Chevron 2004 Annual Report Download - page 89
Download and view the complete annual report
Please find page 89 of the 2004 Chevron annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT 87
ReservesGovernance Thecompanyhasadoptedacomprehen-
sivereservesandresourceclassificationsystemmodeledafter
asystemdevelopedandapprovedbytheSocietyofPetroleum
Engineers,theWorldPetroleumCongressandtheAmerican
AssociationofPetroleumGeologists.Thesystemclassifies
recoverablehydrocarbonsintosixcategories,threedeemed
commercialandthreenoncommercial.Withinthecommercial
classificationareprovedreservesandtwocategoriesofunproved,
probableandpossible.Thenoncommercialcategoriesarealso
referredtoascontingentresources.Forreservesestimatestobe
classifiedasprovedtheymustmeetallSECstandardsanddem-
onstrateahighprobabilityofbeingproduced.
Provedreservesaretheestimatedquantitiesthatgeologic
andengineeringdatademonstratewithreasonablecertainty
toberecoverableinfutureyearsfromknownreservoirsunder
existingeconomicandoperatingconditions.Netprovedreserves
excluderoyaltiesandinterestsownedbyothersandreflectcon-
tractualarrangementsandroyaltyobligationsineffectatthe
timeoftheestimate.
Provedreservesareclassifiedaseitherdevelopedorunde-
veloped.Proveddevelopedreservesarethequantitiesexpectedto
berecoveredthroughexistingwellswithexistingequipmentand
operatingmethods.
Provedreservesdonotincludeadditionalquantitiesthat
mayeventuallyresultfromextensionsofcurrentlyprovedareas
orfromapplyingthesecondaryortertiaryrecoveryprocessesnot
yettestedanddeterminedtobeeconomic.
Duetotheinherentuncertaintiesandthelimitednatureof
reservoirdata,estimatesofundergroundreservesaresubjectto
changeasadditionalinformationbecomesavailable.
Provedreservesareestimatedbycompanyassetteams
composedofearthscientistsandreservoirengineers.Aspartof
theinternalcontrolprocessrelatedtoreservesestimation,the
companymaintainsaReservesAdvisoryCommittee(RAC)that
ischairedbythecorporatereservesmanager,whoisamember
ofacorporatedepartmentthatreportsdirectlytotheexecutive
vicepresidentresponsibleforthecompany’sworldwideexplo-
rationandproductionactivities.AlloftheRACmembersare
knowledgeableofSECguidelinesforprovedreservesclassifica-
tion.TheRACcoordinatesitsactivitiesthroughtwooperating
company-levelreservesmanagers.Thesetworeservesmanagers
arenotmembersoftheRACsoastopreservethecorporate-level
independence.
TheRAChasthefollowingprimaryresponsibilities:pro-
videindependentreviewsofthebusinessunits’recommended
reservechanges;confirmthatprovedreservesarerecognized
inaccordancewithSECguidelines;determinethatreserve
volumesarecalculatedusingconsistentandappropriatestand-
ards,proceduresandtechnology;andmaintaintheCorporate
ReservesManual,whichprovidesstandardizedprocedures
usedcorporatewideforclassifyingandreportinghydrocarbon
reserves.
Duringtheyear,theRACisrepresentedinmeetingswith
eachofthecompany’supstreambusinessunitstoreviewand
discussreservechangesrecommendedbythevariousassetteams.
Majorchangesarealsoreviewedwiththecompany’sStrategy
andPlanningCommittee,whosemembersincludetheChief
ExecutiveOfficerandtheChiefFinancialOfficer.Thecompany’s
annualreserveactivityisalsopresentedtoanddiscussedwith
theBoardofDirectors.Othermajorreserves-relatedissuesare
discussedwiththeBoardasnecessarythroughouttheyear.
RACsubteamsalsoconductin-depthreviewsduringthe
yearofmanyofthefieldsthathavethelargestprovedreserves
quantities.Thesereviewsincludeanexaminationoftheproved
reserverecordsanddocumentationoftheiralignmentwiththe
CorporateReservesManual.
ReserveQuantities AtDecember31,2004,totaloil-equivalent
reservesforthecompany’sconsolidatedoperationswere8.2bil-
lionbarrels.(Refertopage24forthedefinitionofoil-equivalent
reserves.)Nearly30percentwereintheUnitedStatesandabout
10percentinIndonesia.Forthecompany’sinterestsinequity
affiliates,oil-equivalentreserveswere3.1billionbarrels,nearly
85percentofwhichwereassociatedwiththecompany’s50percent
ownershipinTCO.Fewerthan20otherindividualpropertiesin
thecompany’sportfolioofassetseachcontainedbetween1per-
centand4percentofthecompany’soil-equivalentprovedreserves,
whichintheaggregateaccountedforabout35percentofthe
company’sprovedreservestotal.Theseotherpropertieswere
geographicallydispersed,locatedintheUnitedStates,South
America,Europe,westernAfrica,theMiddleEastandtheAsia-
Pacificregion.
IntheUnitedStates,totaloil-equivalentreservesatyear-
end2004were2.4billionbarrels.Ofthisamount,45percent,
20percentand35percentwerelocatedinCalifornia,theGulf
ofMexicoandotherU.S.areas,respectively.
InCalifornia,liquidsreservesrepresented95percentofthe
total,withmostclassifiedasheavyoil.Becauseofheavyoil’shigh
viscosityandtheneedtoemployenhancedrecoverymethods,
theproducingoperationsarecapitalintensiveinnature.Mostof
thecompany’sheavy-oilfieldsinCaliforniaemployacontinuous
steamfloodingprocess.
IntheGulfofMexicoregion,liquidsrepresentedapproxi-
mately60percentoftotaloil-equivalentreserves.Production
operationsaremostlyoffshoreand,asaresult,arealsocapital
intensive.Costsincludeinvestmentsinwells,productionplat-
formsandotherfacilities,suchasgatheringlinesandstorage
facilities.
InotherU.S.areas,thereservesweresplitaboutequally
betweenliquidsandnaturalgas.Forproductionofcrudeoil,
somefieldsutilizeenhancedrecoverymethods,includingwater-
floodandcarbondioxideinjection.
ChevronTexacooperatestheBoscanFieldinVenezuela
underaserviceagreement,buthasnotrecordedreservequantities
forthisoperation.
Thepatternofnetreservechangesshowninthefollowing
tables,forthethreeyearsendingDecember31,2004,isnotnec-
essarilyindicativeoffuturetrends.Thecompany’sabilitytoadd
provedreservesisaffectedby,amongotherthings,mattersthat
areoutsidethecompany’scontrol,suchasdelaysingovernment
permitting,partnerapprovalsofdevelopmentplans,declinesin
oilandgasprices,OPECconstraints,geopoliticaluncertainties
andcivilunrest.
Thecompany’sestimatednetprovedundergroundoiland
naturalgasreservesandchangestheretofortheyears2002,2003
and2004areshowninthefollowingtables.