Exploration Activities
Refer to Table I on page 99 for detail on the company’s exploration expenditures and costs of unproved property acquisitions for 2020, 2019 and 2018.
The following table summarizes the company’s net interests in productive and dry exploratory wells completed in each of the last three years, and the number of exploratory wells drilling at December 31, 2020. “Exploratory wells” are wells drilled to find and produce crude oil or natural gas in unknown areas and include delineation and appraisal wells, which are wells drilled to find a new reservoir in a field previously found to be productive of crude oil or natural gas in another reservoir or to extend a known reservoir.
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|
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|
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Wells Drilling*
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|
Net Wells Completed
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|
|
at 12/31/20
|
|
2020
|
|
2019
|
|
2018
|
|
|
Gross
|
Net
|
|
Prod.
|
Dry
|
|
Prod.
|
Dry
|
|
Prod.
|
Dry
|
|
United States
|
1
|
|
—
|
|
|
4
|
|
1
|
|
|
10
|
|
2
|
|
|
13
|
|
2
|
|
|
Other Americas
|
—
|
|
—
|
|
|
2
|
|
2
|
|
|
—
|
|
—
|
|
|
1
|
|
1
|
|
|
Africa
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Asia
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
—
|
|
|
Australia
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Europe
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
1
|
|
|
Total Consolidated Companies
|
1
|
|
—
|
|
|
6
|
|
3
|
|
|
10
|
|
2
|
|
|
15
|
|
4
|
|
|
Affiliates
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Total Including Affiliates
|
1
|
|
—
|
|
|
6
|
|
3
|
|
|
10
|
|
2
|
|
|
15
|
|
4
|
|
|
* Gross wells represent the total number of wells in which Chevron has an ownership interest. Net wells represent the sum of Chevron’s ownership interest in gross wells.
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Review of Ongoing Exploration and Production Activities in Key Areas
Chevron has exploration and production activities in many of the world’s major hydrocarbon basins. Chevron’s 2020 key upstream activities, some of which are also discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, beginning on page 37, are presented below. The comments include references to “total production” and “net production,” which are defined under “Production” in Exhibit 99.1 on page E-7.
The discussion that follows references the status of proved reserves recognition for significant long-lead-time projects not on production as well as for projects recently placed on production. Reserves are not discussed for exploration activities or recent discoveries that have not advanced to a project stage, or for mature areas of production that do not have individual projects requiring significant levels of capital or exploratory investment.
United States
Upstream activities in the United States are primarily located in Texas, New Mexico, California, Colorado and the Gulf of Mexico. Acreage for the United States can be found in the table on page 7. Net daily oil-equivalent production in the United States can be found in the table on page 6.
With the acquisition of Noble in October 2020, Chevron increased its position in the Permian Basin and acquired acreage in Colorado and Wyoming.
The company’s acreage in the Permian Basin of West Texas and southeast New Mexico includes multiple stacked formations that enable production from several layers of rock in different geologic zones. Chevron has implemented a factory development strategy in the basin, which utilizes multiwell pads to drill a series of horizontal wells that are completed concurrently using hydraulic fracture stimulation. The company is also applying data analytics and technology to drive improvements in identifying well targets, in drilling and completions and in production performance. In 2020, Chevron’s net daily unconventional and conventional production in the Permian Basin averaged 294,000 barrels of crude oil, 980 million cubic feet of natural gas and 150,000 barrels of NGLs.
In 2020, Chevron was one of the largest crude oil producers in California. Construction was completed in April 2020 on a new 29-megawatt solar farm to supply power to the Lost Hills Field. In October 2020, Chevron announced participation in a carbon capture trial in California with start-up expected in 2022.
In Colorado, development in the Denver-Julesburg (DJ) Basin includes Wells Ranch and Mustang areas. Chevron’s integrated development plan provides an opportunity to efficiently produce these resources.
In Wyoming, the company has acreage in the Powder River and Green River Basins.
During 2020, net daily production in the Gulf of Mexico averaged 175,000 barrels of crude oil, 96 million cubic feet of natural gas and 11,000 barrels of NGLs. Chevron is engaged in various operated and nonoperated exploration, development and production activities in the deepwater Gulf of Mexico. Chevron also holds nonoperated interests in several shelf fields.
The deepwater Jack and St. Malo fields are being jointly developed with a host floating production unit located between the two fields. Chevron has a 50 percent interest in the Jack Field and a 51 percent interest in the St. Malo Field. Both fields are company operated. The company has a 40.6 percent interest in the production host facility, which is designed to accommodate production from the Jack/St. Malo development and third-party tiebacks. Additional development opportunities for the Jack and St. Malo fields progressed in 2020. Stage 3 development drilling continued with the final well completed in May 2020. The St. Malo Stage 4 waterflood project includes two new production wells, three injector wells, and topsides water injection equipment at the St. Malo field. First injection is expected in 2023. The Stage 4 multiphase subsea pump project replaces the single-phase subsea pumps in both the Jack and St. Malo fields. Progress during 2020 included beginning pump module installation. Proved reserves have been recognized for the multiphase subsea pump project. The Jack and St. Malo fields have an estimated production life of 30 years.
The company has a 15.6 percent nonoperated working interest in the deepwater Mad Dog Field. Project execution continued in 2020 on the Mad Dog 2 Project. This phase is the development of the southwestern extension of the Mad Dog Field, including a new floating production platform with a design capacity of 140,000 barrels of crude oil per day. Drilling and construction of the floating production unit are progressing as planned, and first oil is expected in 2022. Proved reserves have been recognized for the Mad Dog 2 Project.
Chevron has a 60 percent-owned and operated interest in the Big Foot Project, located in the deepwater Walker Ridge area. Development drilling activities are ongoing, with the third production well coming online in September 2020. An additional well is expected to come online in third quarter 2021. The project has an estimated production life of 35 years.
The company has a 58 percent-owned and operated interest in the deepwater Tahiti Field. Progress continued on the Tahiti Upper Sands Project, which includes topsides facility enhancements to process high gas rates with start-up anticipated in third quarter 2021. Proved reserves have been recognized for this project. The Tahiti Field has an estimated remaining production life of more than 20 years.
Chevron holds a 25 percent nonoperated working interest in the Stampede Field, which is located in the Green Canyon area. Production ramp-up continued in 2020, with the final producing well completed in March 2020. The field has an estimated production life of 30 years.
Chevron has owned and operated interests of 62.9 to 75.4 percent in the unit areas containing the Anchor Field. Stage 1 of the Anchor development consists of a seven-well subsea development and a semi-submersible floating production unit. The planned facility has a design capacity of 75,000 barrels of crude oil and 28 million cubic feet of natural gas per day. Development work continued in 2020 with construction of the drillship, acquisition of seismic data, detailed engineering, equipment procurement and commencement of fabrication for the production facilities. At the end of 2020, no proved reserves were recognized for this project.
Chevron has a 60 percent-owned and operated interest in the Ballymore Field located in the Mississippi Canyon area and a 40 percent nonoperated working interest in the Whale discovery located in the Perdido area. After successful appraisal programs on the Ballymore project, Chevron is planning to enter front-end engineering design (FEED) in second quarter 2021. FEED activities on the Whale project continued in 2020, with final investment decision expected in second-half 2021. At the end of 2020, proved reserves had not been recognized for these projects.
During 2020, the company participated in two exploration wells and one appraisal well in the deepwater Gulf of Mexico. In February 2020, the first well in the Esox prospect, where Chevron holds a 21.4 percent nonoperated working interest, was tied into the Tubular Bells production facility.
In March 2020, Chevron added 15 blocks in a U.S. Gulf of Mexico lease sale. Chevron subsequently added eight blocks resulting from a November 2020 U.S. Gulf of Mexico lease sale.
The company sold its assets in the Marcellus and Utica Shale areas in November 2020.
Other Americas
“Other Americas” includes Argentina, Brazil, Canada, Colombia, Mexico, Suriname and Venezuela. Acreage for "Other Americas" can be found in the table on page 7. Net daily oil-equivalent production from these countries can be found in the table on page 6.
Canada Upstream interests in Canada are concentrated in Alberta and the offshore Atlantic region of Newfoundland and Labrador. The company also has interests in the Beaufort Sea region of the Northwest Territories and British Columbia.
The company holds a 20 percent nonoperated working interest in the Athabasca Oil Sands Project (AOSP) in Alberta. Oil sands are mined from both the Muskeg River and the Jackpine mines, and bitumen is extracted from the oil sands and upgraded into synthetic oil. Carbon dioxide emissions from the upgrader are reduced by carbon capture and storage facilities.
Chevron has a 70 percent-owned and operated interest in most of the Duvernay shale acreage. By early 2021, a total of 203 wells had been tied into production facilities.
Chevron holds a 26.9 percent nonoperated working interest in the Hibernia Field and a 23.7 percent nonoperated working interest in the unitized Hibernia Southern Extension areas offshore Atlantic Canada. The company holds a 29.6 percent nonoperated working interest in the heavy oil Hebron Field, also offshore Atlantic Canada, which has an expected economic life of 30 years.
Chevron holds a 50 percent-owned and operated interest in Flemish Pass Basin Block EL 1138. The company also holds a 25 percent nonoperated working interest in blocks EL 1145, EL 1146 and EL 1148 and a 40 percent nonoperated working interest in EL 1149.
Chevron holds a 50 percent-owned and operated interest in the Kitimat LNG and Pacific Trail Pipeline projects and a 50 percent-owned and operated interest in the Liard and Horn River shale gas basins in British Columbia. Efforts are underway to evaluate strategic alternatives for these projects.
Mexico The company owns and operates a 33.3 percent interest in Block 3 in the Perdido area of the Gulf of Mexico. Seismic interpretation progressed in 2020. Chevron holds a 37.5 percent-owned and operated interest in Block 22 where reprocessing of 3-D seismic data continued in 2020. The company also holds a 40 percent nonoperated interest in Blocks 20, 21 and 23 in the Cuenca Salina area in the deepwater Gulf of Mexico. Two exploration wells were drilled in the first half of 2020.
Argentina Chevron holds a 50 percent nonoperated interest in the Loma Campana and Narambuena concessions in the Vaca Muerta Shale. Evaluation of the nonoperated Narambuena Block continued in 2020, including a four-well appraisal program which achieved first oil in November 2020. Chevron has a 90 percent-owned and operated interest with a four-year exploratory concession in Loma del Molle Norte Block.
In April 2020, drilling and completion activity was halted due to the COVID-19 pandemic at the nonoperated Loma Campana concession in the Vaca Muerta Shale. Completion activity resumed in fourth quarter 2020 with drilling activity planned to re-start in first quarter 2021. During 2020, 17 horizontal wells were drilled. This concession expires in 2048.
Chevron also owns and operates a 100 percent interest in the El Trapial Field with both conventional production and Vaca Muerta Shale potential. The company utilizes waterflood operations to mitigate declines at the operated El Trapial Field and continues to evaluate the potential of the Vaca Muerta Shale. The eight-well drilling program completed in third quarter 2020, and first oil was achieved in October 2020. Chevron expects to complete the appraisal program in second quarter 2021. The El Trapial concession expires in 2032.
Brazil In February 2020, the company initiated the process to sell its 37.5 percent nonoperated interest in the Papa-Terra oil field.
Chevron holds between 30 to 45 percent of both operated and nonoperated interests in 11 blocks within the Campos and Santos basins. One exploration well was drilled in 2020.
Colombia In April 2020, the company completed the sale of its interests in the offshore Chuchupa and onshore Ballena natural gas fields. Chevron holds a 40 percent-owned and operated working interest in the offshore Colombia-3 and Guajira Offshore-3 Blocks. Exploration activities continued in 2020.
Suriname Chevron holds a 33.3 percent nonoperated working interest in deepwater Block 42. Exploration activities continued in 2020. Chevron, along with the operator, relinquished its 50 percent nonoperated working interest in deepwater Block 45 in September 2020.
Venezuela Chevron’s interests in Venezuela are located in western Venezuela and the Orinoco Belt. At the end of 2020, no proved reserves were recognized for these interests.
Chevron has a 30 percent interest in Petropiar, which operates the heavy oil Huyapari Field under an agreement expiring in 2033. Chevron also holds a 39.2 percent interest in Petroboscan, which operates the Boscan Field in western Venezuela and a 25.2 percent interest in Petroindependiente, which operates the LL-652 Field in Lake Maracaibo, both of which are under agreements expiring in 2026. For additional information on the company’s activities in Venezuela, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 31 through 38 under upstream.
Africa
In Africa, the company is engaged in upstream activities in Angola, the Republic of Congo, Cameroon, Equatorial Guinea, and Nigeria. Acreage for Africa can be found in the table on page 7. Net daily oil-equivalent production from these countries can be found in the table on page 6.
Angola The company operates and holds a 39.2 percent interest in Block 0, a concession adjacent to the Cabinda coastline, and a 31 percent operated interest in a production-sharing contract (PSC) for deepwater Block 14. The Block 0 concession extends through 2030. The Sanha Lean Gas Connection Project (SLGC) reached final investment decision in January 2021. SLGC is a new platform that ties the existing complex to new connecting pipelines for gathering and exporting gas from Blocks 0 and 14 to Angola LNG. In October 2020, the Angolan government approved combining all development areas in Block 14, providing enhanced fiscal terms and extending the PSC expiration to 2028.
Chevron has a 36.4 percent interest in Angola LNG Limited, which operates an onshore natural gas liquefaction plant in Soyo, Angola. The plant has the capacity to process 1.1 billion cubic feet of natural gas per day. This is the world’s first LNG plant supplied with associated gas, where the natural gas is a byproduct of crude oil production. Feedstock for the
plant originates from multiple fields and operators. During 2020, work continued toward developing non-associated gas in offshore Angola, which is expected to supply the Angola LNG plant.
Angola-Republic of Congo Joint Development Area Chevron operates and holds a 31.3 percent interest in the Lianzi Unitization Zone, located in an area shared equally by Angola and the Republic of Congo. The expiration for Lianzi is 2031.
Republic of Congo Chevron has a 31.5 percent nonoperated working interest in the offshore Haute Mer permit areas (Nkossa, Nsoko and Moho-Bilondo). The permits for Nkossa, Nsoko and Moho-Bilondo expire in 2027, 2034 and 2030, respectively.
Cameroon Chevron owns and operates the YoYo Block in the Douala Basin. Preliminary development plans include a possible joint development between YoYo and Yolanda Field in Equatorial Guinea.
Equatorial Guinea Chevron has a 38 percent-owned and operated interest in the Aseng oil field and the Yolanda natural gas field in Block I and a 45 percent-owned and operated interest in Alen natural gas and condensate field in Block O. Work continued in 2020 on the development of the Alen Gas Project, which was completed in February 2021. The company also holds a 32 percent nonoperated interest in the natural gas and condensate Alba Field.
Nigeria Chevron operates and holds a 40 percent interest in eight concessions in the onshore and near-offshore regions of the Niger Delta. The company also holds acreage positions in three operated and six nonoperated deepwater blocks, with working interests ranging from 20 to 100 percent.
Chevron is the operator of the Escravos Gas Plant (EGP) with a total processing capacity of 680 million cubic feet per day of natural gas and LPG and condensate export capacity of 58,000 barrels per day. The company is also the operator of the 33,000-barrel-per-day Escravos Gas to Liquids facility. In addition, the company holds a 36.7 percent interest in the West African Gas Pipeline Company Limited affiliate, which supplies Nigerian natural gas to customers in Benin, Togo and Ghana.
Chevron operates and holds a 67.3 percent interest in the Agbami Field, located in deepwater Oil Mining Lease (OML) 127 and OML 128. Additionally, Chevron holds a 30 percent nonoperated working interest in the Usan Field in OML 138. The leases that contain the Usan and Agbami Fields expire in 2023 and 2024, respectively.
Also, in the deepwater area, the Aparo Field in OML 132 and OML 140 and the third-party-owned Bonga SW Field in OML 118 share a common geologic structure and are planned to be developed jointly. Chevron holds a 16.6 percent nonoperated working interest in the unitized area. The development plan involves subsea wells tied back to a floating production, storage and offloading vessel. Work continues to progress toward a final investment decision. At the end of 2020, no proved reserves were recognized for this project.
In deepwater exploration, Chevron operates and holds a 55 percent interest in the deepwater Nsiko discoveries in OML 140. Chevron also holds a 27 percent interest in adjacent licenses OML 139 and OML 154. The company continues to work with the operator to evaluate development options for the multiple discoveries in the Usan area, including the Owowo Field, which straddles OML 139 and OML 154.
In December 2020, the company signed an agreement to divest its 40 percent operated interest in OML 86 and OML 88.
Middle East
In the Middle East, the company is engaged in upstream activities in Cyprus, Egypt, Israel, the Kurdistan Region of Iraq and the Partitioned Zone located between Saudi Arabia and Kuwait. Quantitative data for Egypt can be found within the Africa geography throughout this document. Quantitative data for Cyprus, Israel, the Kurdistan Region of Iraq and the Partitioned Zone can be found within the Asia geography throughout this document.
Cyprus The company holds a 35 percent-owned and operated interest in Aphrodite gas field in Block 12. Chevron operates the field with the Government of Cyprus and has a license that expires in 2044.
Egypt During 2020, Chevron acquired four oil and gas exploration blocks with a 90 percent-owned and operated interest. The acquired blocks are Block 1 in the Red Sea, North Sidi Barrani in Block 2, and North El Dabaa and the Nargis blocks in the Mediterranean Sea. The company also acquired a 27 percent nonoperated working interest in the North Cleopatra and North Marina blocks also in the Mediterranean Sea.
Israel Chevron holds a 39.7 percent-owned and operated interest in the Leviathan Field, which operates under a concession that expires in 2044. During 2020, Chevron continued to ramp up production and progress its efforts to monetize discovered resources at Leviathan Field. The company also holds a 25 percent-owned and operated interest in the Tamar gas field. Progress continues on the Tamar SW development, which consists of one well tied back to Tamar. The current term of the lease for this field expires in 2038.
Kurdistan Region of Iraq The company operates and holds a 50 percent interest in the Sarta PSC, which expires in 2047, and a 40 percent interest in the Qara Dagh PSC, which expires in October 2021. First oil was achieved from the Sarta Stage 1A project in November 2020. At the end of 2020, proved reserves have been recognized for this project. Chevron will operate the Sarta block through 2021 and plans to transfer operatorship thereafter provided certain milestones are achieved.
Partitioned Zone Chevron holds a concession to oper ate the Kingdom of Saudi Arabia’s 50 percent interest in the hydrocarbon resources in the onshore area of the Partitioned Zone between Saudi Arabia and Kuwait. The concession expires in 2046. Production restart was achieved in July 2020, and the company expects production to ramp up to full capacity levels in 2021.
Asia
In Asia, the company is engaged in upstream activities in Kazakhstan, Russia, Bangladesh, Myanmar, Thailand, China and Indonesia. Acreage for Asia can be found in the table on page 7. Net daily oil-equivalent production for these countries can be found in the table on page 6.
Kazakhstan Chevron has a 50 percent interest in the Tengizchevroil (TCO) affiliate and an 18 percent nonoperated working interest in the Karachaganak Field.
TCO is developing the Tengiz and Korolev crude oil fields in western Kazakhstan under a concession agreement that expires in 2033. All of TCO’s 2020 crude oil production was exported through the Caspian Pipeline Consortium (CPC) pipeline.
The Future Growth Project and Wellhead Pressure Management Project (FGP/WPMP) at Tengiz is managed as a single integrated project. The FGP is designed to increase total daily production by about 260,000 barrels of crude oil and to expand the utilization of sour gas injection technology proven in existing operations to increase ultimate recovery from the reservoir. The WPMP is designed to maintain production levels in existing plants as reservoir pressure declines. The project advanced in 2020 with overall progress at approximately 81 percent at year-end 2020. TCO continued construction on the FGP/WPMP including completion of all fabrication and sealift activities and installing key modules and foundations at the 3rd Generation Plant. The WPMP portion is expected to start up in late 2022, with the remaining facilities expected to come online in mid-2023. COVID-19 impacts on project schedules and cost estimates are unknown at this time due to the uncertain timeline for remobilizing all personnel and safely sustaining activity levels. Proved reserves have been recognized for the FGP/WPMP.
The Karachaganak Field is located in northwest Kazakhstan, and operations are conducted under a PSC that expires in 2038. Most of the exported liquids were transported through the CPC pipeline during 2020. Karachaganak Expansion Project Stage 1A reached final investment decision in December 2020. At the end of 2020, proved reserves had not been recognized for future expansion.
Kazakhstan/Russia Chevron has a 15 percent interest in the CPC. Progress continued on the debottlenecking project, which is expected to further increase capacity. During 2020, CPC transported an average of 1.3 million barrels of crude oil per day, composed of 1.1 million barrels per day from Kazakhstan and 0.2 million barrels per day from Russia.
Bangladesh Chevron operates and holds a 100 percent interest in Block 12 (Bibiyana Field) and Blocks 13 and 14 (Jalalabad and Moulavi Bazar fields). The rights to produce from Jalalabad expire in 2030, from Moulavi Bazar in 2033 and from Bibiyana in 2034.
Myanmar Chevron has a 28.3 percent nonoperated working interest in a PSC for the production of natural gas from the Yadana, Badamyar and Sein fields, within Blocks M5 and M6, in the Andaman Sea. The PSC expires in 2028. The company also has a 28.3 percent nonoperated working interest in a pipeline company that transports natural gas to the Myanmar-Thailand border for delivery to power plants in Thailand.
Thailand Chevron holds operated interests in the Pattani Basin, located in the Gulf of Thailand, with ownership ranging from 35 percent to 80 percent. Concessions for producing areas within this basin expire between 2022 and 2035. Chevron
also has a 16 percent nonoperated working interest in the Arthit Field located in the Malay Basin. Concessions for the producing areas within this basin expire between 2036 and 2040.
Within the Pattani Basin the company holds ownership ranging from 70 to 80 percent of the Erawan concession, which expires in April 2022. Chevron also has a 35 percent-owned and operated interest in the Ubon Project in Block 12/27. In late 2020, project studies were suspended pending an improved investment climate. At the end of 2020, proved reserves had not been recognized for this project.
Chevron holds between 30 and 80 percent operated and nonoperated working interests in the Thailand-Cambodia overlapping claims area that are inactive, pending resolution of border issues between Thailand and Cambodia.
China Chevron has nonoperated working interests in several areas in China. The company has a 49 percent nonoperated working interest in the Chuandongbei Project including the Loujiazhai and Gunziping natural gas fields located onshore in the Sichuan Basin.
The company also has nonoperated working interests of 32.7 percent in Block 16/19 in the Pearl River Mouth Basin, 24.5 percent in the Qinhuangdao (QHD) 32-6 Block, and 16.2 percent in Block 11/19 in the Bohai Bay. The PSCs for these producing assets expire between 2022 and 2028.
Philippines The company closed the sale of its 45 percent nonoperated working interest in the offshore Malampaya natural gas field in March 2020.
Indonesia Chevron has working interests through various PSCs in Indonesia. In Sumatra, the company holds a 100 percent-owned and operated interest in the Rokan PSC, which expires in August 2021. The company operates and holds a 62 percent interest in two PSCs in the Kutei Basin (Rapak and Ganal), located offshore eastern Kalimantan. Additionally, in offshore eastern Kalimantan, the company operates a 72 percent interest in the Makassar Strait PSC. The PSCs for offshore eastern Kalimantan expire in 2027 and 2028.
Chevron has concluded that the Indonesia Deepwater Development held by the Kutei Basin PSCs does not compete in its portfolio and is evaluating strategic alternatives for the company’s 62 percent-owned and operated interest.
Azerbaijan In April 2020, Chevron sold its 9.6 percent nonoperated interest in Azerbaijan International Operating Company and its 8.9 percent interest in the Baku-Tbilisi-Ceyhan (BTC) pipeline affiliate.
United Kingdom
Net oil equivalent production for the United Kingdom can be found in the table on page 6.
Chevron holds a 19.4 percent nonoperated working interest in the Clair Field, located west of the Shetland Islands. The Clair Ridge Project is the second development phase of the Clair Field, with a design capacity of 120,000 barrels of crude oil and 100 million cubic feet of natural gas per day. Three additional wells were completed in 2020. The Clair Field has an estimated production life extending beyond 2050.
Australia
Chevron is Australia's largest producer of LNG. Acreage can be found in the table on page 7. Net daily oil-equivalent production can be found in the table on page 6.
Upstream activities in Australia are concentrated offshore Western Australia, where the company is the operator of two major LNG projects, Gorgon and Wheatstone, and has a nonoperated working interest in the North West Shelf (NWS) Venture and exploration acreage in the Carnarvon Basin.
Chevron holds a 47.3 percent-owned and operated interest in the Gorgon Project, which includes the development of the Gorgon and Jansz-Io fields. The carbon dioxide system reached a full injection rate by first quarter 2020. Progress on the Gorgon Stage 2 project continued in 2020 with the completion of drilling of 11 subsea wells and is expected to be completed in 2022. The project's estimated economic life exceeds 40 years.
FEED work continued in 2020 on the Jansz-Io Compression Project. The project supports maintaining gas supply to the Gorgon LNG plant and maximizing the recovery of fields accessing the Jansz trunkline.
Chevron holds an 80.2 percent interest in the offshore licenses and a 64.1 percent-owned and operated interest in the LNG facilities associated with the Wheatstone Project. The project includes the development of the Wheatstone and Iago fields, a two-train, 8.9 million-metric-ton-per-year LNG facility, and a domestic gas plant. The onshore facilities are located at
Ashburton North on the coast of Western Australia. The total production capacity for the Wheatstone and Iago fields and nearby third-party fields is expected to be approximately 1.6 billion cubic feet of natural gas and 30,000 barrels of condensate per day. The project’s estimated economic life exceeds 30 years.
Chevron has a 16.7 percent nonoperated working interest in the NWS Venture in Western Australia. In June 2020, Chevron announced the decision to market its share in the NWS Venture with the data room opening in September 2020.
The company continues to evaluate exploration and appraisal activity across the Carnarvon Basin in which it holds more than 6.6 million net acres. During 2020, the company relinquished nonoperated working interests it held in the Browse Basin.
Chevron owns and operates the Clio, Acme and Acme West fields. The company is collaborating with other Carnarvon Basin participants to assess the possibility of developing Clio and Acme through shared utilization of existing infrastructure.
Sales of Natural Gas and Natural Gas Liquids
The company sells natural gas and NGLs from its producing operations under a variety of contractual arrangements. In addition, the company also makes third-party purchases and sales of natural gas and NGLs in connection with its supply and trading activities.
During 2020, U.S. and international sales of natural gas averaged 3.9 billion and 5.6 billion cubic feet per day, respectively, which includes the company’s share of equity affiliates’ sales. Outside the United States, substantially all of the natural gas sales from the company’s producing interests are from operations in Angola, Argentina, Australia, Bangladesh, Canada, Kazakhstan, Indonesia, Israel, Myanmar, Nigeria and Thailand.
U.S. and international sales of NGLs averaged 233,000 and 120,000 barrels per day, respectively, in 2020.
Refer to “Selected Operating Data,” on page 41 in Management’s Discussion and Analysis of Financial Condition and Results of Operations, for further information on the company’s sales volumes of natural gas and natural gas liquids. Refer also to “Delivery Commitments” beginning on page 7 for information related to the company’s delivery commitments for the sale of crude oil and natural gas.
Downstream
Refining Operations
At the end of 2020, the company had a refining network capable of processing 1.8 million barrels of crude oil per day. Operable capacity at December 31, 2020, and daily refinery inputs for 2018 through 2020 for the company and affiliate refineries are summarized in the table on the next page.
Average crude oil distillation capacity utilization was 76 percent in 2020 and 90 percent in 2019. At the U.S. refineries, crude oil distillation capacity utilization averaged 73 percent in 2020, compared with 91 percent in 2019. Chevron processes both imported and domestic crude oil in its U.S. refining operations. Imported crude oil accounted for about 59 percent and 65 percent of Chevron’s U.S. refinery inputs in 2020 and 2019, respectively.
In the United States, the company continued work on projects to improve refinery flexibility and reliability. At the El Segundo Refinery in California, enhancements are underway to enable production of renewable fuels including diesel, jet and gasoline from bio-feedstocks. At the refinery in Salt Lake City, Utah, construction continued on the alkylation retrofit project with more than 100 modules installed. Project start-up is expected in second quarter 2021. The Pasadena Refinery enables processing of greater amounts of Permian light crude oil and provides integration with Chevron’s Gulf Coast Pascagoula, Mississippi refinery and Houston Blend Center.
Outside the United States, the company has three large refineries in South Korea, Singapore and Thailand. The Singapore Refining Company (SRC), a 50 percent-owned joint venture, has a total capacity of 290,000 barrels of crude per day and manufactures a wide range of petroleum products. Refinery upgrades have enabled SRC to produce higher-quality gasoline that meets stricter emission standards. The 50 percent-owned, GS Caltex (GSC) operated, Yeosu Refinery in South Korea remains one of the world’s largest refineries with a total crude capacity of 800,000 barrels per day. In 2020, progress continued on the olefins mixed-feed cracker and associated polyethylene unit with first production expected second-half 2021. The company’s 60.6 percent-owned refinery in Map Ta Phut, Thailand, continues to supply high-quality petroleum products through the Caltex brand into regional markets.
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|
|
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|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
Petroleum Refineries: Locations, Capacities and Inputs
|
|
Capacities and inputs in thousands of barrels per day
|
December 31, 2020
|
Refinery Inputs
|
|
Locations
|
Number
|
Operable Capacity
|
2020
|
2019
|
2018
|
|
Pascagoula
|
Mississippi
|
1
|
|
369
|
|
305
|
|
358
|
|
332
|
|
|
El Segundo
|
California
|
1
|
|
290
|
|
176
|
|
241
|
|
273
|
|
|
Richmond
|
California
|
1
|
|
257
|
|
198
|
|
236
|
|
249
|
|
|
Pasadena1
|
Texas
|
1
|
|
110
|
|
69
|
|
58
|
|
—
|
|
|
Salt Lake City
|
Utah
|
1
|
|
58
|
|
45
|
|
54
|
|
51
|
|
Total Consolidated Companies — United States
|
5
|
|
1,084
|
|
793
|
|
947
|
|
905
|
|
|
Map Ta Phut
|
Thailand
|
1
|
|
175
|
|
143
|
|
134
|
|
160
|
|
|
Cape Town2
|
South Africa
|
—
|
|
—
|
|
—
|
|
—
|
|
49
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated Companies — International
|
1
|
|
175
|
|
143
|
|
134
|
|
209
|
|
|
Affiliates
|
Various Locations3
|
2
|
|
545
|
|
441
|
|
483
|
|
494
|
|
|
Total Including Affiliates — International
|
3
|
|
720
|
|
584
|
|
617
|
|
703
|
|
|
Total Including Affiliates — Worldwide
|
8
|
|
1,804
|
|
1,377
|
|
1,564
|
|
1,608
|
|
|
1 In May 2019, the company acquired the Pasadena, TX refinery.
2 In September 2018, the company sold its interest in the Cape Town refinery.
3 In March 2020, the company sold its interest in the Pakistan refinery.
Marketing Operations
The company markets petroleum products under the principal brands of “Chevron,” “Texaco” and “Caltex” throughout many parts of the world. The following table identifies the company’s and its affiliates’ refined products sales volumes, excluding intercompany sales, for the three years ended December 31, 2020.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refined Products Sales Volumes
|
|
Thousands of barrels per day
|
2020
|
2019
|
2018
|
|
United States
|
|
|
|
|
Gasoline
|
581
|
|
667
|
627
|
|
Jet Fuel
|
139
|
|
256
|
255
|
|
Diesel/Gas Oil
|
167
|
|
191
|
188
|
|
Residual Fuel Oil
|
33
|
|
42
|
48
|
|
Other Petroleum Products1
|
83
|
|
94
|
100
|
|
Total United States
|
1,003
|
|
1,250
|
|
1,218
|
|
|
International2
|
|
|
|
|
Gasoline
|
264
|
|
289
|
336
|
|
Jet Fuel
|
143
|
|
238
|
276
|
|
Diesel/Gas Oil
|
438
|
|
427
|
446
|
|
Residual Fuel Oil
|
184
|
|
167
|
177
|
|
Other Petroleum Products1
|
192
|
|
206
|
202
|
|
Total International
|
1,221
|
|
1,327
|
|
1,437
|
|
|
Total Worldwide2
|
2,224
|
|
2,577
|
|
2,655
|
|
|
1 Principally naphtha, lubricants, asphalt and coke.
|
|
|
2 Includes share of affiliates’ sales:
|
348
|
|
379
|
373
|
|
In the United States, the company markets under the Chevron and Texaco brands. At year-end 2020, the company supplied directly or through retailers and marketers approximately 8,000 Chevron- and Texaco- branded service stations, primarily in the southern and western states. Approximately 310 of these outlets are company-owned or -leased stations.
Outside the United States, Chevron supplied directly or through retailers and marketers approximately 5,600 branded service stations, including affiliates. The company markets in Latin America using the Texaco brand. In 2020, Chevron continued to grow in northwestern Mexico, expanding to nearly 230 branded stations at the end of the year. The company also operates through affiliates under various brand names. In the Asia-Pacific region and the Middle East, the company uses the Caltex brand. In South Korea, the company operates through its 50 percent-owned affiliate, GSC.
In June 2020, the company acquired a network of terminals and service stations in Australia aligning with Chevron's value chain optimization in the Asia-Pacific region.
Chevron markets commercial aviation fuel to 69 airports worldwide. The company also markets an extensive line of lubricant and coolant products under the product names Havoline, Delo, Ursa, Meropa, Rando, Clarity and Taro in the United States and worldwide under the three brands: Chevron, Texaco and Caltex.
Chemicals Operations
Chevron Oronite Company develops, manufactures and markets performance additives for lubricating oils and fuels and conducts research and development for additive component and blended packages. At the end of 2020, the company manufactured, blended or conducted research at 10 locations around the world. Construction was completed in 2020 on a lubricant additive blending and shipping plant in Ningbo, China. Commercial production is anticipated to begin in the second quarter 2021.
Chevron owns a 50 percent interest in Chevron Phillips Chemical Company LLC (CPChem). CPChem produces olefins, polyolefins and alpha olefins and is a supplier of aromatics and polyethylene pipe, in addition to participating in the specialty chemical and specialty plastics markets. At the end of 2020, CPChem owned or had joint-venture interests in 28 manufacturing facilities and two research and development centers around the world.
CPChem holds a 51 percent interest in the US Gulf Coast II Petrochemical Project (USGC II) and a 30 percent interest in the Ras Laffan Petrochemical Project (RLPP) in Qatar. Engineering and design were completed for USGC II in November 2020 and are ongoing for the RLPP facility.
Chevron also maintains a role in the petrochemical business through the operations of GSC, the company’s 50 percent-owned affiliate. GSC manufactures aromatics, including benzene, toluene and xylene. These base chemicals are used to produce a range of products, including adhesives, plastics and textile fibers. GSC also produces polypropylene, which is used to make automotive and home appliance parts, food packaging, laboratory equipment and textiles.
In 2020, progress continued on the construction of an olefins mixed-feed cracker and associated polyethylene unit within the existing refining and petrochemical facilities in Yeosu, South Korea. First production is expected at the new plant in second-half 2021.
Transportation
Pipelines Chevron owns and operates a network of crude oil, natural gas and product pipelines and other infrastructure assets in the United States. In addition, Chevron operates pipelines for its 50 percent-owned CPChem affiliate. The company also has direct and indirect interests in other U.S. and international pipelines.
As a result of the Noble acquisition, Chevron acquired a majority interest in Noble Midstream Partners LP (Noble Midstream). Noble Midstream is primarily focused in the DJ Basin in Colorado and Delaware Basin in Texas providing services to Chevron and third-party customers. In February 2021, Chevron announced a non-binding offer to acquire all of the outstanding common units of Noble Midstream Partners LP not already owned by Chevron or any of its affiliates.
Refer to pages 12 through 13 in the Upstream section for information on the West African Gas Pipeline and the Caspian Pipeline Consortium.
Shipping The company’s marine fleet includes both U.S. and foreign flagged vessels. The operated fleet consists of conventional crude tankers, product carriers and LNG carriers. These vessels transport crude oil, LNG, refined products and feedstock in support of the company’s global upstream and downstream businesses.
Other Businesses
Chevron Technical Center The company’s technical center provides expertise to drive the application of technology, initiatives to transform Chevron’s digital future, and innovative breakthrough technologies to support the future of energy. The organization conducts research, develops and qualifies technology, and provides technical services and competency development. The disciplines cover earth sciences, reservoir and production engineering, drilling and completions, facilities engineering, manufacturing, process technology, catalysis, technical computing and health, environment and safety.
Chevron’s information technology organization integrates computing, telecommunications, data management, cybersecurity and network technology to provide a digital infrastructure to enable Chevron’s global operations and business processes.
Chevron’s Technology Ventures (CTV) unit identifies and integrates externally developed technologies and new business solutions with the potential to enhance the way Chevron produces and delivers affordable, reliable, and ever-cleaner energy. CTV has more than two decades of venture investing, with eight funds that have supported more than 100 startups and worked with more than 200 co-investors. In addition to the company’s own managed funds, Chevron also makes
investments indirectly through the following funds: the Oil and Gas Climate Initiative (OGCI) Climate Investments fund targets the decarbonization of oil and gas, industry and commercial transportation; Emerald Ventures targets energy, water, industrial IT and advanced materials; and the HX Venture fund targets Houston, Texas high-growth start-ups.
Chevron continued its participation as a member of OGCI, a global collaboration focused on the industry’s efforts to take actions to accelerate and participate in a lower carbon future. In 2020, OGCI committed to a Global Gas Flaring Explorer web platform and set a target for OGCI members to reduce oil and gas carbon intensity.
Some of the investments the company makes in the areas described above are in new or unproven technologies and business processes, and ultimate technical or commercial successes are not certain. Refer to Note 25 on page 95 for a summary of the company’s research and development expenses.
Environmental Protection The company designs, operates and maintains its facilities to avoid potential spills or leaks and to minimize the impact of those that may occur. Chevron requires its facilities and operations to have operating standards and processes and emergency response plans that address significant risks identified through site-specific risk and impact assessments. Chevron also requires that sufficient resources be available to execute these plans. In the unlikely event that a major spill or leak occurs, Chevron also maintains a Worldwide Emergency Response Team comprised of employees who are trained in various aspects of emergency response, including post-incident remediation.
To complement the company’s capabilities, Chevron maintains active membership in international oil spill response cooperatives, including the Marine Spill Response Corporation, which operates in U.S. territorial waters, and Oil Spill Response, Ltd., which operates globally. The company is a founding member of the Marine Well Containment Company, whose primary mission is to expediently deploy containment equipment and systems to capture and contain crude oil in the unlikely event of a future loss of control of a deepwater well in the Gulf of Mexico. In addition, the company is a member of the Subsea Well Response Project, which has the objective to further develop the industry’s capability to contain and shut in subsea well control incidents in different regions of the world.
The company is committed to improving energy efficiency in its day-to-day operations and is required to comply with the greenhouse gas-related laws and regulations to which it is subject. Refer to Item 1A. Risk Factors on pages 18 through 23 for further discussion of greenhouse gas regulation and climate change and the associated risks to Chevron’s business.
Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations on page 49 for additional information on environmental matters and their impact on Chevron, and on the company’s 2020 environmental expenditures. Refer to page 49 and Note 22 beginning on page 92 for a discussion of environmental remediation provisions and year-end reserves.
Item 1A. Risk Factors
Chevron is a global energy company and its operating and financial results are subject to a variety of risks inherent in the global oil, gas, and petrochemical businesses. Many of these risks are not within the company’s control and could materially impact the company’s results of operations and financial condition.
BUSINESS, OPERATIONAL AND ACQUISITION-RELATED RISK FACTORS
Impacts of the COVID-19 pandemic have resulted in a significant decrease in demand for Chevron’s products and caused a precipitous drop in commodity prices that has had, and may continue to have, an adverse and potentially material adverse effect on Chevron’s financial and operating results.
As of the date of this Annual Report on Form 10-K, the economic, business, and oil and gas industry impacts from the COVID-19 pandemic and the disruption to capital markets have continued to be far reaching. Crude oil prices, the single largest variable that affects the company’s results of operations, fell to historic lows, even briefly going negative, due to a combination of a severely reduced demand for crude oil, gasoline, jet fuel, diesel fuel, and other refined products resulting from government-mandated travel restrictions and the curtailment of economic activity resulting from the COVID-19 pandemic. As a result, a market imbalance has existed and may continue to exist, with oil supplies exceeding current and expected near-term demand. Although OPEC members and other countries have agreed to cut global oil supply, the commitments and actions to date have not matched the significant decrease in global demand, which has resulted in increased inventory levels in refineries, pipelines and storage facilities in prior periods and which may drive increased inventory levels in future periods.
Extended periods of low prices for crude oil are expected to have a material adverse effect on the company’s results of operations, financial condition and liquidity. Among other things, the company’s earnings, cash flows, and capital and exploratory expenditure programs may be negatively affected, as would its production volumes and proved reserves. As a result, the value of the company’s assets may also become impaired in future periods, as we saw in 2020.
The company’s operations and workforce are being impacted by the COVID-19 pandemic, causing certain operations to be curtailed to various degrees. At 50 percent-owned Tengizchevroil in Kazakhstan, COVID-19 infections have led to the demobilization of a significant portion of the workforce, adversely impacting the construction pace for completion of the FGP/WPMP project. Although infection levels in Kazakhstan improved in the third quarter 2020, allowing remobilization of the FGP/WPMP construction workforce to commence, a resurgence of infections prevented the final five percent of the planned workforce from returning to work in the fourth quarter 2020, slowing progress on the project. The ultimate effects of COVID-19 on FGP/WPMP construction remain uncertain and cannot be predicted at this time. In particular, we are currently unable to predict whether COVID-19 will have a material adverse impact on our ability to complete FGP/WPMP on schedule or within the current cost estimate for the project.
As a result of decreased demand for its products, the company made cuts to its upstream capital and exploratory expenditure program for 2020, which are expected to negatively impact future production, have led to and could lead to further negative revisions of reserves and could also lead to the further impairment of assets. Production curtailments, such as those due to the reductions imposed by OPEC+ nations in Kazakhstan, Nigeria and Angola, and other production curtailment actions taken by operators of assets for which the company has non-operated interests or due to market conditions, have exacerbated and may continue to further exacerbate these negative impacts in future periods. Within downstream, the company reduced its capital spending program and is also deferring certain discretionary maintenance activities while maintaining expenditures for asset integrity and reliability. The company has reduced the utilization rates of its refineries in response to reduced demand for its products, particularly greatly reduced demand for jet fuel due to the COVID-19 impact on travel and the aviation industry.
The company’s suppliers are also being impacted by the COVID-19 pandemic and access to materials, supplies, and contract labor has been strained. In certain cases, the company has received notices invoking force majeure provisions in supplier contracts. This strain on the financial health of the company’s suppliers could put further pressure on the company’s financial results and may negatively impact supply assurance and supplier performance. In-country conditions, including potential future waves of the COVID-19 virus in countries that appear to have reduced their infection rates, could impact logistics and material movement and remain a risk to business continuity.
In light of the significant uncertainty around the duration and extent of the impact of the COVID-19 pandemic, management is currently unable to develop with any level of confidence estimates and assumptions that may have a material impact on the company’s consolidated financial statements and financial or operational performance in any given period. In addition, the unprecedented nature of such market conditions could cause current management estimates and assumptions to be challenged in hindsight.
There continues to be uncertainty and unpredictability about the impact of the COVID-19 pandemic on our financial and operating results in future periods. The extent to which the COVID-19 pandemic adversely impacts our future financial and operating results, and for what duration and magnitude, depends on several factors that are continuing to evolve, are difficult to predict and, in many instances, are beyond the company's control. Such factors include the duration and scope of the pandemic, including any resurgences of the pandemic, and the impact on our workforce and operations; the negative impact of the pandemic on the economy and economic activity, including travel restrictions and prolonged low demand for our products; the ability of our affiliates, suppliers and partners to successfully navigate the impacts of the pandemic; the actions taken by governments, businesses and individuals in response to the pandemic; the actions of OPEC and other countries that otherwise impact supply and demand and correspondingly, commodity prices; the extent and duration of recovery of economies and demand for our products after the pandemic subsides; and Chevron’s ability to keep its cost model in line with changing demand for our products.
The impact of the COVID-19 pandemic is evolving, and the continuation or a resurgence of the pandemic could precipitate or aggravate the other risk factors identified in this Form 10-K, which in turn could further materially and adversely affect our business, financial condition, liquidity, results of operations and profitability, including in ways not currently known or considered by us to present significant risks.
Chevron is exposed to the effects of changing commodity prices Chevron is primarily in a commodities business that has a history of price volatility. The single largest variable that affects the company’s results of operations is the price of crude
oil, which can be influenced by general economic conditions, industry production and inventory levels, technology advancements, production quotas or other actions that might be imposed by the Organization of Petroleum Exporting Countries or other producers, weather-related damage and disruptions due to other natural or human causes beyond our control (including without limitation due to the COVID-19 pandemic), competing fuel prices, and geopolitical risks. Chevron evaluates the risk of changing commodity prices as a core part of its business planning process. An investment in the company carries significant exposure to fluctuations in global crude oil prices.
Extended periods of low prices for crude oil can have a material adverse impact on the company’s results of operations, financial condition and liquidity. Among other things, the company’s upstream earnings, cash flows, and capital and exploratory expenditure programs could be negatively affected, as could its production and proved reserves. Upstream assets may also become impaired. Downstream earnings could be negatively affected because they depend upon the supply and demand for refined products and the associated margins on refined product sales. A significant or sustained decline in liquidity could adversely affect the company’s credit ratings, potentially increase financing costs and reduce access to capital markets. The company may be unable to realize anticipated cost savings, expenditure reductions and asset sales that are intended to compensate for such downturns. In some cases, liabilities associated with divested assets may return to the company when an acquirer of those assets subsequently declares bankruptcy. In addition, extended periods of low commodity prices can have a material adverse impact on the results of operations, financial condition and liquidity of the company’s suppliers, vendors, partners and equity affiliates upon which the company’s own results of operations and financial condition depends.
The scope of Chevron’s business will decline if the company does not successfully develop resources The company is in an extractive business; therefore, if it is not successful in replacing the crude oil and natural gas it produces with good prospects for future organic opportunities or through acquisitions, the company’s business will decline. Creating and maintaining an inventory of projects depends on many factors, including obtaining and renewing rights to explore, develop and produce hydrocarbons; drilling success; reservoir optimization; ability to bring long-lead-time, capital-intensive projects to completion on budget and on schedule; and efficient and profitable operation of mature properties.
The company’s operations could be disrupted by natural or human causes beyond its control Chevron operates in both urban areas and remote and sometimes inhospitable regions. The company’s operations are therefore subject to disruption from natural or human causes beyond its control, including risks from hurricanes, severe storms, floods, heat waves, other forms of severe weather, wildfires, ambient temperature increases, sea level rise, war, accidents, civil unrest, political events, fires, earthquakes, system failures, cyber threats, terrorist acts and epidemic or pandemic diseases such as the COVID-19 pandemic, any of which could result in suspension of operations or harm to people or the natural environment.
Chevron’s risk management systems are designed to assess potential physical and other risks to its operations and assets and to plan for their resiliency. While capital investment reviews and decisions incorporate potential ranges of physical risks such as storm severity and frequency, sea level rise, air and water temperature, precipitation, fresh water access, wind speed, and earthquake severity, among other factors, it is difficult to predict with certainty the timing, frequency or severity of such events, any of which could have a material adverse effect on the company's results of operations or financial condition.
Cyberattacks targeting Chevron’s process control networks or other digital infrastructure could have a material adverse impact on the company’s business and results of operations There are numerous and evolving risks to Chevron’s cybersecurity and privacy from cyber threat actors, including criminal hackers, state-sponsored intrusions, industrial espionage and employee malfeasance. These cyber threat actors, whether internal or external to Chevron, are becoming more sophisticated and coordinated in their attempts to access the company’s information technology (IT) systems and data, including the IT systems of cloud providers and other third parties with whom the company conducts business. Although Chevron devotes significant resources to prevent unwanted intrusions and to protect its systems and data, whether such data is housed internally or by external third parties, the company has experienced and will continue to experience cyber incidents of varying degrees in the conduct of its business. Cyber threat actors could compromise the company’s process control networks or other critical systems and infrastructure, resulting in disruptions to its business operations, injury to people, harm to the environment or its assets, disruptions in access to its financial reporting systems, or loss, misuse or corruption of its critical data and proprietary information, including without limitation its intellectual property and business information and that of its employees, customers, partners and other third parties. Any of the foregoing can be exacerbated by a delay or failure to detect a cyber incident or the full extent of such incident. Further, the company has exposure to cyber incidents and the negative impacts of such incidents related to its critical data and proprietary information housed on third-party IT
systems, including the cloud. Additionally, authorized third-party IT systems or software can be compromised and used to gain access or introduce malware to Chevron's IT systems that can materially impact the company’s business. Regardless of the precise method or form, cyber events could result in significant financial losses, legal or regulatory violations, reputational harm, and legal liability and could ultimately have a material adverse effect on the company’s business and results of operations.
The company’s operations have inherent risks and hazards that require significant and continuous oversight Chevron’s results depend on its ability to identify and mitigate the risks and hazards inherent to operating in the crude oil and natural gas industry. The company seeks to minimize these operational risks by carefully designing and building its facilities and conducting its operations in a safe and reliable manner. However, failure to manage these risks effectively could impair our ability to operate and result in unexpected incidents, including releases, explosions or mechanical failures resulting in personal injury, loss of life, environmental damage, loss of revenues, legal liability and/or disruption to operations. Chevron has implemented and maintains a system of corporate policies, processes and systems, behaviors and compliance mechanisms to manage safety, health, environmental, reliability and efficiency risks; to verify compliance with applicable laws and policies; and to respond to and learn from unexpected incidents. In certain situations where Chevron is not the operator, the company may have limited influence and control over third parties, which may limit its ability to manage and control such risks.
The company does not insure against all potential losses, which could result in significant financial exposure The company does not have commercial insurance or third-party indemnities to fully cover all operational risks or potential liability in the event of a significant incident or series of incidents causing catastrophic loss. As a result, the company is, to a substantial extent, self-insured for such events. The company relies on existing liquidity, financial resources and borrowing capacity to meet short-term obligations that would arise from such an event or series of events. The occurrence of a significant incident or unforeseen liability for which the company is self-insured, not fully insured or for which insurance recovery is significantly delayed could have a material adverse effect on the company’s results of operations or financial condition.
The Noble acquisition may cause our financial results to differ from our expectations or the expectations of the investment community, we may not achieve the anticipated benefits of the acquisition, and the acquisition may disrupt our current plans or operations.
The success of the Noble acquisition, which closed in October 2020, will depend, in part, on Chevron’s ability to realize the anticipated benefits of the acquisition, including the anticipated annual run-rate operating and other cost synergies and accretion to return on capital employed, free cash flow and earnings per share. Failure to realize anticipated synergies in the expected timeframe, operational challenges, the diversion of management’s attention from ongoing business concerns, and unforeseen expenses associated with the acquisition may have an adverse impact on our financial results.
One of our subsidiaries acts as the general partner of a publicly traded master limited partnership, Noble Midstream Partners LP, which may involve a potential legal liability.
One of our subsidiaries acts as the general partner of Noble Midstream, a publicly traded master limited partnership. Our control of the general partner of Noble Midstream may increase the possibility that we could be subject to claims of breach of duties owed to Noble Midstream, including claims of conflict of interest. Any liability resulting from such claims could have a material adverse effect on our future business, financial condition, results of operations and cash flows.
LEGAL, REGULATORY AND ESG-RELATED RISK FACTORS
Chevron’s business subjects the company to liability risks from litigation or government action The company produces, transports, refines and markets potentially hazardous materials, and it purchases, handles and disposes of other potentially hazardous materials in the course of its business. Chevron's operations also produce byproducts, which may be considered pollutants. Often these operations are conducted through joint ventures over which the company may have limited influence and control. Any of these activities could result in liability or significant delays in operations arising from private litigation or government action. For example, liability or delays could result from an accidental, unlawful discharge or from new conclusions about the effects of the company’s operations on human health or the environment. In addition, to the extent that societal pressures or political or other factors are involved, it is possible that such liability could be imposed without regard to the company’s causation of or contribution to the asserted damage, or to other mitigating factors.
For information concerning some of the litigation in which the company is involved, see Note 14 to the Consolidated Financial Statements, beginning on page 78.
Political instability and significant changes in the legal and regulatory environment could harm Chevron’s business The company’s operations, particularly exploration and production, can be affected by changing economic, regulatory and political environments in the various countries in which it operates. As has occurred in the past, actions could be taken by governments to increase public ownership of the company’s partially or wholly owned businesses, to force contract renegotiations, or to impose additional taxes or royalties. In certain locations, governments have proposed or imposed restrictions on the company’s operations, trade, currency exchange controls, burdensome taxes, and public disclosure requirements that might harm the company’s competitiveness or relations with other governments or third parties. In other countries, political conditions have existed that may threaten the safety of employees and the company’s continued presence in those countries, and internal unrest, acts of violence or strained relations between a government and the company or other governments may adversely affect the company’s operations. Those developments have, at times, significantly affected the company’s operations and results and are carefully considered by management when evaluating the level of current and future activity in such countries. Further, Chevron is required to comply with U.S. sanctions and other trade laws and regulations which, depending upon their scope, could adversely impact the company's operations in certain countries. In addition, litigation or changes in national, state or local environmental regulations or laws, including those designed to stop or impede the development or production of oil and gas, such as those related to the use of hydraulic fracturing or bans on drilling, or any law or regulation that impacts the demand for our products, could adversely affect the company’s current or anticipated future operations and profitability.
Legislation, regulation, and other government actions related to greenhouse gas (GHG) emissions and climate change could continue to increase Chevron’s operational costs and reduce demand for Chevron’s hydrocarbon and other products Chevron may be challenged by a further increase in international and domestic legislation, regulation, or other government actions relating to GHG emissions and climate change. Like any significant changes in the regulatory environment, GHG and climate change-related legislation and regulation could have the impact of curtailing profitability in the oil and gas sector or rendering the extraction of the company’s oil and gas resources economically infeasible. Although the International Energy Agency’s (IEA) World Energy Outlook scenarios anticipate oil and gas continuing to make up a significant portion of the global energy mix through 2040 and beyond, if new legislation, regulation, or other government action contributes to a decline in the demand for the company’s products, this could have a material adverse effect on the company and its financial condition.
International agreements and national, regional, and state legislation and regulatory measures that aim to limit or reduce GHG emissions are currently in various stages of implementation. For example, the Paris Agreement went into effect in November 2016, and a number of countries are studying and may adopt additional policies to meet their Paris Agreement goals. In some jurisdictions, the company is already subject to currently implemented programs such as the U.S. Renewable Fuel Standard program, the European Union Emissions Trading System, and the California cap-and-trade program and low carbon fuel standard obligations. Other jurisdictions are considering adopting or are in the process of implementing laws or regulations to directly regulate GHG emissions through similar or other mechanisms such as, for example, via a carbon tax (e.g., Singapore and Canada) or via a cap-and-trade program (e.g., Mexico and China). Many governments are providing tax advantages and other incentives to promote the use of alternative energy sources or lower-carbon technologies. The landscape continues to be in a state of constant re-assessment and legal challenge with respect to these laws, regulations, and other actions, making it difficult to predict with certainty the ultimate impact they will have on the company in the aggregate.
GHG emissions-related legislation, regulations, and government actions and the effects of operating in a potentially carbon-constrained environment may result in increased and substantial capital, compliance, operating, and maintenance costs and could, among other things, reduce demand for hydrocarbons and the company’s hydrocarbon-based products; make the company’s products more expensive; adversely affect the economic feasibility of the company’s resources; and adversely affect the company’s sales volumes, revenues, and margins. GHG emissions (e.g., carbon dioxide and methane) that could be regulated include, among others, those associated with the company’s exploration and production of hydrocarbons; the upgrading of production from oil sands into synthetic oil; power generation; the conversion of crude oil and natural gas into refined hydrocarbon products; the processing, liquefaction, and regasification of natural gas; the transportation of crude oil, natural gas, and related products; and consumers’ or customers’ use of the company’s hydrocarbon products. Indirect regulation of GHG emissions could include bans or restrictions on technologies that use the company’s hydrocarbon products. Many of these activities, such as consumers’ and customers’ use of the company’s products and substitute products, as well as actions taken by the company’s competitors in response to such legislation and regulations, are beyond the company’s control.
Consideration of climate change-related issues and the responses to those issues through international agreements and national, regional, or state legislation or regulations are integrated into the company’s strategy and planning, capital investment reviews, and risk management tools and processes, where applicable. They are also factored into the company’s long-range supply, demand, and energy price forecasts. These forecasts reflect long-range effects from renewable fuel penetration, energy efficiency standards, climate change-related policy actions and demand response to oil and natural gas prices. The actual level of expenditure required to comply with new or potential climate change-related laws and regulations and amount of additional investments in new or existing technology or facilities, such as carbon dioxide injection, is difficult to predict with certainty and is expected to vary depending on the actual laws and regulations enacted in a jurisdiction, the company’s activities in it, and market conditions.
The ultimate effect of international agreements; national, regional, and state legislation and regulation; and government actions related to GHG emissions and climate change on the company’s financial performance, and the timing of these effects, will depend on a number of factors. Such factors include, among others, the sectors covered, the GHG emissions reductions required, the extent to which Chevron would be entitled to receive emission allowance allocations or would need to purchase compliance instruments on the open market or through auctions, the price and availability of emission allowances and credits and the extent to which the company is able to recover the costs incurred through the pricing of the company’s products in the competitive marketplace. Further, the ultimate impact of GHG emissions and climate change-related agreements, legislation, regulation, and government actions on the company’s financial performance is highly uncertain because the company is unable to predict with certainty, for a multitude of individual jurisdictions, the outcome of political decision-making processes and the variables and tradeoffs that inevitably occur in connection with such processes.
Increasing attention to environmental, social, and governance (ESG) matters may impact our business Increasing attention to climate change, increasing societal expectations on companies to address climate change, and potential consumer and customer use of substitutes to Chevron’s products may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our stock price and access to capital markets. Increasing attention to climate change, for example, may result in demand shifts for our hydrocarbon products and additional governmental investigations and private litigation against the company.
In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters. Such ratings are used by some investors to inform their investment and voting decisions. Also, some stakeholders, including but not limited to sovereign wealth, pension, and endowment funds, have been promoting divestment of fossil fuel equities and urging lenders to limit funding to companies engaged in the extraction of fossil fuel reserves. Unfavorable ESG ratings and investment community divestment initiatives may lead to negative investor sentiment toward Chevron and to the diversion of investment to other industries, which could have a negative impact on our stock price and our access to and costs of capital.
GENERAL RISK FACTORS
Changes in management’s estimates and assumptions may have a material impact on the company’s consolidated financial statements and financial or operational performance in any given period In preparing the company’s periodic reports under the Securities Exchange Act of 1934, including its financial statements, Chevron’s management is required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include impairments to property, plant and equipment and investments in affiliates; estimates of crude oil and natural gas recoverable reserves; accruals for estimated liabilities, including litigation reserves; and measurement of benefit obligations for pension and other postretirement benefit plans. Changes in estimates or assumptions or the information underlying the assumptions, such as changes in the company’s business plans, general market conditions or changes in commodity prices, could affect reported amounts of assets, liabilities or expenses.