Chevron 2012 Annual Report Download - page 15

Chevron Corporation 2012 Annual Report 13
production in the Frade Field. e company’s ultimate expo-
sure related to the incident is not currently determinable, but
could be signicant to net income in any one period.
e company entered into a nonbinding nancing term
sheet with Petroboscan, a joint stock company owned 39.2
percent by Chevron, which operates the Boscan Field in Ven-
ezuela. When nalized, the nancing is expected to occur
in stages over a limited drawdown period and is intended to
support a specic work program to maintain and increase
production to an agreed-upon level. e terms are designed to
support cash needs for ongoing operations and new develop-
ment, as well as distributions to shareholders — including
current outstanding obligations. e loan will be repaid from
future Petroboscan crude sales. Denitive documents are
under negotiation.
Downstream Earnings for the downstream segment are
closely tied to margins on the rening, manufacturing and
marketing of products that include gasoline, diesel, jet fuel,
lubricants, fuel oil, fuel and lubricant additives, and petro-
chemicals. Industry margins are sometimes volatile and can
be aected by the global and regional supply-and-demand bal-
ance for rened products and petrochemicals and by changes
in the price of crude oil, other renery and petrochemical
feedstocks, and natural gas. Industry margins can also be
inuenced by inventory levels, geopolitical events, costs of
materials and services, renery or chemical plant capacity uti-
lization, maintenance programs, and disruptions at reneries
or chemical plants resulting from unplanned outages due to
severe weather, res or other operational events.
Other factors aecting protability for downstream opera-
tions include the reliability and eciency of the company’s
rening, marketing and petrochemical assets, the eectiveness
of its crude oil and product supply functions, and the volatility
of tanker-charter rates for the company’s shipping operations,
which are driven by the industry’s demand for crude oil and
product tankers. Other factors beyond the company’s control
include the general level of ination and energy costs to oper-
ate the company’s rening, marketing and petrochemical
assets.
e company’s most signicant marketing areas are the
West Coast of North America, the U.S. Gulf Coast, Asia and
southern Africa. Chevron operates or has signicant ownership
interests in reneries in each of these areas. e company com-
pleted a multiyear plan in 2012 to streamline the downstream
asset portfolio to concentrate resources and capital on strategic
assets. In third quarter 2012, the company completed the sale of
its Perth Amboy, New Jersey, renery, which had been operated
as a products terminal in recent years. In 2012, the company
completed the sale of its fuels marketing and aviation businesses
in eight countries in the Caribbean.
Refer to the “Results of Operations” section on pages 15
through 16 for additional discussion of the company’s down-
stream operations.
All Other consists of mining operations, power generation
businesses, worldwide cash management and debt nancing
activities, corporate administrative functions, insurance opera-
tions, real estate activities, energy services, alternative fuels, and
technology companies.
Operating Developments
Key operating developments and other events during 2012
and early 2013 included the following:
Upstream
Australia In October 2012, the company acquired addi-
tional interests in the Clio and Acme elds in the Carnarvon
Basin in exchange for Chevron’s interests in the Browse
development. Consolidating interests in the Carnarvon Basin
ts strategically with long-term plans to grow the Wheatstone
area resource base and creates expansion opportunities for the
Wheatstone Project.
In September 2012, the company completed the sale of
an equity interest in the Wheatstone Project to Tokyo Elec-
tric.
During 2012 and early 2013, the company announced
natural gas discoveries at the 47.3 percent-owned and oper-
ated Pontus prospect in Block WA-37-L, the 50 percent-owned
and operated Satyr prospect in Block WA-374-P, the 50 per-
cent-owned and operated Pinhoe prospect in Block
WA-383-P, the 50 percent-owned and operated Arnhem pros-
pect in Block WA-364-P, and the 50 percent-owned and
operated Kentish Knock South prospect in Block WA-365-P.
ese discoveries are expected to contribute to potential
expansion opportunities at company-operated LNG facilities.
During 2012, Chevron signed nonbinding Heads of
Agreement with Tohoku Electric and Chubu Electric and
additional binding agreements with Tokyo Electric for LNG
otake from the Wheatstone Project. To date, more than 80
percent of Chevron’s equity LNG from Wheatstone is cov-
ered under long-term agreements with customers in Asia.
Angola In early 2013, the company announced it plans
to proceed with the development of the Mafumeira Sul Project
located in Block 0.
Angola-Republic of the Congo Joint Development
Area In third quarter 2012, the company reached a nal
investment decision on the cross-border development of the
deepwater Lianzi Field.
Bangladesh In July 2012, the company reached a nal
investment decision on the Bibiyana Expansion Project.
Canada In February 2013, Chevron acquired a 50
percent-owned and operated interest in the Kitimat LNG
project and proposed Pacic Trail Pipeline, and a 50 percent
nonoperated interest in approximately 644,000 acres in the
Horn River and Liard Basins.
China In 2012, Chevron entered into an agreement to
acquire two exploration blocks in the South China Sea’s Pearl
River Mouth Basin. Government approval is expected in
2013.