press release

Chevron Press Release - Growing Against The Odds, Caspian Oil Industry Achieves Critical Commercial

Caspian

(from left) Victor Fedotov, general director, Caspian Pipeline Consortium; John Battle MP, Minister for Science, Energy and Industry, Department of Trade & Industry, U.K.; and Richard Matzke, president, Chevron Overseas Petroleum.

LONDON, Nov. 4, 1998 -- The headlines of 1998 have painted the Caspian oil industry as paralyzed by pipeline problems, hamstrung by government wrangling and plagued by poor exploration results.

But a closer look reveals an industry achieving critical commercial mass, a regional force now showing the potential to drive geopolitical events, rather than be driven by them, Richard H. Matzke, president of Chevron Overseas Petroleum and a director of Chevron Corp., told a Caspian oil conference.

In a wide-ranging speech today, Matzke reaffirmed that the long-awaited approval of the $2.2 billion Caspian Pipeline project by the Russian federal government is imminent.

The report was underscored by Viktor Fedotov, director general of the Caspian Pipeline Consortium, who joined Matkze at the podium and said, All technical issues have now been settled with the expert review bodies.

Dismissing early reports of Caspian exploration failures, Matzke cited a serious shortage of offshore drilling rigs and said, The oil industry has barely begun to explore the Caspian. The eager outside world will have to accept that its going to take quite a while to find out whats down there. None of the prime offshore areas of the world have revealed their oil and gas treasures in just a few years or a few wells.

Premature judgements on exploration, said Matzke, can be blamed partly on widely publicized estimates of Caspian oil reserves in the hundreds of billions of barrels. The same estimates also fanned the flames of speculation about big new regional pipelines, he said: Although multiple pipelines are needed, now that times are tougher in the oil business, any pipeline that cant be commercially justified is going to have a hard time finding friends with money. Were very pleased that CPC will be the next pipeline in the logical development of the regions infrastructure.

Low oil prices are a serious situation, said Matzke. But he added, Its essential to recognize that in 1998, for the first time, oil prices became as important as oil politics in the Caspian. And in fact, this has helped the industry to re-focus on fundamentals. Isolation on the world map can not provide insulation from world oil market trends or global investment requirements. During the year, as the value of barrels dropped in the Caspian, the value of efficient operations increased.

Personally, I think its healthy that the Caspian oil industry is coming back to fundamentals and focusing on the serious commercial priorities of the next two to three years. We need to cooperate regionally to build an industry which will be competitive globally in the long term.

Mr. Matzkes speech is entitled: Caspian Oil: Cooperation or Competition?

Updated: November 1998