Team Work - Together We Shall Go Forward

By Espy Price, Vice President
Chevron Overseas Petroleum Inc.

3rd Annual Kazakhstan InternationalOil & Gas Conference

Almaty, Kazakhstan

Introduction: Ceremonial

Thank you. Unfortunately, Dick Matzke is not here to attend this year's program and he sends his regrets. However, I know many of you here and it's my pleasure to fill in for Dick. And it is always a pleasure to be here in Almaty, and with this distinguished audience.

Allow me to begin by thanking President Nazarbayev for his continuing support of this important conference -- and my thanks to Prime Minister Kazhegeldin for opening the conference and for his excellent comments.

It has been my privilege to speak at each of the previous oil & gas conferences.

There have been many positive changes since the first conference in 1993. The petroleum industry and the government have worked together for the mutual benefit of all the people of Kazakhstan.

That is the nature of progress -- it takes time and cooperation and lots and lots of hard work.

As an industry, we certainly have much more work to do to achieve the full potential of this nation's natural resources of petroleum. But we can be very proud of what we have accomplished in so short a period of time. There has been one thing that has not changed during these last few years -- traditional Kazakh hospitality.

Everywhere I travel in your wonderful country I am treated with graciousness, generosity and dignity. Thank you for that, and thank you for the privilege of getting to know your country and the people of Kazakhstan.

Introduction: Recognition Of Individuals

Before I get into my main comments I want to say a few words about three special people.

First, allow me to extend my appreciation to Mr. Sappayev, who is a director of our project in Tengiz. He is with us today.

Mr. Sappayev's contribution to Tengizchevroil has been enormous. His understanding of the technical and financial aspects of the Tengiz field is critical to our success. But, perhaps even more important has been his understanding of people. He has helped show us the way to work together better.

Now, let me introduce you to someone I hope everyone here has a chance to meet during the conference or in the coming weeks -- Mr. Zana, who is the new general director of Tengizchevroil.

He is known to his friends -- and he has many -- just by his first name of Nick.

Nick, would you please stand.

Nick Zana is a U.S. citizen, but he might also be described as a citizen of the world. Nick was born and raised in Turkey. He received his university education in engineering in the United States -- including a Ph.D. in chemical engineering.

He joined Chevron in 1974 and has worked in a variety of increasingly responsible positions, including some time in Europe, and most recently as the managing director for Chevron's joint-venture project in the People's Republic of China.

Just a few weeks ago Nick was named to his new post with Tengizchevroil and ill primarily be here in Almaty at our new offices at the Marco Polo Hotel.

I hope you get a chance to drop by and spend some time with Nick Zana. Before I move on I must take a moment to thank another man -- Morley Dupre, who was the Tengizchevroil general director for the past three years. Morley's contribution to Tengizchevroil was enormous, and much of our success in Tengiz is due to his leadership and hard work. Morley now has a new assignment and a new challenge with Chevron back in the United States. Just before I left to come to Almaty he asked me to send you his regards and best wishes for continued success -- for Tengizchevroil and for all of Kazakhstan.

Almaty Developments: Chevron Here For Long-Term

In my brief time with you this morning I will bring you up to date on Tengizchevroil. But first, let me tell you about some of the changes you will be seeing right here in Almaty over the coming months.

I believe they illustrate an important point that I try to communicate whenever I find the opportunity: Chevron is committed to doing business in Kazakhstan . . . because Kazakhstan is a good place to do business. As I mentioned earlier, we have moved our Almaty office into the Marco Polo Hotel. It is more convenient for the growing activities of the Chevron family of companies doing business in Kazakhstan. Nick Zana and his Tengizchevroil staff is located there. Bruce Kososki of Chevron Overseas Petroleum company and his staff are there. Please stop by and see our offices when you have a chance. In addition, Stewart Ross, business manager for Chevron's lubricant business, will be headquartered in our new offices. Please stop by and see our offices when you have a chance.

I should also mention that we have started new marketing program in Almaty to sell our high-technology lubricants for a variety of industrial and commercial applications. You will recognize these lubricants by their name -- Delo -- and by the Chevron symbol that is respected around the world. One of the places you will see Delo products in the future will be the first Chevron service station in Almaty. Like our lubricant products, this full-service facility will be identical in quality to the stations we have in the United States. This is Chevron's first service station in the entire CIS. We're proud to have it in Almaty.

Tengiz Update: Introduce Central Metaphor

Now, returning to Tengiz . . . I've been thinking about how to describe the project and it occurred to me that I might use the language of sports. Tengizchevroil is like a young athlete -- robust, growing, healthy -- who can look forward to a long and successful career.

Tengizchevroil, when it reaches its full productive potential, will be an Olympic gold medal winner -- one of the world's greatest oil fields.

Tengiz - Important Changes

There have been positive changes since we last met together -- our young athlete is making great strides.

I think some of you with government agencies are aware of Tengizchevroil's accomplishments protecting the environment. They have completed the critically important assessment studies on air and water quality. They have built a state-of-the-art landfill facility. And they have improved the waste water treatment plant.

And some of you may also remember Tengizchevroil was able to start up the second big gas processing plant in Tengiz -- a facility that will ultimately allow production to be doubled to 6 million tons per year.

About mid-year we cleared another important hurdle with the successful start-up of the Demercaptanization Plant that processes the oil for transportation in pipelines.

As the name implies, this facility removes some chemicals that cause odors near the pipelines that carry the oil.

The results of the Plant have been impressive, with mercaptans reduced to a level twice as good as required by Transneft for pipeline transportation through Russia.

In other words, our young athlete in Tengiz has cleared a very important hurdle. The Demercaptanization Plant is truly an achievement in technology and is equal to anything found in the U.S. or Europe. It is a major contribution to Tengiz. Everyone in Kazakhstan can take pride in this important development.

Overall, Chevron's total investment in Tengiz is about $700 million since the foundation of the joint-venture in April of 1993. The joint-venture has brought many substantial physical improvements to the facilities in Tengiz.

Safety & Training: Tco Is Good for Employees

And it has brought many, many improvements to the lives of our nearly 4,400 employees -- but perhaps the most obvious is safety. We have re-drilled wells to make them safer, we have repaired or replaced faulty equipment, we have provided safety equipment ranging from special protective gloves to brand new fire trucks.

Most important is the extensive training we are continuously conducting with all of our employees . . . and lesson number one for our employees is that their first job is being safe. Nothing else matters if it isn't done safely.

In 1993 we could say we were making progress on safety. In 1994 we could say our safety record was as good as the average for international operations. Today, in 1995, I am proud to say the safety in Tengiz is comparable to safety record anywhere in the world.

And I'll make you a promise -- it's going to get even better. Another contribution to the lives of our employees is skills training. Maybe just a few statistics will illustrate the point:

  • More than 800 employees, nationals and expats alike, have received language instruction -- in English, Russian or Kazakh;
  • More than 450 have been trained on the computer systems;
  • More than 4000 have been trained in the operational control of the hundreds of oil field equipment systems in Tengiz;

In summary, almost all of the Tengizchevroil workforce has received one or another form of job-related training that helps Tengizchevroil and helps the employee.

Community: Tco Is Good for Neighbors

Another investment in which Kazakhstan and Chevron can take pride is the help Tengizchevroil has provided to the people in the Atyrau Oblast. The support has been very substantial -- and very well-received by the local community. The $50-million Atyrau Bonus Fund has passed the half-way mark with completion of a new heating plant, improvement to the medical equipment in the main hospital, and an extensive training program for the maternity hospital.

Tengizchevroil has also completed the construction of 20 new homes in Kulsary, and by the end of the year will complete work on the Kulsary water treatment plant and the medical clinic.

And there has been progress on many other community programs -- a housing loan program for employees, increased hiring of local workers, and local business development.

This young athlete of Tengizchevroil is making very good progress.

Key Message: Access to Export Pipelines

And yet -- the greatest challenge still remains.

If Tengiz is to grow and become a world champion it must be allowed to reach its full production potential. To proceed as we are is the same as asking a marathon runner to compete with weights tied to his feet.

Eventually one or more large pipelines will be built to service Tengiz -- and perhaps the entire Caspian region. Many people are working on this challenge, and I have no doubt that a solution will be found and additional pipelines will be built.

There are many ideas for these pipelines. And there is a great deal of speculation about routes and ownership and commercial terms. Chevron's position is well-known and completely consistent with international standards: we will finance the pipeline in proportion to our ownership interest in the pipeline. That's been our position for three years and it is still our position.

That's all I'm going to say on this subject. I don't want to dwell on it because it will be the focus of much of the discussion during this conference.

Today -- and for the next year or two -- I am more concerned with access to the existing pipelines.

Tengiz must be allowed to make steady progress. Tengizchevroil is capable of production volumes more than double the quota it has been given. In other words, the Tengiz oil field could be . . . growing . . . developing . . . expanding . . . and returning more to the community, to Kazakhstan, and to the entire region.

No athlete -- or oil field -- should be held back from its natural development.

There are risks to delayed development.

The world is filled with other oil fields and other investment opportunities, and we at Chevron see these opportunities every day -- in China, in Indonesia, the North Sea, in South America.

There is no end to attractive alternatives for investment funds. I would urge everyone in this room to support the joint-venture in this important task of opening existing pipeline systems to Tengiz oil. Tengizchevroil needs your help. And, most important, the Tengiz field and all of Kazakhstan needs your support.

The athlete of Tengiz needs our help to reach its potential. I'll end my comments by telling you about one small development at Tengizchevroil that I think is very important. During the past year the symbol of the company was changed slightly to include a few words. Above the symbol are the words "Team Work." Below the symbol are the words "Together We Shall Go Forward." Those few words tell the whole story. Thank you for your attention -- and for the privilege of being here with you today.

Updated: October 1995