevron has signed an exclusive, long-term contract for the rig, capable of drilling in waters up to 3,500 feet deep. Chevron now has more than 60 people devoted to deepwater work, many of them assigned to Genesis.

Formerly named the "Green Canyon 205" or "Vancouver" project, Genesis should start production in late 1998 using a floating "spar" production facility (see related June 19 Chevron news release). Chevron is operating the project for itself (56.67 percent interest), Exxon (38.38 percent) and FINA (4.95 percent). Cost of the Genesis production facility and development drilling is projected at $750 million.

Genesis' daily output should reach about 55,000 barrels of oil and 72 million cubic feet of natural gas. Treated oil and gas will be pipelined to shore. Project reserves, located in three different leases in the Green Canyon area, are estimated in excess of 160 million barrels of oil and gas (measured as oil-equivalent).

So-called "deepwater" projects differ from most offshore developments because they often require expensive, floating production facilities attached to the sea floor with cables or other flexible systems. The wells extend to the sea floor and then penetrate thousands of feet into the earth to tap oil and gas and bring it to the surface.

Conventional offshore projects employ massive steel platforms which stand on the sea floor and support the production facilities above. Today's tallest conventional platform stands in waters 1,350 feet deep -- but most stand in waters ranging from 50 to 400 feet.

The oil industry has been drilling exploratory wells in deep water for many years, discovering a number of large accumulations of oil and gas. But the technology for recovering these resources wasn't proven until 1989, when the first true deepwater production system was installed in 1,760 feet of water. In 1993, a deepwater facility was placed in waters 2,800 feet deep, and projects now planned or in progress will tap fields in waters 3,000 to 5,400 feet deep.

For some deepwater natural gas fields, automated sea-floor production facilities -- connected to distant conventional platforms via seafloor pipelines -- are currently being used.

Chevron U.S.A. Production Co., based in Houston, is the U.S. oil and gas subsidiary of San Francisco-based Chevron Corp.

Updated: June 1996