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Chevron Looks to Boost Production, Build on 2005 Success

Taking its success in 2005 with the hopes of building on it, Chevron CEO David O'Reilly said the company hopes to grow oil and natural gas production by more than 3% per year over the next five years. He noted that the company has added over 4 billion barrels of resources in the past four years.

Speaking to analysts at the New York Stock Exchange last week, O'Reilly outlined a five-year plan for the company's sustained growth, which included updating its progress on a number of major oil and natural gas development projects. The company upped net income in 2005 from $13.3 billion in 2004 to $14.1 billion (see NGI, Jan. 30).

"2005 was a momentous year," said O'Reilly. "Through a disciplined approach, we have built very strong and integrated positions in growth areas of the world. We've converted those positions into tangible production growth, and we're creating a platform for sustained performance going forward."

O'Reilly emphasized that Chevron has changed dramatically since 1998, with the capacity of producing approximately 2.7 million boe/d. The company has tripled in size and has become more balanced geographically. He pointed out that in 1998, almost half of Chevron's production was in North America, but currently North America accounts for less than 30%, with about 25% now in the Asia-Pacific region. "Over this period, our production has grown by two-thirds and our proved reserves have about doubled," O'Reilly said.

"Our success is predicated on our core business strategies," he said. "We are focused on three things: growing upstream profitability in core areas and building new legacy positions, commercializing our equity natural gas resource base, and improving downstream returns in markets with the best fundamentals."

John Gass, corporate vice president responsible for Chevron's gas business, explained to analysts the company's strategies to develop its resource base through liquefied natural gas (LNG) and gas-to-liquids (GTL) projects.

"The LNG element of our gas strategy is gaining momentum. In just the past year, we've made significant progress," Gass said. In addition to entering a number of agreements on the supply side, Chevron secured 1 Bcf/d of capacity at the Sabine Pass terminal in Louisiana and filed permits with the Federal Energy Regulatory Commission for the Casotte Landing terminal to be located near the company's Pascagoula, MS refinery.

"We are also making significant progress in building a global gas-to-liquids business," added Gass. "GTL's time has come. The technology is viable, and the economics for GTL have dramatically improved." Chevron recently broke ground in Nigeria on a world-scale GTL plant scheduled to come online in 2009.

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