Chevron 2005 Annual Report Download - page 32

30 CHEVRON CORPORATION 2005 ANNUAL REPORT
In December 2005, Chevron signed a transition agree-
ment with Petróleos de Venezuela, S.A. (PDVSA), the
Venezuelan state-owned petroleum company, to convert
contracts for the Boscan and LL-652 operating service
agreements into an Empresa Mixta (EM). The EM is a joint-
stock contractual structure with PDVSA as the majority
shareholder. Negotiation of the ownership and format of the
fi nal EM structure will be conducted during 2006. Possible
fi nancial implications of the EM structure are uncertain, but
are not expected to have a material effect on the company’s
consolidated fi nancial position or liquidity.
Global Natural Gas Projects In Angola, the company
awarded contracts in April 2005 for front-end engineering
and design studies for a multibillion-dollar onshore LNG
project located in northern Angola. This project will be
designed to help reduce fl aring of natural gas and represents a
major step toward the commercialization of some of Angola’s
vast natural gas resources. The company has a 36 percent
ownership interest in the Angola LNG project and will co-
lead development with the Angolan government’s national
oil company. Construction is expected to begin in 2007.
In April 2005, the company reached an agreement
with joint-venture participants in the Greater Gorgon Area,
offshore Western Australia that will enable the combined
development of natural gas at Gorgon and nearby gas fi elds
as one project. The company is a signifi cant holder of gas
resources in the area and will have an approximate 50 percent
ownership interest across most of the Greater Gorgon Area.
In June 2005, the company announced the decision to
move the Australian Greater Gorgon gas development proj-
ect into the front-end engineering and design phase for a
two-train (10 million metric tons per year) LNG facility and
a potential domestic gas plant on Barrow Island, targeting
initial production by 2010. Chevron is the operator and has a
50 percent ownership interest in the licenses for the Greater
Gorgon Area.
In the fourth quarter 2005, the company signed a Heads
of Agreement (HOA) for fi rst sale of LNG from the Gorgon
Project into Japan, the world’s largest LNG market. The
preliminary agreement was signed by Chevron Australia Pty
Ltd with Tokyo Gas Co., Ltd., a major Japanese utility com-
pany, for the purchase of 1.2 million metric tons per year of
Gorgon LNG over 25 years. Two additional HOAs were later
signed by Chevron Australia Pty Ltd with Chubu Electric
Co., Inc. and Osaka Gas Co., Ltd., both companies from
Japan. Each preliminary agreement was for the purchase of
1.5 million metric tons per year of Gorgon LNG over 25
years commencing in 2010 and 2011, respectively.
The company and its partners in the North West Shelf
(NWS) venture agreed in mid-2005 to expand the project’s
onshore LNG facilities in Western Australia. Chevron holds
a one-sixth interest in the NWS venture. The $1.5 billion
project includes adding a fi fth train that will increase LNG
export capacity by more than 4 million metric tons per year
to approximately 16 million metric tons per year, with start-
up expected in 2008. In December 2005, the NWS joint
venture participants approved development of the Angel
natural gas fi eld, which will provide the natural gas supply
for the Train 5 expansion.
In Nigeria, the company awarded a $1.7 billion con-
tract in April 2005 for the engineering, procurement and
construction of the Escravos gas-to-liquids project. Plant
construction began in 2005 including major equipment
fabrication and site preparation.
In the third quarter 2005, installation began on a
350-mile main offshore segment of the West African Gas
Pipeline that will provide natural gas to markets in Ghana,
Togo and Benin by connecting to an existing onshore
pipeline in Nigeria. The pipeline will have a capacity of
approximately 475 million cubic feet per day and will help in
the reduction of the fl aring of natural gas in the company’s
areas of operation.
In Russia, OAO Gazprom has included Chevron on a
list of companies that could continue further commercial
and technical discussions concerning the development and
related commercial activities of the Shtokmanovskoye Field.
Discussions were under way in early 2006, but the timing of
Gazprom’s selection of the company or companies that will
participate in the fi eld development was uncertain. Shtok-
manovskoye is a very large natural gas fi eld offshore Russia
in the Barents Sea. OAO Gazprom is Russia’s largest natural
gas producer.
In the United States, Chevron completed the acquisition
of the remaining 40 percent interest of Bridgeline Holdings,
L.P. in August 2005. Bridgeline manages and operates more
than 1,000 miles of pipeline and 12 billion cubic feet of
natural gas storage capacity in southern Louisiana.
In the third quarter 2005, the company fi led an appli-
cation with the Federal Energy Regulatory Commission to
own, construct and operate a natural gas import terminal
at the Casotte Landing site adjacent to Chevron’s refi nery
in Pascagoula, Mississippi. The terminal will be designed to
initially process 1.3 billion cubic feet of natural gas per day
from imported LNG.
In the fourth quarter 2005, the company committed to
pipeline and additional LNG terminal capacity in the Sabine
Pass area of Louisiana. The fi rst commitment was for 1 bil-
lion cubic feet per day of pipeline capacity in a new pipeline
and additional interconnect capacity to an existing pipeline.
The company also exercised its option to increase capacity at
a Sabine Pass LNG terminal from 700 million to 1 billion
cubic feet per day.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS