Chevron News - 2008
News summaries from
press releases and from unaffiliated news agencies are provided below. The summaries are sorted by month and are further categorized as upstream news, downstream news, and business/finance news.
oilprimer.com makes no claim as to the authenticity of the information posted here, but provides it as a courtesy to our visitors. The information provided on this page was obtained from company-provided press releases and the New York Times and the Los Angeles Times, and is believed to be reliable, but we do not guarantee its accuracy. Neither the information, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any stock or option or any claim of authenticity. You are encouraged to contact the relevant corporations and news agencies for the most accurate information.
• Upstream news:
- Chevron Corporation (NYSE:CVX) announced that its affiliate Tengizchevroil LLP has started up new facilities as part of the first phase of its expansion at the Tengiz Field in Kazakhstan. This initial expansion of 90,000 barrels per day brings Tengizchevroil’s current capacity to a total of approximately 400,000 barrels per day. Included in the startup is the Sour Gas Injection (SGI) project and the front end of the Second Generation Plant (SGP). SGI reinjects produced sour gas into the reservoir at very high pressures to boost production. SGP was brought up to about one-third of its full capacity and is currently separating the natural gas for injection while also stabilizing and sweetening the crude oil. Once fully operational, SGP is designed to also process sour gas into gas products and elemental sulfur. The addition of full facilities is projected to further increase daily crude production capacity at Tengiz to 540,000 barrels. Start-up of full facilities is expected during the second half of 2008.
- Chevron Corporation (NYSE: CVX) announced the successful completion of an appraisal well at its Big Foot prospect in the deepwater Gulf of Mexico. Big Foot is located in over 5,000 feet of water on Walker Ridge 29, approximately 225 miles south of New Orleans, and 180 miles offshore. The appraisal well, Big Foot no. 3, Sidetrack no. 2, confirmed the same pay intervals of the previously announced discovery and sidetrack wells, and found the main pay sand full of oil to the base. Operated by a Chevron subsidiary, the appraisal well reached a measured depth of 25,113 feet (including water) at a location to the northwest of, and deeper than, the previous wells. Chevron is evaluating a range of production development options for the Big Foot prospect. Chevron owns a 60 percent working interest in Big Foot. Partners are StatoilHydro (27.5%) and Shell Gulf of Mexico Inc. (12.5 %).
• Downstream news:
- Chevron Energy Solutions, a unit of Chevron Corporation (NYSE: CVX), and the Contra Costa Community College District (CCCCD) announced the completion of the first phase of the largest solar power installation ever constructed for an institution of higher learning in North America. The project is the highlight of a multi-facility energy efficiency and solar program that is expected to save CCCCD more than $70 million over 25 years. The state-of-the-art energy infrastructure upgrades — designed, engineered and constructed by Chevron Energy Solutions — make CCCCD's three college campuses and District Office more energy efficient, reliable and environmentally friendly as well as easier to manage. At the same time, the improvements are reducing the District's energy costs and its exposure to utility price volatility.
• Business/Finance news:
- Chevron Corporation reported in its interim update that fourth quarter net income is expected to be higher than the $3.7 billion earned in the third quarter 2007. Higher earnings are expected in the upstream business, which benefited during the fourth quarter from higher prices for crude oil and natural gas. In the third quarter, upstream earned $3.4 billion. For the downstream segment, refined-product margins continued to be weak in the fourth quarter. Earnings for worldwide downstream in the third quarter were $377 million and are expected to remain low in the fourth quarter. Net income in the fourth quarter is not expected to be as significantly affected by nonrecurring items as in the third quarter.
- The Global Fund to Fight AIDS, TB and malaria announced the launch of The Global Fund Corporate Champions program, an innovative way for multinational corporations to significantly invest in the fight against the three diseases. Chevron Corporation (NYSE:CVX) is the program’s inaugural Corporate Champion, making a commitment to invest US$30 million over three years in Global Fund-supported programs in parts of Asia and Africa. The Global Fund Corporate Champions program has been designed as an integrated platform for public private partnership, giving companies the opportunity to make a substantial commitment to global health. Each Corporate Champion will make a financial contribution to Global Fund-supported programs in countries where it operates, thereby significantly expanding upon its own workplace and community projects and investing in high-quality, rigorously monitored and results-focused, health programs aligned with national needs and strategies.
- While some of the world’s largest oil producers, including Mexico and Iran, are struggling to remain exporters, Brazil is moving in the opposite direction. A huge underwater oil field discovered late last year has the potential to transform South America’s largest country into a sizable exporter and win it a seat at the table of the world’s oil cartel. The new oil, along with refining projects under way by Petrobras, the national oil company, could eventually make Brazil a larger exporter of gasoline as well, adding to supplies in the United States and other countries where it is all but impossible to build new refineries. The subsalt basin that contains Tupi, the new deepwater field estimated to hold the equivalent of five billion to eight billion barrels of light crude oil, is creating a buzz among the world’s largest oil companies. They have struggled lately to find global-scale projects worth investing in, even with oil touching $100 a barrel. Tupi is the world’s biggest oil find since a 12-billion-barrel field discovered in 2000 in Kazakhstan. Talk by the Brazilian government of tightening investment terms for the new offshore exploration frontier, however, could quickly curb international enthusiasm. Brazil is even drawing comparisons with Bolivia and Venezuela, two South American countries that have nationalized parts of their energy industries in recent years. Still, Brazil has remained far more open to foreign investment than those neighbors, and it has encouraged international oil companies like Exxon Mobil, Shell and Chevron to pour billions of dollars into offshore exploration, though so far without much success. Even if Petrobras asks for help from other major oil companies, developing Tupi will require solving thorny technical challenges and executing a project on a scale it has never tried before. The first commercial quantities of oil are not expected for some seven years. José Sergio Gabrielli, the chief executive of Petrobras, said he was optimistic that the company could develop the oil with little outside help.
• Upstream news:
- Chevron confirms that its subsidiary Chevron Nigeria Deepwater Limited and its co-venturers are moving forward to develop the offshore Usan field in Nigeria. Discovered in 2002, the Usan Field is located at a water depth of 2,461 feet (750 meters) in Oil Mining License 138 approximately 62 miles (100 kilometers) off the coast in the eastern Niger Delta. The development plan for the Usan Field includes a floating production, storage and offloading (FPSO) vessel with a storage capacity of 2 million barrels of oil. First production is expected in late 2011 with peak production of 180,000 barrels of oil per day. The associated gas will be reinjected in the reservoir.
• Downstream news:
- Chevron Corporation (NYSE: CVX) announced that it has restarted production at the crude unit damaged by a fire last summer at the Pascagoula Refinery. The fire occurred Aug. 16 at the Mississippi refinery's No. 2 crude unit. As part of the rebuild, the company completed modifications to improve the unit's reliability and safety.
• Business/Finance news:
- Chevron Corporation (NYSE: CVX) reported net income of $4.9 billion ($2.32 per share — diluted) for the fourth quarter 2007, compared with $3.8 billion ($1.74 per share — diluted) in the year-ago period. For the full year 2007, net income was $18.7 billion ($8.77 per share — diluted), up 9 percent from $17.1 billion ($7.80 per share — diluted) in 2006.
- The oil giant Exxon Mobil has won court orders freezing as much as $12 billion in petroleum assets controlled by Venezuela’s government in an escalation of a dispute over efforts by President Hugo Chávez to assert greater control over the country’s oil industry. Venezuela’s dollar-denominated bonds suffered their steepest drop in six months on concerns that Mr. Chávez’s government could face a protracted legal battle with Exxon, preventing the government from raising cash through the sale of refineries abroad if the economy here slows after years of torrid growth. Investors are also increasingly concerned about the financial health of the national oil company, Petróleos de Venezuela, amid reports that its debt is ballooning as its output declines. The oil company is the largest single source of revenue for Mr. Chávez’s government, financing an array of social welfare projects and foreign aid to leftist allies. After Mr. Chávez’s move to take control of large oil ventures last year, Exxon dug in for a fight. While Chevron and other companies accepted the terms imposed by Mr. Chávez, Exxon aggressively sought to prevent Venezuela from transferring control of foreign-based oil assets to entities here ahead of arbitration proceedings. In recent days, Exxon won a court order from the High Court of London prohibiting Petróleos de Venezuela from selling assets worldwide up to a value of $12 billion, Margaret Ross, an Exxon spokeswoman in Houston, said in a statement. Exxon won similar orders in the Netherlands and the Netherlands Antilles for assets worth up to $12 billion. And in New York, Exxon won an order freezing $300 million of Petróleos de Venezuela’s assets. Despite a deterioration of political relations between Caracas and Washington, Venezuela remains a major trading partner with the United States, ranking as its fourth-largest supplier of imported crude oil. Venezuela’s government also controls Citgo Petroleum of Houston, which operates refineries in Illinois, Louisiana and Texas. Mr. Chávez’s government has compensated American companies in previous nationalizations of their assets when it was faced with the possibility of losing control of Citgo and other foreign assets in retaliation. A spokesman for Petróleos de Venezuela did not return calls seeking comment. The company is expected to appeal the rulings. The dispute may raise borrowing costs for Petróleos de Venezuela, which is being reconfigured by Mr. Chávez to focus on pressing social concerns.
- The Dow Jones industrial average is adding two companies, the Bank of America Corporation and the Chevron Corporation, the first change to the blue-chip stock index in almost four years, Dow Jones & Company said. Two others, the Altria Group and Honeywell International, will be dropped from the 30-member index, the oldest and single most-watched gauge of stock performance in the world. The changes will take effect next Tuesday, Dow Jones said. The planned spinoff of Philip Morris International from Altria, which will leave it a purely domestic tobacco company, prompted the change, Marcus W. Brauchli, managing editor of The Wall Street Journal, said. Editors of The Journal determine the composition of the Dow index, which is 111 years old. The Journal is published by Dow Jones, a unit of the News Corporation. The change is the first since April 2004, when three stocks were replaced. Adding Chevron makes sense because the Dow was light on energy at 5 percent, compared with the broader Standard & Poor's 500-stock index at 12.5 percent, said Chris Orndorff, a managing principal at Payden & Rygel Investment Management in Los Angeles. Similarly, Mr. Orndorff said, adding Bank of America was appropriate because the Dow represented financials at 10 percent, compared with 18 percent for the S.& P. 500. The decision to drop Honeywell and Altria is unusual because the two stocks have performed well recently. Previous changes often marked the departure of stocks in decline at the time, like Eastman Kodak, International Paper and Sears. The additions recognize trends within the stock market, including the continued growth of the financial service industry and the growing importance of the oil and gas industry to the world economy, Dow Jones said.
- Discovery Channel Global Education Partnership, Chevron (CVX: NYSE), and The Coca-Cola Africa Foundation are working together to extend the power of educational media technology to more than 20,000 Nigerian students and community members with the launch of eight Learning Centers and a teacher training program in under-resourced schools in Lagos, Nigeria. Discovery Channel Global Education Partnership (the Partnership), a nonprofit organization that works in schools and communities around the world, equips each school – called a Learning Center – with a television; DVD player; a library of specially produced, locally relevant educational video programming; and access to information from any source that meets the needs of the school and community. Each Learning Center also receives three years of teacher training and technical support in how to use television and video effectively in the classroom and as a community resource.
- President Hugo Chávez said that Venezuela was not planning to halt oil exports to the United States. The statement may ease fears in energy markets over fallout from Venezuela’s legal battle with Exxon Mobil over compensation for the nationalization of a large oil project. Mr. Chávez’s conciliatory tone stands in contrast to recent comments made by him and other officials here in which they threatened to stop exporting oil to the United States. They said the Bush administration and Exxon Mobil were conspiring to wreak economic havoc in Venezuela. Venezuela supplies about 1.25 million barrels of crude oil a day to the United States, ranking as the country’s third-largest supplier of oil after Canada and Saudi Arabia, according to the Department of Energy in Washington. Mr. Chávez explained that Venezuela would halt the oil exports if the United States attacked. Claims by Mr. Chávez that the Bush administration is preparing an invasion of Venezuela, with the objective of gaining control of its oil reserves, have been a staple of his political rhetoric for several years. While seemingly a reversal, Mr. Chávez’s latest comments reflect the devilish complexity of efforts to undo an oil relationship with the United States that goes back nearly a century. For instance, Petróleos de Venezuela, the national oil company, announced last week that it would suspend commercial relations with Exxon. But the move seemed to be meant more for consumption within Mr. Chávez’s political movement here, which faces growing discontent over corruption charges and food shortages. In fact, the decision applies only to day-to-day sales of oil to Exxon, not to established contracts. And though Exxon is regularly described on state television here as an enemy of Venezuela, Exxon and Petróleos de Venezuela still jointly own a refinery outside New Orleans that was specifically built to handle Venezuelan oil, which is high in impurities like sulfur. Few countries outside the United States have such refineries designed to process Venezuela’s oil, making a redirection of the country’s petroleum exports problematic. Despite a deterioration of political ties with Washington, oil exports to the United States remain Venezuela’s largest single source of export revenue. Exxon has adopted the most aggressive approach of any major international oil company in dealing with Venezuela, choosing to shut down much of its Venezuelan operations last year. Most other companies ceded control of projects to Mr. Chávez, becoming minority partners and paying higher taxes. Signaling that his efforts to exert greater control over the oil industry are not over, Mr. Chávez also spoke Sunday of the possibility of raising taxes on foreign oil companies by enacting a windfall profits tax. International companies like Chevron, BP and StatoilHydro of Norway continue to operate in Venezuela.
- Lawyers for the Alaska Native coastal village of Kivalina, which is being forced to relocate because of flooding caused by the changing Arctic climate, filed suit in federal court arguing that 5 oil companies, 14 electric utilities and the country’s largest coal company were responsible for the village’s woes. The suit is the latest effort to hold companies like BP America, Chevron, Peabody Energy, Duke Energy and the Southern Company responsible for the impact of global warming because they emit millions of tons of greenhouse gases, or, in the case of Peabody, mine and market carbon-laden coal that is burned by others. It accused the companies of creating a public nuisance. In an unusual move, those five companies and three other defendants — the Exxon Mobil Corporation, American Electric Power and the Conoco Phillips Company — are also accused of conspiracy. “There has been a long campaign by power, coal and oil companies to mislead the public about the science of global warming,” the suit says. The campaign, it says, contributed “to the public nuisance of global warming by convincing the public at large and the victims of global warming that the process is not man-made when in fact it is.” Kivalina, an Inupiat village of 400 people on a barrier reef between the Chukchi Sea and two rivers, is being buffeted by waves that, in colder times, were blocked by sea ice, the suit says. The estimated cost of relocating the village is up to $400 million, the suit says.
- Chevron Corporation (NYSE: CVX) and Weyerhaeuser Company (NYSE: WY) announced the creation of a 50-50 joint venture company focused on developing the next generation of renewable transportation fuels from nonfood sources. The joint venture, Catchlight Energy LLC, will research and develop technology for converting cellulose-based biomass into economical, low-carbon biofuels. The formation of Catchlight Energy is the first milestone of a biofuels alliance announced by Chevron and Weyerhaeuser in April 2007 and reflects the companies' shared view that nonfood biofuels will play an important role in diversifying the nation's energy supply.
• Upstream news:
• Downstream news:
- Chevron Corporation (NYSE: CVX) said it plans to build a pre-commercial plant at its refinery in Pascagoula, Miss., to test the technical and economic viability of a breakthrough heavy-oil upgrading technology. This proprietary technology, called Vacuum Resid Slurry Hydrocracking (VRSH), has the potential to significantly increase yields of gasoline, diesel and jet fuel from heavy and ultra-heavy crude oils and could be used to increase and upgrade production of heavy oil resources. The Pascagoula pre-commercial plant will have a capacity of 3,500 barrels per day. All necessary permits have been secured, and construction is expected to begin later this year. Chevron has been actively developing VRSH technology since 2003. The patented process has undergone successful preliminary testing on a wide range of feedstocks in multiple pilot plants at Chevron's research center in Richmond, Calif. Chevron's research shows the technology can achieve up to 100 percent conversion of the heaviest feedstock, while the best current commercial refining technology achieves less than 80 percent conversion.
- Chevron Corporation (NSYE: CVX) announced that its Australian subsidiary, Chevron Australia Pty Ltd, plans to develop a new Australian liquefied natural gas (LNG) project, based on its 100 percent-owned Wheatstone natural gas discovery. The facility will be located on the northwest coast of mainland Australia and have initial capacity of at least one 5 million-ton-per-annum LNG production train with expansion capacity for additional production trains. The facility will also provide commercial domestic gas to the local market.
- Chevron Corporation (NYSE:CVX) announced that the company and its partners have given the green light to construct the Platong Gas II natural gas project in the Gulf of Thailand. Total development cost of the field is approximately $3.1 billion with startup scheduled for first quarter 2011. The Platong Gas II development, located in shallow water, 120 miles (200 km) offshore, is designed to add 420 million cubic feet of natural gas per day processing capacity. The project feeds the growing demand for gas in the domestic market. Chevron is operator and holds a 69.8 percent participating interest with Mitsui Oil Exploration Co. Ltd. (27.4 percent) and PTT Exploration and Production Public Co. Ltd.(2.8 percent).
• Business/Finance news:
- Chevron Corp. (NYSE: CVX) announced a new employee giving and volunteer program that will provide up to $20 million annually for U.S. nonprofit organizations. The new program, Chevron Humankind, includes company matching for employee financial contributions, grants to nonprofits for volunteer time and company-sponsored volunteer opportunities. Chevron Humankind, open to U.S.-based employees and retirees, allows employees to support nearly any nonprofit rather than restrict giving to specific categories of organizations.
- Fierce, unforgiving seas surround Ireland's shores. And that could prove to be a moneymaker for the country. The government, university research departments, and a growing number of entrepreneurs, are collaborating in various ways to tap the power and resources of the ocean. Wavebob and Ocean Energy, for instance, have installed wave power prototypes in Galway Bay and will experiment with larger prototypes in an energy park being created just to the north, off the coast of county Mayo. By 2012, the government aspires to harvest 75 megawatts from waves and by 2020 to raise that energy production to 500 megawatts. It also wants to export services and equipment. For all the promise of electric power generated by the sea, there are many impediments, from construction costs to environmental concerns and the sheer unpredictability of the weather. But rising energy costs and concerns over climate change are providing renewed impetus--and a new sales pitch--for those pursuing such projects. Wavebob plans first to target customers with the greatest need: Ireland, Tahiti, Hawaii, and New Zealand are all promising early markets. Oil companies, which run their offshore derricks on diesel power, are also potential early customers. Chevron, in fact, is an investor. Defense departments are also interested.
- The Iraqi government is negotiating with American and European oil companies to manage the development of five new fields in northern and southern Iraq, an Oil Ministry official said. Iraq hopes to reach agreements that will help it reach its goal of increasing crude oil production — now 2.3 million barrels a day — by 500,000 barrels a day, said Asim Jihad, a spokesman for the Oil Ministry. The oil minister, Hussain al-Sharistani, is in Vienna for a meeting of the Organization of the Petroleum Exporting Countries and did not respond to requests for an interview. Iraq once had one of the region’s strongest agricultural and industrial economies. But United Nations sanctions and years of war with Iran destroyed much of its economic base, leaving the nation heavily dependent on petrodollars. Hobbled by armed conflict, mismanagement and neglect, Iraq produces less oil than Saudi Arabia (more than nine million barrels a day) or Iran (nearly four million barrels a day), and far less than its potential capacity. Mr. Jihad said Iraq hoped to produce six million barrels of crude a day by 2015. He declined to identify the companies invited to bid on the technical service contracts because the deals have not been completed. But in previous interviews Iraqi officials have described meetings in February with executives from Chevron, Exxon Mobil, Royal Dutch Shell and Total SA. Mr. Jihad said Iraqi officials selected specific companies for their knowledge of Iraq’s oil fields and their expertise in managing large development projects. The negotiations are in their second round, he said, and would probably be completed by the end of this month. Despite Iraq’s enormous reserves — in excess of 100 billion barrels — global oil corporations have been reluctant to invest because of a lack of clarity among Iraqi politicians about how to develop the industry and how to share profits. The monumental scale of the violence in Iraq has also dissuaded many investors. The Oil Ministry is studying more than 70 oil exploration bids, he added. Parliament has still not agreed on a law to determine how the country’s oil wealth will be divided. But a Kurdish official reached late Wednesday said that while he was not familiar with the details of the negotiations, he could not immediately see why the Kurdish government would oppose them. The Kurds angered Sunni and Shiite leaders last fall when they signed oil exploration and development deals with international oil companies.
- Exxon Mobil suffered a setback in its dispute with Venezuela when a British court overturned an earlier ruling that froze as much as $12 billion in petroleum assets controlled by the government of President Hugo Chávez. The British court overturned an injunction won by Exxon in January to keep Venezuela from moving any assets of its national oil company, Petróleos de Venezuela, out of reach of an international arbitration commission that is dealing with claims against Mr. Chávez’s nationalization of an oil field last year. Judge Paul Walker said the injunction should be reversed because Petróleos de Venezuela does not directly own any assets in Britain and thus the dispute was not connected to Britain. An Exxon spokesman, Alan Jeffers, said the company would not appeal the ruling because “the court did not question the merits of the underlying claim.” Petróleos de Venezuela had argued that Britain lacked jurisdiction in the case. Exxon, the world’s largest oil company, said similar injunctions it had won in the Netherlands and the Netherlands Antilles for assets worth up to $12 billion would remain in place. A ruling by a United States court last month that froze as much as $315 million that Petróleos de Venezuela would have gained in a bond buyback would also remain, Exxon said. The freeze had prompted Mr. Chávez to threaten last month that he would halt oil exports to the United States or raise taxes on foreign oil companies. The dispute had also raised concerns among some investors over the financial health of Petróleos de Venezuela, which controls the largest oil reserves in South America. Venezuela supplies about 1.25 million barrels of crude oil a day to the United States, ranking as the country’s third-largest supplier behind Canada at No. 1 and Saudi Arabia, according to the Energy Department. Petróleos de Venezuela is the government’s largest single source of export revenue, financing a range of social welfare projects and foreign aid. Mr. Chávez last year seized control of Venezuela’s last remaining oil projects operated by large American and European energy companies as part of his efforts to assert greater power over the country’s oil industry. Venezuela allowed the private companies to remain as minority partners, but disputes continued over compensation for the loss of their assets. Exxon adopted the most aggressive approach of any international oil giant in its dealings with Venezuela and shut down much of its Venezuelan operations last year. Other companies like Chevron, BP and StatoilHydro of Norway continue to operate in the country. Exxon contended that Petróleos de Venezuela had agreed to compensate Exxon if the government decided to expropriate Exxon’s part of a joint venture set up in the 1990s in the Orinoco oil region.
- Chevron Corporation (NYSE:CVX) told financial analysts at a meeting in New York City that major upstream capital projects in the U.S. Gulf of Mexico, offshore Nigeria and in Kazakhstan will produce additional crude oil and natural gas this year. In the downstream business, company executives said projects to increase refining scale and flexibility are under way in areas of market strength in the United States and Asia.
- Chevron Corporation (NYSE:CVX) named Joe W. Laymon corporate vice president of Human Resources, effective immediately. Laymon joins Chevron from the Ford Motor Company, where he was group vice president of Corporate Human Resources and Labor Affairs. In his new role, Laymon, 55, will oversee Chevron's human resources and medical functions worldwide. He succeeds Alan R. Preston, who is retiring from Chevron on April 30, after 35 years with the company.
- Chevron Corporation (NYSE:CVX) announced that Gen. James L. Jones (retired, United States Marine Corps) has been nominated for election to Chevron's board of directors. Jones, 64, is currently president and chief executive officer of the Institute for 21st Century Energy, a policy, economic and educational center in affiliation with the United States Chamber of Commerce. Jones will be considered for election to Chevron's board at the company's annual stockholders meeting on May 28. If he is elected, the board will increase from 14 to 15 members, and Jones will serve on the Public Policy Committee and the Board Nominating and Governance Committee.
• Upstream news:
- Chevron Corporation (NSYE: CVX) confirmed first production from the deepwater offshore Moho-Bilondo project in the Republic of the Congo. The project, in which Chevron has a 31.5 percent interest, was completed ahead of schedule. Originally planned to come onstream in the second half of 2008, Moho-Bilondo consists of subsea well clusters that flow into a floating processing unit. Maximum total daily production of 90,000 barrels of crude oil is expected in 2010. The Moho Field, located nine miles (15 km) off the Congolese coast, was discovered in 1995 in the Haute-Mer concession in 2,300 feet (700 meters) of water. In addition, two exploration wells, Moho-Nord Marine 1 and 2, were drilled in the permit area in 2007. Chevron's partners on the project are Société Nationale des Pétroles du Congo (15 percent) and Total E&P Congo (operator and 53.5 percent).
• Downstream news:
• Business/Finance news:
- Chevron Corporation (NYSE:CVX) said that it will petition the Superior Court in Lago Agrio to strike from the record a flawed and patently partisan report submitted in the ongoing environmental lawsuit filed by Ecuadorian citizens against Chevron. The purported purpose of the report, presented to the Court yesterday by Richard Cabrera, a mining engineer appointed by the Court, was to evaluate what, if any, environmental effects exist in the area of the former consortium between Petroecuador, the state-owned oil company of Ecuador, and Texaco Petroleum Company ("Texpet"), a Chevron subsidiary. Chevron has repeatedly presented objections to the Court about Cabrera's lack of qualifications and expertise, bias in favor of the plaintiffs, and violation of Court orders.
- The Tiger Woods Foundation and Chevron said they will join together to enhance and develop programs, activities and events in support of the Foundation. As part of this new relationship, Chevron will assume the title sponsorship of the Chevron World Challenge golf tournament, a significant fundraising event for the Tiger Woods Foundation. The event is held annually at Sherwood Country Club in Thousand Oaks, Calif.
- Chevron Corporation (NYSE: CVX) reported in its interim update for the first quarter 2008 that upstream earnings are expected to benefit from an increase in prices for crude oil and natural gas from the fourth quarter 2007. Downstream earnings for the first quarter are expected to remain at the low level recorded in last year's fourth quarter. Corporate and other charges are anticipated to be higher between periods. Additionally, foreign exchange effects are expected to have a more adverse impact on first quarter results than in the fourth quarter 2007.
- Chevron Corp. (NYSE: CVX) announced that Melody Meyer will become president of Chevron Energy Technology (ETC) and Louie Ehrlich will become president of Chevron Information Technology (ITC) and chief information officer (CIO), effective June 1, 2008. Meyer replaces the retiring Mark Puckett, while Ehrlich replaces the retiring Gary Masada.
- The Board of Directors of Chevron Corporation (NYSE: CVX) declared a quarterly dividend of $0.65 cents per share, payable June 10, 2008, to stockholders of record as May 19, 2008. The amount represents a 12.1 percent increase in the company's quarterly dividend and marks the 21st consecutive year Chevron has increased its annual dividend payment.
- An independent environmental expert told a court in Ecuador that the oil company Chevron should pay $7 billion to $16 billion in compensation for environmental damage in the country. In a report to the court, the expert, Richard Cabrera, who is a geologist, said the low end of the range represented the cost to remediate soils and pay for health care costs, a water system and infrastructure improvements. The high end of the range was based on an “unjust enrichment” penalty. The lawsuit, which peasants and Indians in Ecuador brought in the early 1990s, contends that Texaco, which Chevron bought in 2001, polluted the jungle and damaged their health by dumping 18 billion gallons of contaminated water from 1972 to 1992. Chevron’s general counsel, Charles James, disputed the findings of the report, saying the case had become a political issue in Ecuador. He did not rule out reaching an out-of-court settlement with the plaintiffs, but said the company would not be “blackmailed.” The company said later it would petition the local court to dismiss the report. Steven Donziger, a lawyer based in the United States who is advising the plaintiffs, said the report was “a complete rejection of everything that Chevron has been saying since the case began 15 years ago.” He said Mr. Cabrera’s report validates the plaintiffs’ arguments, and added that he expected a court ruling in 2009 “knowing that Chevron will try to delay the process.” Chevron has argued that it was released from any liability because it paid $40 million for an environmental cleanup in the 1990s. It blames the state oil company, Petroecuador, for much of the pollution.
- The glorious Fairmont Hotel in San Francisco, historic host to presidents and royals, was the improbable scene of a brawl. Squaring off beneath the cream-and-gilt ceilings and behind mahogany doors were oil behemoth Chevron Corp. and a pair of Ecuadorean environmental activists. It was not, however, a fair fight. Oil giant vs. environmentalists? In San Francisco? Chevron never had a chance. The occasion for the face-off was the prestigious Goldman Environmental Prize. In green circles, the prize is huge -- sort of an environmental Nobel. (Indeed, a past Goldman winner, Kenyan tree planter Wangari Maathai, did go on to win the Nobel Peace Prize.) Among this year's recipients are lawyer Pablo Fajardo Mendoza and community organizer Luis Yanza, who represent a class of 30,000 indigenous people in a lawsuit filed in Ecuador alleging that, from 1964 to 1992, Texaco Inc., which was bought by Chevron in 2001, polluted their land and water, sickening their families, crops and animals. Faced with the powerful condemnation implied by the award to its adversaries, Chevron did not flinch. It went after the activists, and the Goldman Prize too -- saying the selection committee had been misled and that it was about to tarnish the prize's illustrious reputation by bestowing a bronze sculpture of Ouroboros and $150,000 on two charlatans. Learning that Fajardo and Yanza would hold a news conference at the Fairmont, Chevron held one of its own one floor up. The company's PR offensive is understandable: A report by a court-appointed expert found that Chevron could have to pay up to $16 billion if it loses the case. So Chevron officials strove to get their points across in their counter-conference, maintaining that the company remediated any contamination that could have been laid at its door long ago -- and that the state-owned oil company, Petroecuador, is the real culprit for whatever pollution exists today. But it's hard for a liberal city to love an oil company, and the activists' message was heart-rending. At the awards ceremony at the San Francisco Opera House later that night, the audience watched a film -- narrated by Robert Redford -- showing oil-soaked earth, physically disfigured people and the grave sites of Ecuadoreans stricken with cancer. Viewers were left pondering not legal distinctions but the fact that people in Ecuador are fighting for their lives. And never, ever, Fajardo told the audience, would he give up seeking justice for a humble people whose way of life had been destroyed by Chevron. The case in Ecuador may take years to resolve, but in the Opera House, with the crowd on its feet for Fajardo, Yanza and the other prize winners, Ecuador could claim a victory.
- What's with the weird new carports at East L.A. College? Tiffany Hsu has the scoop: The seven carports covering the northwest parking lot at East Los Angeles College now feature some of the country’s most innovative, energy-efficient technology, but there’s an added bonus: Students are delighted that they can park their cars in the shade. Officials from the Los Angeles Community College District revealed the 1.2-megawatt solar farm spread over the 3-acre, 530-spot space in Monterey Park. With 5,952 photovoltaic panels tapping energy, the array is expected to last at least 40 years and provide up to 45% of the college’s electricity needs. But with clear skies and good weather lately, the panels have been performing better than expected, said Raoul L. Wood, a project manager for Chevron Energy Solutions who designed the array. The project is just part of the district’s plan to “green” its nine colleges with more than $2.2 billion in bond funding approved by Los Angeles voters in 2001 and 2003. Eventually, officials hope the entire district will be able to go “off the grid” by deriving all of its energy from alternative sources. When construction and renovation is completed, 44 buildings will meet the Leadership in Energy and Environment Design certification standards developed by the U.S. Green Buildings Council. Savings should total about $270,000 per year, and offset the production of 1,160 tons of carbon dioxide emissions –- equivalent to removing 320 cars from the streets.
• Upstream news:
• Downstream news:
- Chevron Energy Solutions and Keenan Development announced the commercial operation of a $100 million central utility plant to provide efficient and reliable power, chilled water, and steam to the National Interagency Biodefense Campus (NIBC) at the U.S. Army's Fort Detrick in Frederick, Maryland. The central utility plant's design provides for continuous steam, chilled water, electricity and standby emergency power to reliably meet the needs of the NIBC's laboratory and biodefense research work. Chevron Energy Solutions, a unit of Chevron Corporation (NYSE: CVX) that designed and built the plant on schedule and on budget, is operating the facility, while Keenan Development owns the plant and is leasing the project land from Fort Detrick.
• Business/Finance news:
- Chevron Corporation (NYSE: CVX) reported net income of $5.17 billion ($2.48 per share – diluted) for the first quarter 2008, compared with $4.72 billion ($2.18 per share – diluted) in the 2007 first quarter. Earnings in the 2007 period included a $700 million gain on downstream asset sales in Europe. Sales and other operating revenues in the first quarter 2008 were $65 billion, up from $46 billion a year earlier on higher prices for crude oil, natural gas and refined products.
- Chevron Corporation reduced greenhouse gas (GHG) emissions, increased its number of renewable energy research partnerships and invested approximately $119 million in communities around the world, according to the company's 2007 Corporate Responsibility Report. Chevron's sixth report, published annually, provides descriptions, data and perspective on the company's community engagement, health, safety and environmental performance for 2007.
- Chevron Corporation (NSYE: CVX) announced that it has contributed $2 million to provide assistance to those affected by the recent devastating cyclone in Myanmar. The International Federation of the Red Cross will receive a $1 million contribution. An additional $1 million will be allocated to four other organizations: the International Organization for Migration, Mercy Corps, Pact and Save the Children. The contributions will aid disaster relief efforts for Cyclone Nargis that struck Myanmar May 2, 2008, and caused widespread destruction along the country's southern coast and southeast regions.
- Chevron Corporation (NYSE: CVX) announced that it will contribute $1.4 million (approximately 10 million yuan) towards relief efforts in the aftermath of the earthquake that struck Sichuan Province in central China on May 12. The funds will be directed to the Sichuan Province Red Cross, an affiliate of the Red Cross Society of China. Chevron has an interest in the Chuandongbei gas project, which is located in the province.
- Chevron Corporation (NYSE: CVX) achieved another year of record earnings and continued to build on its financial strength, Chevron Chairman and CEO Dave O'Reilly said at the company's 2008 Annual Meeting of Stockholders. In his remarks, O'Reilly highlighted technology among several key elements contributing to Chevron's success. He credited technology for transforming not only how and where Chevron produces energy, but also how much the company can produce. O'Reilly said technology also can create new opportunities for the company. He noted that Chevron's technology leadership in sour natural gas led to a new opportunity with the China National Petroleum Corporation in developing the Chuandongbei natural gas area in central China. In 2007, the company also opened two new global technology centers to expand its research and development capability and established alliances with government and academic institutions to pursue technology to convert nonfood sources into commercially viable biofuels. Peter Robertson, vice chairman of the board, elaborated on Chevron's strong financial performance in 2007. He said the company's net income of $18.7 billion in 2007 represented the fourth consecutive year of record earnings. Return on capital employed for 2007 was 23 percent.
- A dozen oil companies agreed to pay $423 million in cash plus clean-up costs to settle litigation over groundwater contamination from the gasoline additive, MTBE, lawyers representing public water utilities and public agencies in 17 states, said. The settlement, filed in the Federal District Court in Manhattan, reportedly involves BP America, the Chevron Corporation, ConocoPhillips , Shell Oil, Marathon Oil, Venezuela’s Citgo Petroleum, Sunoco Inc. and the Valero Energy Corporation. Five smaller companies, including the Lyondell Petrochemical Corporation, the chemical’s maker, have not settled. The 2003 lawsuit by public water providers in 17 states was consolidated into a single federal case. The settlement is “a step in the direction of making the parties responsible for the contamination pay for it rather than the folks who drink the water and pay the rates,” said Victor Scher, another of the lawyers. “It’s a significant development.” MTBE, or methyl tertiary butyl ether, was added to gasoline for some three decades to curb smog emissions.
- Some of the nation’s largest oil companies have agreed to pay about $423 million in cash to settle a lawsuit brought by more than a hundred public water providers, claiming water contamination from a popular gasoline additive. The terms of the settlement were submitted for approval in the federal court for the Southern District of New York. Under the terms of the deal, the companies also agreed to pay 70 percent of the future cleanup costs over the next 30 years. The defendants that agreed to the settlement include BP, Royal Dutch Shell, ConocoPhillips, Chevron, Marathon Oil, Valero Energy, Citgo and Sunoco. Six other companies named in the lawsuit, including Exxon Mobil, did not agree to the deal, said Scott Summy, a lawyer at Baron & Budd and a counsel for the plaintiffs. In the lawsuit, the plaintiffs, which include 153 public water systems in New York, California and 15 other states, claimed that the additive, a chemical called methyl tertiary butyl ether, or M.T.B.E., was a defective product that led to widespread contamination of groundwater. The suit contended that the chemical was used by oil companies, even though they knew of the environmental and health risks that it posed. Low levels of M.T.B.E. can make drinking water supplies unpalatable because of its “offensive taste and odor,” according to the Environmental Protection Agency. The agency has also found that the compound caused cancer in laboratory rats that were exposed to high doses. Since the mid-1990s, hundreds of lawsuits have been brought against oil companies for their use of the chemical. This deal, if approved, would be the largest settlement to date. M.T.B.E. has been used since 1979 to increase octane levels in gasoline, but its use became more widespread after the 1990 Clean Air Act mandated the use of an oxygenate in certain cities to reduce smog and other pollutants. When mixed with gasoline, the additive ensured that the fuel burned more thoroughly, thereby reducing air pollution. But after being widely adopted, it was found to corrupt groundwater. Even in small amounts, the additive makes water smell and taste like turpentine. The use of M.T.B.E. is now banned in 23 states, including New York and California. In 2005, some 130,000 barrels of M.T.B.E. were produced a day, representing about 1 percent of the nation’s gasoline supplies. Oil companies stopped using it in 2006. The oil industry has fought hard to avoid penalties related to its use of the additive, arguing that it should not be forced to pay for the cleanup of a product that it was mandated to use. Estimates of the cost of a total cleanup of M.T.B.E. have run to the tens of billions of dollars. In 2003, the Republican-dominated Congress tried to pass a provision that would have shielded M.T.B.E. manufacturers from litigation, but failed because of strong opposition in the Senate. A second attempt to add a lawsuit shield also failed during discussion of the 2005 energy bill. The high risk of lawsuits related to M.T.B.E. has prompted the oil industry to stop using it and look for another gasoline additive. That eventually led to the development and use of ethanol as an oxygenate replacement. Peter J. Sacripanti, a lawyer representing Exxon at McDermott Will & Emery, said that Exxon did not plan to settle and would “vigorously defend” itself. “Exxon’s position is very simple,” he said. “When it engages in conduct that injures people, it pays recompense for that. In all these cases, our conduct did not cause injury, or cause damages. Our conduct was lawful.” The suit, first filed in 2003 by public water providers in several states, was eventually consolidated into a single federal case. The pending case will go to trial in September in New York.Robert J. Gordon, of Weitz & Luxenberg in New York, also represented the plaintiffs.
- Chevron said first-quarter profit rose 9.5 percent, beating Wall Street estimates. Net income climbed to $5.17 billion, or $2.48 a share, from $4.72 billion, or $2.18, a year earlier, the company said. Petroleum output dropped 1.7 percent, however, to the equivalent of 2.6 million barrels of crude a day. Chevron’s chief executive, David J. O’Reilly, plans to spend more than $400 million a week this year in the company’s costliest push ever to find new reserves, tap discoveries and expand refineries.
- It seems quaint to think of it now, but it was only three years ago that lawmakers in Washington were debating whether to impose a windfall profits tax on the oil industry for all oil sold above $40 a barrel. Proponents of the tax argued that U.S. consumers simply couldn’t tolerate the gobs of profit oil companies were making as pump prices hovered around $2.60 for a gallon of regular unleaded. Oil was trading near $116 a barrel, gas was averaging $3.60 a gallon nationwide and $3.89 in California, and oil companies were making even bigger gobs of profit. Exxon Mobil, the world’s largest oil company, reported quarterly profit of $10.9 billion last week, up 17% from a year before. It was the second-most-lucrative quarter in the company’s history, after the record $11.7 billion pocketed in the previous three months. Chevron reported profit of $5.2 billion, up almost 10% from a year earlier. Europe’s Royal Dutch Shell said its quarterly profit jumped 25% to a record $9.1 billion, while BP said its profit soared 63% to a record $7.6 billion. Earlier, ConocoPhillips said its profit rose 17% to $4.1 billion, and Westwood-based Occidental Petroleum said its profit climbed 50% to a record $1.8 billion. So what about that windfall profits tax? The measure was vigorously opposed by the oil industry and voted down by the Senate in late 2005. But the situation that so vexed lawmakers remains. So does drivers’ anger toward the oil industry, which is seen as gleefully padding its pockets at the expense of cash-strapped consumers. I stopped by a Pasadena gas station where a gallon of regular unleaded was going for about $4.04 the other day. Every driver I spoke with said the oil companies were gouging people at the pump and that their profit levels were outrageous. “They’re killing us,” said Altadena resident Andrew McAllister, 48, as he filled his 1989 Honda Accord. “I can’t afford to drive, and I make a decent living.” Like others I spoke with, McAllister said he favored a windfall profits tax. “If they’re making record profits again and again, they need to give some of it back,” he said. Do they? I too got caught up in the outrage during an appearance last week on the cable channel CNBC, where I’d been asked to comment on what the oil companies should do with all that money. My proposal: Some sort of levy – call it a windfall profits tax, call it something else – that would raise billions of dollars annually for public transportation projects so that drivers would have viable alternatives to using their cars. This prompted a gusher of e-mail from CNBC viewers asking why I was seeking to punish oil companies for doing what companies are supposed to do – make money and enrich shareholders. It was a fair question. I took up the matter with Philip Verleger, an economist who, as an official in the Carter administration, was one of the architects of a windfall profits tax imposed on the oil industry in 1980. The eight-year levy on domestic production was intended to provide a sense of economic fairness to consumers as politicians lifted price controls imposed in 1971. It basically taxed all profits above a base price linked to the cost of oil in 1979, with annual adjustments for inflation. “Unless we tax the oil companies, they will reap huge and undeserved windfall profits,” President Carter declared at the time. Verleger said the windfall profits tax he helped devise had a clear purpose – to compensate for the lifting of price controls. He isn’t sure as clear a rationale exists today. “How would you measure the windfall?” Verleger asked. “If you can’t measure it, you can’t tax it.” The trick is setting the base price. Just three years ago, a windfall was seen as anything surpassing $40 a barrel for oil. Now we’re at almost three times that level, and Verleger said he believes oil will be at $200 a barrel by the end of the year. So where do fair (albeit high) profits end and windfalls begin? The oil industry already pays billions of dollars a year in taxes, but it also receives billions in government subsidies. The exact amount of tax breaks is difficult to calculate because of the variety and complexity of programs involved, but Greenpeace estimates the figure could be as high as $35 billion. Meanwhile, the perception remains among many drivers that the industry is taking advantage of people because, well, it can. “There’s nothing you can do,” La Cañada Flintridge resident Vanessa McEwen, 39, wearily declared as she filled her 2000 Jeep Cherokee in Pasadena and prepared to chauffeur her kids to an after-school activity. After thinking about it a bit, I suppose I have to grudgingly acknowledge that a windfall profits tax isn’t the solution. Like many people, I find the oil companies’ profits obscene. But they don’t control the market, and, yes, they’re in business to make money for shareholders. But that doesn’t mean they’re totally off the hook. Subsidies? Sayonara. The last thing these guys need are tax breaks. Lawmakers should immediately terminate all government programs that give the oil industry unfair (and unnecessary) advantages. And like Spider-Man says, with great power comes great responsibility. The oil companies should be required to devote a specific amount of their annual profit to public transportation and alternative energy projects. Call that a tax if you like. I see it as a recognition of the companies’ enormous potential to have a positive effect on society, rather than just being first-class riders on the economic gravy train. How much should they give? I don’t know. But I do know that the oil industry reaped more than $155 billion in profit last year, according to the Congressional Research Service. Exxon Mobil alone accounted for a quarter of the take. Something tells me these firms would somehow scrape by with a few billion less. At the Pasadena gas station, 34-year-old Darcy Fraser, who works as an assistant vice president at a well-known bank, said that with fuel, food, housing and healthcare costs all rising, the oil companies have a responsibility to give something back. “They should use some of their money to help out people who are suffering at the pump,” she said. “They should give us a little relief.” You know an industry is getting too fat when even a banker criticizes its profit level.
- With Big Oil pumping out immense profits, you’d think cash would be available to fund renewable-energy programs. It is, and there's plenty of it, yet the majors' outsize earnings may be leading them back to the oil patch instead. In February, BP said it would regard its impressive solar and wind operations strictly for their equity value and might spin them off. So much for Beyond Petroleum. More recently, Royal Dutch Shell withdrew from a landmark wind project in Britain and in 2006 sold the lion’s share of its solar interests to a German firm. Exxon Mobil Corp., the giant among giants, remains outspoken in its belief in the enduring primacy of oil -- an issue that activist shareholders challenged at the company's annual meeting today in Dallas. Energy alternatives have gotten a bit more traction at Chevron Corp. and ConocoPhillips, but they still take a far back seat to other priorities at those premier fossil fuel marketers. Big Oil commands the expertise, and certainly the resources, to play a transformative role in tackling the planet's energy dilemma. That, however, would entail a measure of self-transformation. At least in the short term, these profit machines have little incentive to bear the costs of a new mission or foster a culture of change. Contrast their stance with that of U.S. carmakers. General Motors Corp., for one, is scrambling for survival by investing in hybrids, fuel cells and other technologies that limit oil use and carbon emissions. "The auto industry has been disciplined by the marketplace," said Deron Lovaas, a transportation expert with the Natural Resources Defense Council. "Their profit margins are gone. The marketplace is not providing the discipline for the oil companies to help get us where we, and they, need to go." Instead, the majors are going to Canada’s Alberta province to squeeze oil out of tar sands. These lands contain potentially 175 billion recoverable barrels, but don't expect to see gushers. The oil is embedded in sand, clay and silt, and its extraction requires great flows of water and natural gas. In the process, a heavy load of CO2 is released, much more than in conventional oil operations. Costs are steep in the tar sands. The added overhead is justified only by the startling price the resource now fetches. Why are the majors going to such trouble? As the cliché says, the low-hanging fruit already has been picked. Access to the world’s rich fields is dwindling for the Western oil powers. Stagnant global output is fanning supply fears –- is "peak oil" approaching? -– and state-controlled companies overseas have a lock on the majority of the remaining assets. Consider that in the most recent quarter, maturing wells and confiscation in Venezuela factored into a 10% decline in production at Exxon Mobil. For investors, that was an oil shock of a different kind. "Many people in the industry I speak to off the record admit to being quite terrified about where future supply is coming from," said Andrew Logan, oil program director at CERES, which works with investors toward environmental goals. "They don’t know what to do, so they are investing in these secondary sources. They see where the future is going, but their business is so good currently that they fear the market response if they diversify." Indeed, Big Oil is finely attuned to rewarding shareholders by throwing off cash. Stock buybacks outstrip spending to find oil and gas, to say nothing of the industry’s minuscule investment in clean and renewable fuels. Exxon, for example, racked up almost $405 billion in revenue last year, taking home $40.6 billion in profit. About $21 billion was channeled into capital costs, including exploration. By contrast, the company laid out $31.8 billion to take its own shares out of circulation. And then there's the ever-rising dividend. Even after the buybacks, Exxon has $41.4 billion in cash sitting on its balance sheet. Exxon's direction is under fire from some activist investors. At the annual meeting ballots will be taken on a series of resolutions mandating sustainable-energy projects, along with a proposal to separate the roles of chief executive and chairman. The California Public Employees' Retirement System, the biggest public pension pool in the U.S., is an avid backer of the campaign, which CERES helped organize. Large swaths of the Rockefeller clan –- descendants of Exxon's founder, John D. -- are keen to see the company's top jobs divided. A smaller but still sizable contingent favors the green intitiatives. (Post-meeting update: The ballot measures failed. Go here for the results.) These investors say the firm's own sustainability is at risk, not just energy resources. To keep the rich returns coming, they argue, Exxon can't ignore the need to adapt to a low-carbon future, with momentum shifting to renewables. Better, why not lead the way? It's a future that's still blurry, but it promises to change the equation for Big Oil. As the majors tear up the tar sands and delve into even more experimental sources like the shale along the Continental Divide, each unit of energy becomes more costly to extract. Regulation is likely to pile on additional burdens. Lawmakers are expected to attach a price to carbon emissions in the coming years and potentially raise standards for clean-burning fuels. Investors aren't being warned because no one can put their finger on the charges. Analysts on Wall Street "don't know how to capture these potential costs yet," said Philip Weiss of Argus Research. If and when the numbers change, he said, oil company shareholders may be in for a rude surprise. Weiss applauds the majors' dive into the tar sands but also believes they need to direct some of their vast resources into alternatives. He favors the venture capital model rather than in-house projects -- he’s not sure these old hands are built to go about the task effectively themselves. "Oil is a depleting resource, and if I’m a shareholder, that's something I care about," Weiss said. "If the company does nothing to replace it, eventually that company is going to go away."
- Did record oil prices just get talked to death -- or at least into a short-term coma? Crude oil futures slumped 3.4%, the biggest decline in two months, after weeks of headlines suggesting that energy prices were in an unstoppable upward spiral. Even by their own wacky standards, commodity markets in general had a wild session -- and the end result had to give consumers a reason to be hopeful, and bullish speculators a reason to fear. Gold, silver, copper, wheat and other commodities followed oil sharply lower. Oil futures in New York shot as high $133.12 a barrel early in the session, then quickly sank to $126.11 before finishing the day at $126.62. It was the biggest one-day drop for crude since March 19. Traders said the market initially reacted bullishly to the government’s weekly data on oil inventories, which showed a decline in supplies. But William O’Neill, a veteran commodities analyst at Logic Advisors in Upper Saddle River, N.J., said the supply shortfall was quickly explained away by delays in Gulf Coast tanker off-loadings because of fog. So supplies there are expected to rebound soon, he said. Meanwhile, the government said U.S. gasoline demand averaged 9.3 million barrels a day in the four weeks ended May 23, down 0.4% from the same period last year -- another sign that record prices are crimping consumption (surprise!). A rally in the dollar against other currencies also undercut commodities today, because a stronger dollar would be anti-inflationary, giving speculators less reason to buy commodities as inflation hedges. Finally, there was a political element to the sell-off in oil: Amid rising ire in Washington about the role investors and speculators are playing in helping to drive crude to record heights, the Commodity Futures Trading Commission disclosed that it has been investigating that aspect of the market since December -- raising the possibility of regulatory action to curb trading activity. (See story here.) Whatever you may think of the global long-term supply and demand situation for oil, in the short run the market just looks to have gotten way too excited about itself, O’Neill and Gotthelf said. Gotthelf, who said he has been shorting some commodities recently, said veteran market players know all too well what can happen when bull markets reach wretched excess. Historically, "The most spectacular trends in commodities are the price implosions," he said.
- Ten years ago, I was shot by Nigerian soldiers who, my federal lawsuit will show, were paid for by Chevron Nigeria Ltd., a subsidiary of Chevron Corp. I was standing on a drilling platform in the Niger Delta run by Chevron Nigeria Ltd. More than 100 unarmed villagers joined me there to protest the loss of our fish, our clean water and our trees because of Chevron's oil production activities in our region, and to protest the loss of our traditional ways of supporting ourselves as a result of these activities.
• Upstream news:
• Downstream news:
- Milpitas Unified School District, in collaboration with Chevron Energy Solutions and Bank of America, announced it has begun construction on a 14-site, districtwide solar power and energy efficiency program designed to supply 75 percent of the district's total annual electricity needs through solar energy. The 3.4-megawatt solar installation will generate what is believed to be the highest percentage of solar power for any K-12 school district in the United States and will supply 100 percent of the district's power during the peak-demand summer months, when California's electricity needs are greatest.
• Business/Finance news:
- Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power. Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat. The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations. The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production. There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq’s Oil Ministry. Sensitive to the appearance that they were profiting from the war and already under pressure because of record high oil prices, senior officials of two of the companies, speaking only on the condition that they not be identified, said they were helping Iraq rebuild its decrepit oil industry. For an industry being frozen out of new ventures in the world’s dominant oil-producing countries, from Russia to Venezuela, Iraq offers a rare and prized opportunity. While enriched by $140 per barrel oil, the oil majors are also struggling to replace their reserves as ever more of the world’s oil patch becomes off limits. Governments in countries like Bolivia and Venezuela are nationalizing their oil industries or seeking a larger share of the record profits for their national budgets. Russia and Kazakhstan have forced the major companies to renegotiate contracts. The Iraqi government’s stated goal in inviting back the major companies is to increase oil production by half a million barrels per day by attracting modern technology and expertise to oil fields now desperately short of both. The revenue would be used for reconstruction, although the Iraqi government has had trouble spending the oil revenues it now has, in part because of bureaucratic inefficiency. For the American government, increasing output in Iraq, as elsewhere, serves the foreign policy goal of increasing oil production globally to alleviate the exceptionally tight supply that is a cause of soaring prices. The Iraqi Oil Ministry, through a spokesman, said the no-bid contracts were a stop-gap measure to bring modern skills into the fields while the oil law was pending in Parliament. It said the companies had been chosen because they had been advising the ministry without charge for two years before being awarded the contracts, and because these companies had the needed technology. A Shell spokeswoman hinted at the kind of work the companies might be engaged in. “We can confirm that we have submitted a conceptual proposal to the Iraqi authorities to minimize current and future gas flaring in the south through gas gathering and utilization,” said the spokeswoman, Marnie Funk. “The contents of the proposal are confidential.” While small, the deals hold great promise for the companies. “The bigger prize everybody is waiting for is development of the giant new fields,” Leila Benali, an authority on Middle East oil at Cambridge Energy Research Associates, said in a telephone interview from the firm’s Paris office. The current contracts, she said, are a “foothold” in Iraq for companies striving for these longer-term deals.
- At a time of record gasoline costs and surging oil prices, oil companies are in an increasingly uncomfortable position. They are blamed by both the public and Congress for the current energy crisis, but complain about being hamstrung in their own search for energy sources. Before heading to Saudi Arabia for an emergency energy summit, David J. O’Reilly, the chairman and chief executive of Chevron, spoke about why Congress should allow more access to offshore drilling in the United States and offered his explanation of why oil prices have jumped to record levels in recent months.Q. President Bush this week called for lifting the moratorium on offshore drilling. What impact will this have on future oil supplies in the United States ? A. It is a good thing. The president is going in the right direction here. But I would have gone even further and lifted the moratorium with a presidential order. But you also have to remember that the lag time between exploration and first production is still in the range of eight to 10 years. Still, it would send a very strong message to the world that U.S. energy policy is shifting and is going toward a little more supply. Q. How much more oil can be produced in these regions there? A. That’s really impossible to know until we have more exploration. But I know the chances are pretty good it would expand our supply. Let’s suppose that we expanded production by one million barrels a day 15 years from now. At over $100 a barrel — remember this is a hypothesis — that would still mean $3 billion a month less in oil imports. That would have a demonstrable impact. Q. But there is strong opposition to offshore drilling. A. I realize there is a discomfort. This has to be done very carefully. But we’ve demonstrated, in the face of very powerful hurricanes, that even under extreme weather conditions our offshore systems are pretty robust and environmentally sound. The Europeans have a strong environmental record but the Norwegians and the British have been able to safely encourage offshore developments. Brazil was a recent example of success offshore. So what’s wrong with this country? It is a shame that we need to get to $100 a barrel for oil or $4 a gallon for gasoline to have this discussion. Q. Democrats say oil companies are sitting on unused leases and they should drill there first before more regions are opened up to production. A. What I would encourage the Democrats to do is to look at the facts. We should not be making these crass statements without facts. There are already existing limitations on leases. Already you have to use them or loose them. It takes time for geological exploration to occur. In our case, over 80 percent of our leases are being actively worked. We turned back many of them last year, even before they expired, because many don’t have anything on them. Q. Oil prices are headed for their seventh straight year of gains. Why such a sustained run-up in prices? A. This is a case of demand-driven increases. The time we could count on cheap oil and cheap gas is ending. In prior periods, you’ve had price spikes because of big disruptions in supplies. But in this decade, the new phenomenon is that demand has been the main driver. Q. But hasn’t the oil industry failed to anticipate the surge in consumption growth that we’re seeing now by underinvesting in the 1990s? A. It is very easy to say that looking backward. But you have to remember that oil was at $10 a barrel in 1998 and a lot of people were getting out of the business. It was a tough time back then. But those that were tough enough to continue investing then survived. Q. Oil prices have jumped from around $25 in 2002 to about $140 a barrel recently. Are we in a bubble? A. I am a believer that most of this is related to fundamentals. Those are concerns about supplies. Last year, oil supplies did not grow in total. What the market is looking for is more visibility in future oil supplies. That is one of the main drivers for the difference between the prices five years ago and the prices we’re seeing now. Q. What has been the impact of financial investors or “speculators” in the market? A. I am not quite sure that I know that. It is quite possible that they have added some volatility. But the bulk of the price of oil that we see today relates to concerns about the outlook for physical supplies in the long term. Q. Many people are concerned about the issue of peak oil and the perception that the world is running out of oil has taken hold within investors. How do you respond to these concerns? A. It is not so much the molecules in the ground that are a concern. The biggest problem is to provide adequate access to permit investment to occur in a timely manner. If you include the United States, this is a matter of access. Q. Iraq is looking to bring back international oil companies. What can you tell us about your company’s plans there? A. We’ve been helping with technical support with Iraqi engineers on a voluntary basis. The Iraqis are also interested in short-term technical service agreements, which we’re considering entering into, that will allow production to increase in the short term by a total of 500,000 barrels a day. The world needs more oil. Having near-term supply from Iraq is important. But a hydrocarbon law and a predictable long-term investment climate, the Iraqis themselves say, is a prerequisite for long-term development.
- The rise in oil prices turned into a stampede with futures jumping a staggering $11 a barrel to set a record above $138 a barrel. The unprecedented surge came as the dollar fell sharply against the euro and a senior Israeli politician once again raised the possibility of an attack against Iran. Oil prices have doubled in the last 12 months, and are up 42 percent since the beginning of the year. Oil futures surged $10.75, or 8 percent, to $138.54 a barrel on the New York Mercantile Exchange, their biggest jump since contracts began trading in 1983. The record rise brought a two-day jump of more than $16 a barrel. The latest jump came as the dollar lost more than 1 percent against the euro amid bleak economic news that fanned recession fears. The unemployment rate surged to 5.5 percent in May, the government said, the biggest increase in more than two decades. The pronounced volatility in energy markets in recent weeks continued to puzzle traders. Prices kept rising despite a lack of shortages in the market and strong evidence of lower consumption in industrialized countries. But investors are caught in a bullish mood, focusing on the perceived risks to future oil supplies and the growth in oil demand from emerging economies, where fuel prices are subsidized. Even as uncertainties abound about the fundamentals of the energy market, geopolitical tensions in the Middle East regained center stage after Israel’s transportation minister and a deputy prime minister, Shaul Mofaz, said that an attack on Iran’s nuclear sites looked “unavoidable” if Iran did not abandon its nuclear program. Iran is the second-largest oil producer within the OPEC cartel and exports nearly two million barrels a day. Because the world has few supplies to spare, any interruptions in Iran’s exports could push prices to higher levels. The world currently has about three million barrels a day of spare capacity, and consumes 86 million barrels a day of oil. Investors also reacted to the latest forecast by a large Wall Street bank that oil prices would keep rising. Morgan Stanley predicted that prices would spike to $150 a barrel in the next month because of strong demand in Asia. The threat of a strike by Chevron’s workers in Nigeria also raised concerns that some production could be shut down. A similar strike by Exxon Mobil workers last April, which lasted a week, reduced Nigerian output by 800,000 barrels a day, or nearly a third of the country’s daily exports. A strike may delay the start of Chevron’s 250,000 barrels-a-day Agbami project, the country’s largest offshore venture, which is to begin June 15. One view gaining ground is that the commodity market is caught in a speculative bubble akin to the recent housing bubble or the technology bubble of the late 1990s. That theory was raised by politicians in Washington and by OPEC producers, who blame speculators for the staggering oil rally. Speaking before Congress recently, George Soros, a prominent hedge fund investor, said the current oil markets presented some characteristics of a bubble. But many analysts say that fundamentals, not speculation, are driving prices. Jeffrey Harris, the chief economist at the Commodity Futures Trading Commission, who was speaking before a Senate committee last month, said he saw no evidence of a speculative bubble in commodities. Instead, Mr. Harris pointed to a confluence of trends that has contributed to the oil price rally, including a weak dollar, strong energy demand from emerging economies, and political tensions in oil-producing countries.
• Upstream news:
- Chevron Australia announced a significant extension of the Chevron-operated Iago gas field located 80 miles (130 kilometers) offshore northwestern Australia in permit WA-16-R. The Iago-2 well was drilled using Diamond Offshore's semi-submersible drilling rig Ocean Bounty in water depths of approximately 384 feet (117 meters). The well discovered 154 feet (47 meters) of net pay in sands of the Triassic Mungaroo Formation, confirming a southerly extension of the Iago Field into a previously untested reservoir compartment. A subsequent Drill Stem Test over a 105 foot (32 meters) interval flowed at a rate of 53 million cubic feet per day. The Iago resource spans two retention permits, WA-17-R, which is wholly owned by Chevron Australia, and WA-16-R, in which Shell Development (Australia) Pty Ltd has a one-third share with Chevron holding the remainder. The Iago field was discovered in 2000 with the Iago-1 exploration well.
- Chevron Corporation (NYSE: CVX) announced that its Nigerian affiliate, Star Deep Water Petroleum Ltd, has commenced crude oil production from the Agbami Field, located offshore Nigeria. First oil from the Agbami Field was achieved on July 29, 2008, from a floating production, storage and offloading (FPSO) vessel. Initial production from the Agbami Field is expected to be more than 100,000 barrels per day and is projected to increase to 250,000 barrels of crude oil and natural gas liquids per day by the end of 2009. The Agbami field, discovered in 1998, is the largest deepwater discovery in Nigeria and is estimated to hold potentially recoverable volumes of 900 million barrels. Chevron is the operator and has a 68.2 percent interest under the unit agreement.
• Downstream news:
• Business/Finance news:
- In its interim update for the second quarter 2008, Chevron Corporation (NYSE: CVX) reported that upstream earnings are expected to benefit from an increase in prices for crude oil and natural gas while downstream earnings are expected to be significantly lower than the first quarter. Additionally, "all other" charges are anticipated to be substantially higher compared with the first quarter.
- The Board of Directors of Chevron Corporation (NYSE: CVX) declared a quarterly dividend of 65 cents per share. The dividend is payable September 10, 2008, to holders of common stock as shown by the transfer records of the Corporation at the close of business August 19, 2008.
- Just three years ago, with oil trading at a seemingly frothy $66 a barrel, David J. O’Reilly made what many experts considered a risky bet. Outmaneuvering Chinese bidders and ignoring critics who said he overpaid, Mr. O’Reilly, the chief executive of Chevron, forked over $18 billion to buy Unocal, a giant whose riches date back to oil fields made famous in the film “There Will Be Blood.” For Chevron, the deal proved to be a movie-worthy gusher, helping its profits to soar. And while he has warned about tightening energy supplies for years and looks prescient for buying Unocal, even Mr. O’Reilly says that he still can’t get his head around current oil prices, which closed above $145 a barrel, a record. For the rest of the country, the feeling is more like shock. As gasoline prices climb beyond $4 a gallon, Americans are rethinking what they drive and how and where they live. Entire industries are reeling — airlines and automakers most prominent among them — and gas prices have emerged as an important issue in the presidential campaign. Ninety percent of Americans, meanwhile, expect the pain at the pump to pose a financial hardship in the next six months, according to a recent Associated Press-Yahoo News poll. Stocks now trade inversely to crude prices, and the Dow Jones industrials are in bear-market territory. Old icons have been written off, with Starbucks boasting nearly twice the market value of General Motors, which some on Wall Street say faces the possibility of bankruptcy. Outside the thriving oil patch, it makes for a bleak economic picture. But it didn’t have to be this way. Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction. Even as politicians heatedly debate opening new regions to drilling, corralling energy speculators, or starting an Apollo-like effort to find renewable energy supplies, analysts say the real source of the problem is closer to home. In fact, it’s parked in our driveways. Nearly 70 percent of the 21 million barrels of oil the United States consumes every day goes for transportation, with the bulk of that burned by individual drivers, according to the National Commission on Energy Policy, a bipartisan research group that advises Congress. So, despite the fierce debate over what’s behind the recent spike in prices, no one differs on what’s really responsible for all that underlying demand here for black gold: the automobile, fueled not only by gasoline but also by Americans’ famous propensity for voracious consumption. To be sure, the American appetite for crude oil is only one reason for the recent price surge. But the country’s dependence on imported oil has only kept growing in recent years, undermining the trade balance and putting an added strain on global supplies. Although the road to $4 gasoline and increased oil dependence has been paved in places like Detroit, Houston and Riyadh, it runs through Washington as well, where policy makers have let the problem make lengthy pit stops. “Much of what we’re seeing today could have been prevented or ameliorated had we chosen to act differently,” says Pete V. Domenici, the ranking Republican member of the Senate Energy and Natural Resources Committee and a 36-year veteran of the Senate. “It was a bipartisan failure to act.” Mike Jackson, the chief executive of AutoNation, the country’s biggest automobile retailer, is even more blunt. “It was totally preventable,” he says, anger creeping into his affable car-salesman’s pitch. The speed at which gas prices are climbing is forcing a seismic change in long-held American habits, from car-buying to commuting. Last week, Ford Motor reported that S.U.V. sales were down 55 percent from a year ago, while demand for its full-size F-series pickup, a gas guzzler that was the country’s best-selling vehicle for 26 consecutive years, is off 40 percent. The only Ford model to show a sales increase was the midsized Fusion. A Ford spokeswoman says the market shift is “totally unprecedented and faster than anything we’ve ever seen.” If the latest rise in oil prices isn’t just another spike — like those of the 1970s and 1980s — but is instead a fundamental repricing of the commodity responsible for much of modern American life, the impact of that change will affect everyone from home builders and homeowners in exurbs to corporate leaders, landlords and commuters in cities. Although Asian consumers have begun emulating America’s love affair with the automobile, with the commercial booms of China and India playing pivotal roles in increased oil demand, the largest energy appetite in the world is still found in the United States. Home to only 4 percent of the world’s population, the nation slurps up about a quarter of the planet’s oil — and Americans’ daily use is nearly twice the combined consumption of the Chinese and Indians, according to an annual energy survey published by BP, the British oil giant. Indeed, low-priced gasoline has long been part of the American social contract, according to Newt Gingrich, the former House speaker and Republican leader. While in office, Mr. Gingrich battled efforts to modulate demand through tools like increased gas taxes and tighter fuel standards, and he argues that voters won’t support such measures even now. “They will work if you coerce the entire system and if you pretend the American people are Japanese and Europeans,” Mr. Gingrich says. “Our culture favors driving long distances in powerful vehicles and the car as a social expression.” Perhaps, but on Capitol Hill, members of both parties now say they are furious with Detroit for fighting so hard, and for so long, against higher fuel-efficiency standards.
- The Iraqi government sued dozens of companies, including the Chevron Corporation, that it said paid kickbacks to Saddam Hussein’s government under the United Nations oil-for-food program. The civil lawsuit seeks to recover damages from companies investigated by a United Nations-commissioned inquiry, saying they cheated the Iraqi people out of the benefits of the $67 billion program. The inquiry, led by Paul A. Volcker, the former Federal Reserve chairman, found that the program was corrupted by 2,200 companies from 66 countries that paid $1.8 billion in kickbacks to Iraqi officials to win supply deals. The lawsuit follows criminal investigations into the program, which produced the convictions of individuals, including Oscar Wyatt and David Chalmers, both Texas oilmen, and oil companies named in the complaint, including Chevron, which agreed to pay $30 million to resolve criminal and civil liabilities. The program, which operated from 1996 to 2003, was created to help Iraqis cope with United Nations sanctions after Iraq invaded Kuwait in 1990. It allowed Baghdad to sell oil in order to buy food medicine and other goods. Other companies named in the lawsuit include BNP Paribas, and the drug makers GlaxoSmithKline and Roche Holding.
- The Chevron Corporation said that second-quarter oil output fell to the lowest level since 2005 as record energy prices reduced the company’s share of output in countries like Nigeria and Indonesia. The company, which is scheduled to report second-quarter results on Aug. 1, said it pumped the equivalent of 2.54 million barrels of crude a day in April and May, compared with 2.63 million a day during the second quarter of 2007. Production was the lowest since the April-June period of 2005, when Chevron was in negotiations to acquire the Unocal Corporation for $20 billion to gain access to Asian gas fields and exploration prospects in the Gulf of Mexico. Chevron, based in San Ramon, Calif., must increase output by 190,000 barrels a day, or 7.5 percent, for the rest of this year to meet its 2008 production target of 2.65 million barrels a day. Oil pumped from wells outside the United States, which accounts for three-fourths of Chevron’s crude, sold for about $106 a barrel during the second quarter of 2008, up 74 percent from $61 a year earlier, the company said. Production-sharing contracts with some oil-rich nations reduce Chevron’s share of output as crude prices rise.
- Iraq’s oil minister announced the start of bidding by foreign companies for contracts to boost the production of eight underperforming oil and gas fields. The contracts, to be executed in about 18 months, would open Iraq’s oil fields to foreign companies for the first time since former dictator Saddam Hussein nationalized foreign concessions in the 1970s. Oil Minister Hussein Shahristani said 35 companies had been selected to bid. Among them were seven from the U.S. and four each from China and Japan. The bidding will proceed even though parliament has not yet ratified a national oil law to regulate foreign contracts. The measure has been stalled by disagreements over how to divide oil revenues among Iraq’s regions. Shahristani said there had already been too long a delay in upgrading depleted fields, which require new technology and foreign expertise to tap hard-to-reach reserves. Iraq has been unable to invest sufficiently in its oil operations over the last two decades because of international sanctions and war. Insurgents have frequently attacked oil sites since the U.S.-led invasion in 2003, though overall violence is down throughout the country since an increase in American troop levels last year. The work put up for bid would increase production by 1.5 million barrels per day by 2013, approaching the prewar level of 4.5 million barrels a day, Shahristani said. At a sometimes testy news conference, Shahristani renewed his criticism of the Kurdish regional government for signing deals with foreign companies that offer them a share of the oil they extract. In contrast, he said, the national government was only offering contracts to service existing fields. Development of new resources would come later. To further protect Iraqi interests, Shahristani said, companies bidding for the contracts would be required to set up offices in Baghdad. Those winning the bids would be required to open branches in Baghdad and to establish partnerships providing Iraqi companies at least a 25% ownership share, he said. The Oil Ministry itself has faced criticism over its efforts to retain four major oil companies as consultants. The no-bid contracts were viewed as offering a foot in the door for those companies, which would then be in a good position to win contracts for larger projects. Three U.S. senators urged the Bush administration to try to stop the deals, which they said could lend credence to the perception that the U.S. went to war in Iraq over oil and could inflame sectarian tensions in Iraq. Nonetheless, he said the no-bid contracts had not been signed and indicated that he was not sure they would be. Their purpose was to raise production by 500,000 barrels a day in the short-term, but Iraqi engineers had been able to do that without help, he said. A spokesman for Chevron Corp. said the company, which is also among those bidding on the service contracts, was still negotiating with the ministry and still hoped to close the deal for the no-bid contract. The 35 companies invited to bid on the service contracts were chosen from 120 applicants based on a rating system that included technical, financial and legal tests. In addition to Chevron, the American companies bidding on the contracts include several other major corporations – Occidental Petroleum, ExxonMobil and Conoco Phillips. But any firm that has signed agreements with Kurdistan was automatically disqualified. One disappointed potential bidder learned this after the news conference when he asked an oil official why his company, IGI Group, was spurned. Iraq faces no pressing need to increase its oil revenues, which support 95% of the national budget. Even though dilapidated equipment and insurgent attacks have kept production below prewar levels, oil exports are generating more revenue than Baghdad’s bureaucracy can spend. Nonetheless, oil production is seen as essential to creating employment, stimulating the economy and funding the huge public works projects needed to restore the country’s infrastructure. Meanwhile, the government said violent deaths were down slightly in June. The 510 Iraqis killed included 41 police officers and 21 soldiers. The May total was 563 people slain, including 27 police and 32 soldiers.
• Upstream news:
- Chevron Corporation (NYSE: CVX) announced that its wholly owned subsidiary, Chevron Canada Limited, and its co-venturers have finalized legal agreements with the government of Newfoundland and Labrador to develop the Hebron heavy oil project offshore the east coast of Canada. The Hebron Field is located 210 miles (340 km) offshore the province of Newfoundland and Labrador in 300 feet (92 m) of water. Discovered in 1981, the field is expected to be developed using a gravity-based structure with integrated drilling and production topsides. Hebron contains an estimated 400 million to 700 million barrels of recoverable oil.
• Downstream news:
- Chevron Corporation (NYSE: CVX) announced that two of its subsidiaries have entered into an agreement with a subsidiary of Ultrapar Participações S.A. (Ultrapar) to sell Chevron's fuels marketing business in Brazil for approximately $730 million plus a working capital adjustment. The final amount will vary based on exchange rate fluctuations and the actual working capital sold. Under the terms of the agreement, Ultrapar will acquire a network of approximately 2,000 service stations operating under the Texaco brand, an equity interest in associated terminal operations, and Chevron's commercial and industrial fuels business. Other terms of the agreement were not disclosed.
- Chevron announced that it will end its NASCAR sponsorship after the 2008 season. As a part of this action, Chevron will pursue new marketing strategies in support of the Texaco and Havoline brands with a focus on increased awareness through local and regional marketing programs.
- Chevron Corporation (NYSE: CVX) announced that it has submitted an environmental permit application to the Mississippi Department of Environmental Quality for the construction of a premium base oil facility at the company's Pascagoula refinery. The facility is expected to produce approximately 25,000 barrels per day of premium base oil for use in manufacturing high-performance lubricants, such as motor oils for consumer and commercial uses. Construction is anticipated to begin in early 2009 and conclude in 2011.
• Business/Finance news:
- Chevron Corporation (NYSE: CVX) reported net income of $6.0 billion ($2.90 per share - diluted) for the second quarter 2008, compared with $5.4 billion ($2.52 per share - diluted) in the year-ago period. Earnings in the 2007 quarter included a net gain of approximately $500 million on the sale of an investment and redemption of debt. For the first half of 2008, net income was $11.1 billion ($5.38 per share - diluted), up 10 percent from $10.1 billion ($4.70 per share - diluted) in the first six months of 2007. Sales and other operating revenues in the second quarter 2008 were $81 billion, compared with $54 billion in the year-ago quarter. First-half 2008 sales and other operating revenues were $146 billion, versus $101 billion in the corresponding 2007 period.
- On August 9th, Ecuador's President Rafael Correa offered to facilitate settlement discussions between Chevron and the Amazon Defense Coalition in order to resolve the ongoing civil lawsuit underway in Ecuador. The mediation offer was repeated by Ecuador's Attorney General Diego Garcia in an interview with Reuters. In response, Chevron issued the following statement: "Chevron desires to have a fair and complete resolution to the Lago Agrio case. In 2004, we requested that Petroecuador engage in arbitration. The Republic of Ecuador and Petroecuador have sued Chevron to prevent such a conversation. Chevron remains open to an amicable solution, but such a dialogue would need to include discussion of Petroecuador's unfulfilled contractual obligations and a commitment from the Ecuadorian state to stop interfering in the ongoing trial."
- U.S. Senator John McCain will visit a Chevron offshore oil production facility in the deepwater Gulf of Mexico on August 19, 2008, at his request. News media interested in learning more about this visit should contact Senator McCain's staff at: McCain 2008 National Press Office 703-650-5550.
- Chevron Corporation (NYSE: CVX), the government of Indonesia, the local government of Aceh province, the National Education Department, the Rehabilitation and Reconstruction Agency for Aceh and Nias, and the United States Agency for International Development (USAID) announced the completion of a $16 million partnership to construct a polytechnic institute in Aceh province, Indonesia. Chevron committed $6 million to the polytechnic, which supports the government of Indonesia's plan to assist in restoring people's livelihoods following the tsunami of December 26, 2004. The company has committed a total of $14.7 million through the Chevron Aceh Recovery Initiative to support reconstruction initiatives. More than 100,000 people in Aceh have been helped by the company's efforts.
- As North Texas suffered through the 11th day of a deadly heat wave, coastal cities prepared for a tropical storm that was gaining strength as it churned through the Gulf of Mexico toward Galveston. Texans are used to extreme weather, and most shrugged off the latest insults from nature with a smile, saying they had seen worse. Still, residents in coastal communities thronged general stores to buy water and canned goods, while people in Dallas sought relief from the triple-digit heat that has killed four people. Forecasters at the National Hurricane Center said that Tropical Storm Edouard gained strength during the night and that it was likely to approach hurricane strength before it hit the Texas coast on Tuesday morning. The oil industry reacted cautiously as the storm approached. Chevron, Shell and other major oil companies, in standard procedure for the industry, evacuated scores of employees from offshore rigs, disrupting production of oil and natural gas. The authorities shut down for the day the Houston Ship Channel, which is the Port of Houston’s conduit to the Gulf of Mexico and home to large refineries. Most refineries kept operating, but one company, Marathon, closed its Texas City refinery, which produces 76,000 barrels a day. Despite the storm, oil and gas prices fell during the day, suggesting that energy traders took the storm in stride.
- Oil production has begun falling at all of the major Western oil companies, and they are finding it harder than ever to find new prospects even though they are awash in profits and eager to expand. Part of the reason is political. From the Caspian Sea to South America, Western oil companies are being squeezed out of resource-rich provinces. They are being forced to renegotiate contracts on less-favorable terms and are fighting losing battles with assertive state-owned oil companies. And much of their production is in mature regions that are declining, like the North Sea. The reality, experts say, is that the oil giants that once dominated the global market have lost much of their influence — and with it, their ability to increase supplies. “This is an industry in crisis,” said Amy Myers Jaffe, the associate director of Rice University’s energy program in Houston. “It’s a crisis of leadership, a crisis of strategy and a crisis of what the future looks like for the supermajors,” a term often applied to the biggest oil companies. “They are like a deer caught in headlights. They know they have to move, but they can’t decide where to go.” The sharp retreat in all of the commodities’ prices over the last month, about 20 percent, reflects slowing global growth and with it reduced demand for more oil in the short term. But over the next decade, the world will need more oil to satisfy developing Asian economies like China. The oil companies’ difficulties suggest that these much-needed future supplies may be hard to come by. Oil production has failed to catch up with surging consumption in recent years, a disparity that propelled oil prices to records this year. Despite the recent decline, oil remains above $100 a barrel, unimaginable a few years ago, causing pain throughout the economy, like higher prices at the gas pump and automakers posting sizable losses. The scope of the supply problem became more clear in the latest quarter when the five biggest publicly traded oil companies, including Exxon Mobil, said their oil output had declined by a total of 614,000 barrels a day, even as they posted $44 billion in profits. It was the steepest of five consecutive quarters of declines. While that drop might not sound like much in a world that consumes 86 million barrels of oil each day, today’s markets are so tight that the slightest shortfalls can push up prices. Along with mature fields, the companies have contracts with producing countries whose governments allocate fewer barrels to oil companies as prices rise. “It has become really, really difficult to grow production,” said Paul Horsnell, an analyst at Barclays Capital. “International companies have a portfolio of assets in areas of significant decline and no frontier discoveries to make up for that.” As a result of the industry’s troubles, energy experts do not expect oil supplies to grow this year in countries outside the Organization of the Petroleum Exporting Countries. Global demand for oil is expected to expand by 800,000 barrels a day, mostly because of rising demand in China and the Middle East, despite lower consumption in developing countries. This imbalance between supplies and demand will be one thing that OPEC ministers will consider when they meet next month to decide whether or not to increase their production. OPEC has about 2 million barrels a day in untapped capacity that its members control. The new oil order has been emerging for a few decades. As late as the 1970s, Western corporations controlled well over half of the world’s oil production. These companies — Exxon Mobil, BP, Royal Dutch Shell, Chevron, ConocoPhillips, Total of France and Eni of Italy — now produce just 13 percent. Today’s 10 largest holders of petroleum reserves are state-owned companies, like Russia’s Gazprom and Iran’s national oil company. Sluggish supplies have prompted a cottage industry of doomsday predictions that the world’s oil production has reached a peak. But many energy experts say these “peak oil” theories are misplaced. They say the world is not running out of oil — rather, the companies that know the most about how to produce oil are running out of places to drill. “There is still a lot of oil to develop out there, which is why we don’t call this geological peak oil, especially in places like Venezuela, Russia, Iran and Iraq,” said Arjun Murti, an energy analyst at Goldman Sachs. “What we have now is geopolitical peak oil.” Western companies are far better than most national oil companies at finding and extracting petroleum, experts say. They have developed advanced exploration technologies and can muster significant financing to develop new fields. Many of the world’s exporting states, however, have spurned their expertise. Oil company executives see a straightforward explanation: a trend known as resource nationalism. They contend that they have been shut out of promising regions by a rising assertiveness in the Middle East, in Russia, in South America and elsewhere by governments determined to keep full control of their oil.
- When the main pipeline that carries oil through Georgia was completed in 2005, it was hailed as a major success in the United States policy to diversify its energy supply. Not only did the pipeline transport oil produced in Central Asia, helping move the West away from its dependence on the Middle East, but it also accomplished another American goal: it bypassed Russia. American policy makers hoped that diverting oil around Russia would keep the country from reasserting control over Central Asia and its enormous oil and gas wealth and would provide a safer alternative to Moscow’s control over export routes that it had inherited from Soviet days. The tug-of-war with Moscow was the latest version of the Great Game, the 19th-century contest for dominance in the region. A bumper sticker that American diplomats distributed around Central Asia in the 1990s as the United States was working hard to make friends there summed up Washington’s strategic thinking: “Happiness is multiple pipelines.” Now energy experts say that the hostilities between Russia and Georgia could threaten American plans to gain access to more of Central Asia’s energy resources at a time when booming demand in Asia and tight supplies helped push the price of oil to record highs. “It is hard to see through the fog of this war another pipeline through Georgia,” said Cliff Kupchan, a political risk analyst at Eurasia Group and a State Department official during the Clinton administration. “Moving forward, multinationals and Central Asian and Caspian governments may think twice about building new lines through this corridor. It may even call into question the reliability of moving existing volumes through that corridor.” At the very least, the analysts warn, a newly emboldened Russia may figure even more prominently in shaping the region’s energy future. The latest struggle over Caspian oil started in earnest in the 1990s under Bill Clinton, after the breakup of the Soviet Union. The building of the pipeline that passes through Georgia, the Baku-Tbilisi-Ceyhan line, or BTC, remains one of the signature successes of the American strategy to put a wedge between Russia and the Central Asian countries that had been Soviet republics. Attempts to get oil out of Kazakhstan through a non-Russia route failed. Most of the oil production from the giant field of Tengiz, for example, in which Chevron is the largest investor, now travels through a pipeline known as the Caspian Pipeline Consortium, which runs along the northern Caspian coastline to the Russian Black Sea port of Novorossiysk. And proposals for new oil and natural gas pipelines in the region have stalled, in part, because of Moscow’s opposition. Some analysts believe the armed conflict between Russia and Georgia not only is rooted in historical enmity, but it is an outgrowth of Russia’s fears that Georgia, with its pro-Western bent, could prove to be a lasting competitor for energy exports. “Russians treasured the fact they had a monopoly on oil and gas pipelines from Central Asia, as it gave them considerable clout,” said Marshall I. Goldman, a senior scholar for Russian studies at Harvard and the recent author of “Petrostate: Putin, Power, and the New Russia.” “By agreeing to having an oil pipeline, Georgia made itself more vulnerable.” A big concern for the future is what will happen to oil from Kashagan, the giant oil field in the Caspian Sea that holds over 10 billion barrels of reserves. Located off Kazakhstan, Kashagan is the most ambitious attempt to date by Western companies to develop new supplies in the Caspian. It will be at least five years before oil starts flowing from there, but the operating consortium, which includes Exxon Mobil and ConocoPhillips, plans to transport some of Kashagan’s oil through the BTC pipeline. That would involve building a new pipeline under the Caspian to connect to BTC. Russia has opposed similar plans in the past. The Baku-Tbilisi-Ceyhan pipeline, 1,100 miles long, transports 850,000 barrels a day of oil, or one percent of global supplies, from Azerbaijan through Georgia and Turkey, ending at the port of Ceyhan on the Mediterranean. Much of the oil is bound for Europe and the United States. The oil comes from several fields in Azerbaijan, offshore in the Caspian. The line, which cost $4 billion to build, also carries some oil from Tengiz that is barged across the Caspian. Before the BTC pipeline was built, the West struggled to find routes that would avoid what Western leaders considered to be potential trouble spots, but it was difficult. The United States did not want the line to pass through Iran, for instance. In the end, the United States government, BP, which operates the pipeline, and other private investors decided the line should proceed on its current route. That gave a boost to newly independent counties and to Turkey, an ally, but it also sent the line through three nations struggling with separatists. Even before the outbreak of hostilities between Russia and Georgia, analysts were reminded of how precarious even the favored route could be. Recently, the pipeline was shut down after it was hit by an explosion in Eastern Turkey. Kurdish separatists claimed responsibility, although it remains unclear what caused the blast. There have also been unconfirmed reports in recent days that Russian planes had targeted the pipeline, although BP has said the line was not hit. BP said that it would take a week to determine how long the pipeline will remain shut. Other investors in the pipeline are Socar, the state-owned oil company of Azerbaijan; Chevron; ConocoPhillips; StatoilHydro, from Norway; ENI, from Italy; and Total, from France. Russia, which is flush with petrodollars because of the rise in the price of oil, has not been afraid to flex its muscle in recent years to bring its neighbors in line. Two years ago, Gazprom, the national oil company then run by Dmitri A. Medvedev, now the Russian president, cut off natural gas supplies to Ukraine in the winter because of a price dispute. That had a knock-on effect in Europe, where many policy makers began questioning their reliance on Russian natural gas, although there was no consensus on what to do. One proposal, favored by the United States, has been to build a natural gas pipeline parallel to the BTC line. “For the Europeans, the Ukraine gas crisis was like a snooze alarm,” said Frank A. Verrastro, the director of the energy and national security program at the Center for International and Strategic Studies in Washington. But Mr. Verrastro, a former senior executive with Pennzoil, said it would be very hard now to build a new Western pipeline. “We got BTC because there was a confluence of commercial and diplomatic interests,” he said. “But the United States didn’t learn the right lessons. They thought that all you had to do was lean on these countries and a new pipeline would happen. But that was an abject failure.” He added: “There is a shift happening in the marketplace. We need a Plan B. But we don’t have a Plan B.”
- Senator John McCain finally made it to an oil rig in the Gulf of Mexico (Chevron Genesis oil rig platform in the Gulf of Mexico south of New Orleans) for a tour and photographs that his campaign hoped would be worth, if not 1,000 words, then at least two — “drill now,” Mr. McCain’s mantra in recent weeks. Senator Barack Obama spent his morning in Orlando, Fla., striking back at Mr. McCain in a speech to a Veterans of Foreign Wars convention that accused Mr. McCain of being a lot of talk and little else.As the two men headed into the final stretch before the Democratic and Republican conventions, their campaign appearances were overshadowed by the intense speculation surrounding their choice of running mates. Mr. Obama was expected to announce his choice. Mr. McCain was expected to announce his choice in the last few days of this month, shortly after the Democrats meet in Denver. But they both sped through their campaign days and refused to entertain questions about their choices. Mr. McCain used his appearance on the rig, 150 miles south of New Orleans and 200 feet above the water, to sound his call for more offshore drilling as a way to fight this summer’s record high gas prices, even though it will take an estimated five to seven years for new drilling to affect American consumers. Mr. McCain also took a swipe at Mr. Obama over offshore drilling. Despite the urgency that Mr. McCain attached to the problem, Democrats noted that he had missed every vote on a 2007 energy bill that increased fuel economy standards for the first time in three decades. Mr. McCain also missed all eight votes on a renewable energy bill that was defeated last month. In Orlando, Mr. Obama appeared before the veterans a day after Mr. McCain, who had described him as advocating a policy of defeat in Iraq and had suggested that he had put personal ambition before the interests of the country. Mr. Obama received a polite but not enthusiastic response from the estimated 3,000 veterans assembled in a cavernous convention hall. Many seats were empty because a number of veterans left Orlando ahead of the advancing tropical storm, Fay. Mr. Obama said that he and Mr. McCain had genuine differences about the course of the war in Iraq and the place of the United States in the world, but he said those were legitimate subjects for debate rather than personal vitriol.
- Chevron said that record oil prices drove second-quarter earnings up 11 percent to its highest-ever profit, but weak margins from gasoline production led to a big loss at its refining operations. Chevron, the second-largest oil company in the United States, joined StatoilHydro of Norway and Total of France in posting huge earnings as a result of soaring crude prices. Oil prices averaged slightly less than $125 a barrel in the quarter, nearly double year-earlier levels, but gasoline prices rose only 25 percent during that same period, resulting in weak profit margins for the companies’ refining and marketing businesses. Chevron said net income rose to $5.98 billion, or $2.90 a share, from $5.38 billion, or $2.52 a share, a year earlier. Analysts expected the company to earn around $3.02 a share. Revenue rose to $82.98 billion from $56.09 billion. The company posted a $734 million loss at its refining and marketing business, down from a profit of $1.3 billion a year earlier. It said weak profit margins as well as planned refinery maintenance in the United States hurt results at that unit. Chevron’s income from its exploration and production business nearly doubled to $7.25 billion. The company’s production fell about 3 percent, to 2.54 million barrels of oil equivalent a day. Chevron said production rose slightly, excluding the effect of contracts that give a higher share of productions to host countries as oil prices rise. Total said second-quarter net income surged 39 percent, to 4.7 billion euros ($7.32 billion), and beat analysts’ estimates. The start-up of a gas field in the North Sea and an oil field off the Republic of Congo helped lift Total’s output by a percent, to 2.353 million barrels of oil equivalent per day. StatoilHydro reported record second-quarter profit but missed forecasts in adjusted terms, sending its stock lower. Quarterly net income at StatoilHydro rose 36 percent, to 18.92 billion crowns ($3.68 billion). Operating profit, which excludes income taxes and other items, rose 74 percent from the year-earlier level to a record 62.6 billion crowns ($12.19 billion). Second-quarter production met analysts’ average expectations and rose to 1.71 million barrels of oil equivalent a day from 1.67 million a year ago.
- Chevron Corp. said it was open to an amicable solution to a multibillion-dollar lawsuit in Ecuador.
An out-of-court settlement would hinge on state-owned PetroEcuador fulfilling obligations in oil-field cleanups, the company said. The plaintiffs' lawyers say that about 30,000 people have suffered from health problems triggered by pollution caused by Texaco, which Chevron took over in 2001.
• Upstream news:
- Chevron Corporation (NYSE: CVX) announced the extension and amendment of its agreement with the Kingdom of Saudi Arabia. This agreement grants Chevron the right to operate on behalf of the Saudi government for its 50 percent undivided interest in the petroleum resources of the onshore area of the Partitioned Neutral Zone (PNZ) between the Kingdom and the State of Kuwait. The agreement extends the existing arrangement for 30 years, through February 19, 2039. Under the agreement, Saudi Arabian Chevron (SAC), a subsidiary of Chevron, will continue to explore for and produce crude oil and natural gas on behalf of the Kingdom in the onshore PNZ. The field operations are managed jointly by SAC and Kuwait Gulf Oil Company. Saudi Arabian Chevron and the Kuwait Gulf Oil Company, operator for Kuwait's equal 50 percent undivided interest in the petroleum resources of the onshore PNZ, jointly operate four fields in the area - Wafra, South Umm Gudair, South Fuwaris and Humma - that produce mainly heavy crude from 10 reservoirs. In 2004, the 3 billionth barrel of oil was produced in the onshore PNZ. Operations in the PNZ are managed by the Saudi Arabia/Partitioned Neutral Zone Strategic Business Unit of the Chevron Europe, Eurasia and Middle East Exploration and Production Co., one of four Chevron upstream operating companies.
- Chevron Corporation (NYSE:CVX) announced that its affiliate Tengizchevroil LLP has completed a major expansion at the Tengiz Field in Kazakhstan that will nearly double production capacity at one of the world's largest oil fields. The completion of the expansion brings Tengizchevroil's daily crude production capacity to 540,000 barrels. The first phase of expansion, accomplished earlier this year, increased daily capacity from approximately 310,000 barrels to 400,000 barrels. The Sour Gas Injection (SGI) operations and the crude processing portion of the Second Generation Plant (SGP) have been successfully in service for several months while the natural gas and sulfur processing portions of SGP were being completed and commissioned. SGP's full facilities now stabilize and sweeten crude oil, as well as separate and process natural gas into gas products and elemental sulfur. SGI reinjects one-third of produced sour gas into the reservoir at very high pressures to help preserve reservoir pressure.
• Downstream news:
- Chevron Corporation (NYSE:CVX) subsidiary Chevron Australia Pty Ltd announced first gas from the North West Shelf Venture's Train 5 onshore liquefied natural gas (LNG) facility at the Karratha Gas Plant in Western Australia. The US $2.1 billion (Aus $2.6 billion) new Train 5 production facility is now online and is expected to increase the joint venture's export capacity by up to 4.4 million tonnes of LNG annually to 16.3 million tonnes. The Train 5 expansion includes: a fifth LNG processing train, a jetty extension and second LNG loading berth, two additional power generation units, a third LPG fractionation unit, a new fuel gas compressor, an acid gas removal unit and a third boil off gas compressor.
- Chevron Corporation (NYSE: CVX) announced that its subsidiary Chevron Africa Holdings Limited has agreed to sell Chevron Nigeria Holdings Limited to Corlay Global S.A, a Panamanian company owned by an African-based consortium composed of MRS Holdings Limited and Petroci Holdings. Chevron Nigeria Holdings Ltd. is a Bermudan company that holds 60 percent of the issued shares of Chevron Oil Nigeria PLC, a publically listed operator and owner of downstream marketing assets in Nigeria. Chevron's upstream operations in Nigeria are not affected by the sale. The transaction is subject to Bermuda regulatory consent and is expected to close quickly. No additional details of the transaction were disclosed.
- Chevron Corporation (NYSE: CVX) announced that its subsidiary Chevron Africa Holdings Limited has agreed to sell its affiliates in Benin, Cameroon, Republic of the Congo, Côte d'Ivoire and Togo to Corlay Global S.A., a Panamanian company owned by an African-based consortium composed of MRS Holdings Limited and Petroci Holdings. All of the affiliates are wholly owned with the exception of Chevron Togo S.A., in which Chevron has a 65 percent interest. Chevron's upstream operations in the region are not affected by the sales. The transactions are expected to close following receipt of required local regulatory and government approvals. No additional details of the transactions were disclosed. Chevron Corporation announced the sale of its fuels marketing business in Nigeria on Sept. 19, 2008.
• Business/Finance news:
- Chevron Corporation (NYSE: CVX) announced the launch of a U.S.-based public campaign called "I Will." The campaign is designed to raise awareness of the importance of energy efficiency and conservation.
- Ecuador's Prosecutor General indicted two Chevron attorneys associated with the company's ongoing civil lawsuit between Chevron and 48 Ecuadorian plaintiffs. The politically motivated indictments mark a renewal of the Ecuadorian state's attempts to disavow contractual obligations owed to Chevron from contracts signed in 1995 and 1998. The actions also ignore the findings of prior Prosecutor Generals who have repeatedly investigated fraud allegations and found them to be meritless. In response, Chevron Vice President and General Counsel Charles James issued the following statement: "By issuing these baseless indictments, it is clear the government of Ecuador is trying to intimidate Chevron into forfeiting its legal rights. This outrageous tactic won't work. Chevron intends to continue pursuing the rights it is owed under the law and its agreements with the government of Ecuador. "Recent events in Ecuador leave no doubt that there is improper collaboration between the government and plaintiffs' lawyers. The systematic denial of Chevron's right to a fair trial is obvious, and it is clear that the proceeding has been thoroughly corrupted. By persecuting Chevron's counsel and collaborating with the plaintiffs to undermine Chevron's legal rights, Ecuador's government has intervened in the legal proceeding. The Ecuadorian state continues to call into serious question the legitimacy of its judiciary and its commitment to the rule of law."
- Chevron Corporation (NYSE:CVX) announced it is making a commitment of $3 million to support recovery efforts in the communities affected by hurricanes Gustav, Hanna and Ike. The commitment will provide assistance to disaster relief efforts along the U.S Gulf Coast, where Chevron has had a long presence, and in the Caribbean, where Chevron has marketing operations under the Texaco brand. The funds will be directed towards the Red Cross, Save the Children, Feeding America and the Pan American Development Foundation, together with local charities and relief efforts near Chevron businesses in affected states as determined by the company.
- Chevron Corporation (NYSE: CVX) said that a key report submitted to a court hearing in an environmental lawsuit in Ecuador contains fabricated and erroneous evidence. The document also has exaggerated claims for damages and was developed in collusion with the plaintiffs and their U.S. attorneys. The company has urged the court to reject its findings because the author "produced an advocacy report for the plaintiffs, not a competent or impartial review of evidence." In filing its response to a report by Richard Cabrera, which was requested by the Superior Court in Nueva Loja, Ecuador, the company said: Cabrera manipulated and altered findings to justify false conclusions, including backdating photos; He presented no evidence of pollution by Texaco Petroleum, erroneously assigning $1.4 billion in remediation costs to pits he did not visit and do not exist; He presented no evidence to support cancer claims - neither identifying a single individual nor including a single medical report; He did not take a single drinking water sample to establish contamination, yet he assigned $428 million in damages to be paid to improve Ecuador's potable water system; Plaintiffs helped Cabrera compile the report, accompanying and assisting him on field trips, influencing the content of his report by providing him methodological tools such as questionable surveys and pre-written reports to use as report exhibits; The executive summary to the report can be found at www.chevron.com.
- The anti-bailout crowd got what it wanted: More pain for Wall Street fat cats, to the tune of the biggest one-day drop in key stock indexes since the 1987 market crash. Unfortunately, that pain also was felt in the not-so-fat 401(k) retirement savings plans of millions of Americans. The 777-point, 7% plunge in the Dow Jones industrial average, fueled in large part by the U.S. House's "no" vote on the White House's $700-billion financial-system rescue, points up the dilemma for many of those who oppose the measure as a handout to Wall Street. Nobody really wants to help the investment and commercial bankers who dug their own graves by lending recklessly during the housing bubble. But amid deepening gloom about the financial system and the economy, rooting for the banks' demise now risks more days like Monday -- when many people saw the value of their stock holdings fall by near double-digit percentages in a mere 6 1/2 hours of trading. That's going to hurt the average worker with money in the market far more than it will hurt a bank executive with millions of dollars to spare and a generous pension to boot. The selling was so fierce that only a relative handful of stocks rose. And many companies that have nothing to do with banking were hammered. Shares of Google Inc. plummeted 12% to $381, a two-year low. U.S. Steel Corp. tumbled 17%. Energy giant Chevron Corp. slumped 11%. I can only imagine that some people who oppose the bailout are smelling a conspiracy. After all, the more damage stock prices suffer, the greater the pressure on the House to come back and approve the administration's proposal or some version of it that achieves the same end: using public money to buy up toxic mortgages from lenders and investors.
• Upstream news:
• Downstream news:
• Business/Finance news:
- Chevron Corporation (NYSE: CVX) announced that it has donated $500,000 to the State of California's Department of Forestry and Fire Protection (CAL FIRE) to help support the cost of battling the state's severe wildfires this year. The Chevron donation is in response to the more than 2,000 fires this summer that engulfed nearly 1.2 million acres across the state – several times the annual average – and required the response of firefighters from CAL FIRE, local firefighters and other volunteers.
- Chevron Corporation (NYSE:CVX) reported in its interim update that it expects third quarter 2008 earnings to exceed those of 2008's second quarter. Downstream results are expected to improve significantly compared with the second quarter. Upstream earnings are expected to decline between quarters, in part due to the effect of September hurricanes, as well as lower commodity prices.
- When the stock market goes on sale, smart investors are supposed to seize the opportunity. But Wall Street's decline of the last three weeks has been so drastic, it has left even veteran money managers too afraid to step up. Aren't stocks cheap yet? Nearly everyone agrees that, on paper, they are, with major indexes such as the Dow Jones industrials now at five-year lows and down more than 40% from a year ago. Yet instead of attracting bargain-hunters, lower prices have had the opposite effect: Stocks have crumbled so quickly recently that many potential buyers have been driven back to the sidelines. Shares of machinery giant Caterpillar Inc., for example, had dived to $43.13 by Friday from $64.13 on Sept. 26. Retailer Nordstrom Inc. fell to $18.38 from $29.19 in the same period, while energy titan Chevron Corp. slumped to $57.83 from $86.95.
- David J. O'Reilly, chairman and chief executive officer of Chevron Corporation (NYSE: CVX), commented on the passing of George M. Keller, the company's former chairman and chief executive officer. Keller was 84. Keller joined Chevron in 1948 after serving in the U.S. Army Air Force during World War II and graduating as a chemical engineer from the Massachusetts Institute of Technology. He served in positions of increasing responsibility, starting as a design and construction engineer on refinery and chemical facilities.
- George M. Keller, who as chairman of the Standard Oil Company of California in the 1980s executed what was then the largest corporate takeover ever, a deal in which Socal swallowed Gulf Oil to form an even bigger oil company, Chevron, died Friday in Palo Alto, Calif. He was 84. The cause was complications of orthopedic surgery, said his daughter-in-law Emma Gilbey Keller. On the evening of March 4, 1984, Mr. Keller went alone to his suite in a Pittsburgh hotel to decide what to wager for Gulf Oil. He had said that Standard Oil would not join a wave of oil company mergers then roiling the industry, contending that Socal could acquire oil reserves more efficiently by drilling. But Gulf was now fighting a hostile takeover by T. Boone Pickens, and as Mr. Keller recalled in an interview in Fortune magazine, Gulf’s chairman, James E. Lee, had summoned him to Gulf’s headquarters in Pittsburgh with what amounted to a one-word message: “Help!” What persuaded Mr. Keller to bid for Gulf was not the camaraderie of industry leaders, however, but a minute examination of Gulf’s books by Standard Oil analysts. Mr. Keller sifted through their work and came up with a price of $79 a share. The next morning, at the last minute, he raised the offer to $80. The extra dollar was the winning edge in an acquisition costing $13.3 billion. In the Fortune interview, Mr. Keller allowed that the move had been “a little glandular.” Time magazine deemed this fitting: “Its elements of cold calculation, high risk and individual daring made the move seem entirely characteristic of the oil industry, which has always rewarded the nervy gambler.” Three years later, Mr. Keller told Fortune that the takeover had succeeded because it doubled Chevron’s oil reserves, with much of the bill being paid by selling some Gulf assets. Industry analysts agreed, although some pointed out that the company had to wrestle with a tremendous debt load for several years. Gregarious but also studious, Mr. Keller was known as a deft juggler of often conflicting constituencies, including shareholders, public interest groups, investment bankers and journalists. Strongly opinionated, he was also willing to buck his own industry. In the mid-1980s, he recommended, unsuccessfully, that the federal government set a price for oil high enough to jump-start a stagnant drilling industry, a position that defied long-held oil patch sentiment against any government intervention in pricing. And unlike many oil chieftains, Mr. Keller was unusually accessible to journalists. “If you wanted to get him on the phone, all you had to do was call him,” said Roz Liston, who covered energy for United Press International. George Matthew Keller was born in Kansas City, Mo., on Dec. 3, 1923. His mother died when he was in the first grade, and an aunt nurtured his passion for science. At age 10, at the DuPont exhibit at the Chicago World’s Fair of 1933, he became mesmerized by chemistry. He enrolled in the Massachusetts Institute of Technology, then joined the military as a sophomore, serving as an Army Air Forces meteorologist in Labrador. He returned to M.I.T., and, after marrying in 1946 and graduating in 1948, received four oil-company job offers. He asked his wife, the former Adelaide McCague, to choose among them. She chose Standard Oil, based in San Francisco. She died last year. Mr. Keller is survived by three sons, Bill, of Manhattan, who is the executive editor of The New York Times; Bob, of Denver; and Barry, of Granite Bay, Calif.; and six grandchildren. Mr. Keller began at Standard Oil by designing refineries, and though he had initially hoped to be assigned to research, he climbed steadily through the corporate ranks. One job was overseeing operations in Saudi Arabia, where in 1938 the company had discovered the first oil there. A replica of Mohammed’s sword, a Saudi gift, hung on his wall. After becoming chairman in 1981, Mr. Keller quickly demonstrated both an informal management style — preferring to gather information in hallway conversations rather than in formal meetings — and a risk-taking executive approach. At his first board meeting, he approved a $600 million bid for offshore leases that led to the discovery of an oil field containing an estimated 300 million barrels. Chevron, as the company was named after the merger, was criticized in the 1980s for doing business with Angola’s Marxist government. Mr. Keller answered that if Chevron left the country, other companies would gladly fill the vacuum. Protesters nonetheless distributed “wanted” posters of Mr. Keller. In an interview with U.P.I., Mr. Keller at one point expressed regret at “the remoteness” of the chairman’s job. And his wife, who was known as Addie, was unimpressed with the corporate stratosphere. After dining with Queen Elizabeth II on the Royal Yacht Britannia in 1983, she was heard to say, “You know, that’s the first time I’ve been glad George was chairman.” Mr. Keller, a rabid fan of the San Francisco 49ers, said the royal dinner party was the best thing since the 1982 Super Bowl.
- African children smile for the camera, a youngster sips pink medicine from a spoon and a doctor explains his part in a venture to fight malaria, the No. 1 killer on the continent. It’s an effort, he says, that will help save hundreds of thousands of lives. The images look like something out of a health documentary, but it’s a commercial for oil giant Exxon Mobil Corp., for which the doctor is medical projects director. Exxon’s other new ads talk about efforts such as its breakthrough technology for hybrid-electric car batteries. Chevron Corp. is showcasing its geothermal operations. Of the energy challenge, one ad says, “This isn’t just about oil companies. This is about you and me.” The world’s best-known oil companies are pouring on the charm as they get ready this week to parade another round of fat profits before a public that is feeling suddenly poorer. The spotlight will shine on Exxon and Chevron. Such advertising makes sense after a summer with oil at nearly $150 a barrel and a fall likely to bring renewed scrutiny of their investments and tax breaks. But when oil companies spend their money, it’s less about you and me than about their shareholders. In many respects, industry experts note, what’s good for Big Oil’s bottom line isn’t necessarily good for Joe Q. Jetta. “That’s a game that oil companies have been playing for a while, but they’ve been pumping more money into it lately,” said Sheldon Rampton, research director at the Center for Media and Democracy. “They’re hoping to mitigate their bad reputation rather than become beloved.” A few examples in which shareholders have trumped consumers: with world oil production falling behind demand, major oil firms are spending a larger share of their record profits on stock buybacks and dividends rather than increasing supply-boosting exploration; in July, when refiners saw profits squeezed by high oil prices and lower fuel demand, they throttled back production. When hurricanes hit the Gulf Coast, as much as 14% of the nation’s refining capacity was off-line and gasoline inventories were unusually low. Drivers quickly felt the effects; as high diesel prices help put truckers on the road to bankruptcy, refiners have been sending diesel to Europe to fetch a better price. In nearly every industry, shareholder returns regularly win out over the needs of consumers – who may also be shareholders. Energy companies are unusual, though, because the planet hasn’t yet figured out how to get by without their products. And unlike regulated utilities such as Southern California Edison Co. and Pacific Gas & Electric Co., which have a legal duty to consider the needs of ratepayers, oil companies today have little direct connection to the customers who frequent their branded gas stations. Most Shells, Chevrons and the like long ago were sold off to dealers and wholesalers. “It’s a tough, tough business, and that’s why they’ve decided to get out of it,” said John Felmy, chief economist at the American Petroleum Institute, the industry’s lobbying group. But, he said, “we do care about consumers. If you don’t care about consumers, you’re not going to stay in business.” That allegiance to consumers is sure to be tested in the next year, as Congress and the public weigh major energy proposals, said Amy Myers Jaffe, energy fellow at Rice University’s James A. Baker III Institute for Public Policy. “The question is, would consumers be better off if they spent more money on exploration and less money buying back stock? In my opinion, the answer to that question is yes,” Jaffe said. In 1993, the five biggest publicly traded oil companies – Exxon Mobil, Royal Dutch Shell, BP, Chevron and ConocoPhillips – spent 39% of their operating cash flow on development projects, 14% on exploration and only 1% on buying back their own stock. In 2007, they spent 34% on development, 6% on exploration and 34% on stock buybacks, according to a study co-written by Jaffe. In a capitalist market, though, “you could say that it’s not their job to be doing things in the public’s best interest,” Jaffe said. Domestic oil exploration illustrates the point. Congress recently voted to ease long-standing bans on new offshore oil drilling in certain regions. Whether the energy companies pursue any new drilling will depend not on the needs of consumers but on profit considerations such as the price of oil, the cost of the project and estimates of future demand. When oil pushed toward $150 a barrel and natural gas fetched $13 per thousand cubic feet, it was hard to imagine any company having second thoughts about new drilling. But oil prices have slumped below $70 a barrel. Natural gas prices have fallen by nearly half. And the economies of the U.S. and elsewhere are flagging, cutting energy demand. Natural gas producer Chesapeake Energy Corp., whose ads assert that the answer to the nation’s energy crisis is “right under our feet,” isn’t as enthusiastic now. Last month, the company told investors that production was “uneconomic” at today’s prices. So Oklahoma City-based Chesapeake, one of the largest suppliers of U.S. natural gas, cut production by 4% and investment spending by 17% through 2010. The company also is eyeing exports, calling the opportunity for overseas sales “very compelling” for U.S. natural gas companies. This summer’s soaring gasoline and diesel prices and post-hurricane shortages underscored the fragility of the nation’s fuel supplies. Even though the nation’s fuel production runs chronically short of demand, the combination of rising construction costs, sinking demand, greater use of renewable fuels and worsening credit markets have tempered enthusiasm for investments that would pump up output. Last week, Canada’s Connacher Oil & Gas Ltd. shelved plans to more than triple production at its Montana refinery. The project “would have increased diesel supplies in the Northern Rockies and in some Western provinces that at times have been chronically short of diesel,” the Oil Price Information Service said in a subscriber note. Valero Energy Corp., the largest U.S. fuel maker, is one of the few refiners planning big investments. But like its rivals, the company keeps its focus on the bottom line. The company noted that high gasoline stocks in the spring cut into profit, but the returns on diesel have been “terrific all year,” Chief Executive Bill Klesse told analysts last month. Felmy, the oil industry economist, said some of what refiners are exporting isn’t usable in the U.S. because of clean-air requirements. Profits on gasoline picked up after the hurricanes, in part because several refiners had cut output to reduce inventories and revive profit margins. That decision left the Gulf Coast region with inventories too low to make up for the lost production when hurricanes Gustav and Ike shut refineries. In mid-August – before the first hurricane hit – U.S. refineries operated at nearly 86% of capacity, and gasoline inventories dropped below a 21-day supply – a very small cushion, said Tom Kloza, chief oil analyst for the Oil Price Information Service. After the hurricanes, refiners’ profits perked up as prices leaped and shortages developed. “Even though prices have leveled off and come down, I think people are still leery of the oil companies,” said Tyson Slocum, director of the energy program for Public Citizen, a Washington-based consumer group. “As soon as prices go back up again or we see more record profits, steam will be coming out of people’s ears.”
- Opening statements began in a trial over whether Chevron Corp. colluded with the Nigerian military in 1998, when troops broke up a protest at an offshore oil rig, killing two villagers. The suit was brought under a federal law that allows foreigners to sue American companies for alleged human rights violations in other countries. The case in U.S. District Court is being closely watched by human rights advocates seeking to hold U.S. corporations accountable for their actions overseas. In court , attorney Dan Stormer argued on behalf of his Nigerian clients that San Ramon, Calif.-based Chevron used company helicopters to fly “notoriously brutal” Nigerian troops to the oil platform, where they killed and injured unarmed protesters. Other protesters were arrested and tortured, Stormer contended. “Chevron paid, housed, fed, transported and supervised the military and police,” Stormer told the nine-member jury. But Chevron attorney Bob Mittelsteadt countered that the protesters had held workers at the oil rig hostage for more than three days and that the company was obligated to call in the authorities to protect its employees. “It was the right decision,” he said. “It was the decision anyone being kept hostage would want the company to make.” In their opening remarks, the two attorneys presented contrasting versions of the events that took place in May 1998. Stormer, representing 19 Nigerians who were injured or lost a family member in the clash, portrayed the villagers as peaceful people who were upset by ecological damage to their Niger Delta villages and were seeking jobs from the oil company. He said that Chevron’s oil operations in the delta had destroyed the fishery, contaminated wells and killed fruit trees. Many villagers of the Ilaje ethnic group were unemployed. “They were watching the community die,” he said. The Ilaje villagers sent numerous letters to Chevron seeking a meeting, but the company ignored them, Stormer said. In early 1998, a rival ethnic group occupied a Chevron oil platform and negotiated jobs for some of its members. Soon after, the Ilaje decided to do the same. More than 100 men went to the Parabe oil platform and, according to Stormer’s account, were invited aboard an adjoining tugboat and a barge that housed employees. The men were peaceful and posed no threat to the workers as elders onshore negotiated for jobs with the oil company, he said. On the fourth day, three helicopters leased by Chevron and flown by Chevron pilots flew Nigerian troops to the barge. Stormer said they immediately began firing tear gas and bullets. Villager Larry Bowoto, the lead plaintiff in the lawsuit, approached the soldiers shouting, “Don’t shoot. We are peaceful. Don’t shoot,” Stormer recounted. Bowoto was shot in the elbow, side and backside. One protester who was killed left three widows and 11 children. The family members are among those suing, and the three widows sat together in court. Some of the protesters were arrested and held in deplorable conditions, Stormer said. One was hung by the arms. Another was beaten as authorities attempted to get him to confess that he was a sea pirate, the attorney said. After the incident, he said, Chevron attempted to cover up its role by claiming that the troops were not on its payroll. Mittelsteadt, the Chevron attorney, told the jury: “This is an emotional case.” But he characterized the protest as an unlawful occupation of company facilities. Some of the “invaders” had knives, he said, and some workers feared for their lives. Protesters poured diesel fuel on the barge and threatened to set it on fire, he said. “This was not a peaceful protest,” he said. “It was a hostile illegal invasion that put the workers’ lives at risk.” His comments to the jury contradicted a fax sent by a company official on the third day of the protest saying that the villagers were unarmed and that the situation had remained calm. Mittelsteadt acknowledged that it was a common practice for Chevron and other foreign companies operating in Nigeria to pay police and soldiers to supplement their salaries, but said that did not make them company employees. The trial is expected to last into December.
- The oil-profit gusher continued with Westwood-based Occidental Petroleum posting a 72% boost in earnings for the third quarter on higher production and oil prices that nearly touched $150 a barrel. Oil giant BP reported an 83% jump in net income. In spite of the earnings that one oil critic referred to as “outlandish,” the challenge for Occidental and BP is maintaining momentum in a market that has changed so much that the quarter “feels like distant history,” as Byron Grote, BP’s chief financial officer, put it. Still, both companies said they expected to do well despite sharply lower energy prices. Crude oil for December delivery fell 49 cents to $62.73 a barrel Tuesday on the New York Mercantile Exchange, unable to rally even though the Dow Jones industrial average soared almost 900 points. Oil futures have fallen more than 50% from July’s peak. “It was a great quarter for Occidental and BP thanks to high energy prices, but that is over in terms of earnings going forward. It’s a new game now,” said Fadel Gheit, senior energy analyst at Oppenheimer & Co. Gheit said Occidental and BP should benefit from their conservative outlooks at the expense of more aggressive rivals that based their long-term plans on oil staying at least in the $80- to $100-a-barrel range. “Both have relatively low cost structures and low production costs,” Gheit said. Analyst Phil Weiss of Argus Research said that better-managed oil companies such as Occidental and BP tend to crunch their numbers based on exceedingly conservative estimates of how the oil market was going to perform. He said that didn’t change even if oil surged to record levels. Occidental uses a price below $60 a barrel and BP does projections on oil as low as $40 a barrel. Occidental Chief Executive Ray Irani said as much during the earnings conference call with analysts: “We feel quite comfortable that at $57 a barrel we’ll still have free cash flow.” Another round of record oil company profits has inflamed critics. Speaking specifically about BP, Santa Monica-based Consumer Watchdog said the British company “rode the wave of the crude oil price spike to a staggering profit jump in the third quarter of 2008. It is a stark reminder of the damage inflicted by energy costs on a world economy that was heading into recession.” Last week, ConocoPhillips said third-quarter earnings rose 41% to $5.2 billion. Hefty profits are expected Thursday from Exxon Mobil Corp. and Friday from Chevron Corp. Occidental’s net income for the three months ended Sept. 30 climbed to $2.3 billion, or $2.78 a share, from $1.3 billion, or $1.58, a year earlier, easily beating the average $2.71 a share estimated by analysts polled by Thomson Reuters. Sales rose 46% to $7.1 billion. Its oil and natural gas output rose 3.2% to the equivalent of 588,000 barrels of crude a day, lead by improvements in Qatar, Oman and the U.S. BP’s net profit advanced to just under $8.1 billion, or 43 cents a share, from $4.41 billion, or 23 cents, a year earlier. Revenue rose 45% to $103.2 billion. Occidental shares gained $7.62, or 18%, to $49.70, while BP rose $6.37, or 16%, to $46.52.
- A Nigerian villager who is suing Chevron Corp. for human rights violations testified in federal court that he was shot four times by Nigerian troops at a Chevron oil platform even though he was unarmed. “I saw military men jump off a helicopter and as they jumped off they were shooting,” Larry Bowoto, 44, testified through an interpreter. “I was raising my hands [and shouting] ‘We are community protesters. We are for peace. Don’t shoot us.’ ” Bowoto is the lead plaintiff in a landmark suit against San Ramon-based Chevron. Under the Alien Tort Claims Act, foreigners can sue American companies for alleged human rights violations overseas. Bowoto brought the suit with 18 other Nigerians who were injured or lost a family member in 1998, when more than 100 villagers came to the Parabe oil platform and an adjoining barge to protest Chevron’s actions. Their attorney, Dan Stormer, said Chevron used three company helicopters and pilots to fly the troops to the platform nine miles off the coast. The government troops – described as “notoriously brutal and vicious” – killed two protesters and wounded two others, including Bowoto. An autopsy concluded that one of the dead was shot four times in the back. Other protesters were arrested and tortured, Stormer said. Chevron attorney Bob Mittelsteadt said the company acted properly in calling in the authorities to protect its employees and was not responsible for the troops’ actions. He said the villagers who came to the platform were “illegal invaders” who held workers hostage for more than three days. Mittelsteadt acknowledged that it was common for Chevron and other foreign companies to supplement the salaries of Nigerian police and soldiers, but said the payments did not make them company employees. The clash at the oil platform had been building for years as villagers in the Niger Delta grew increasingly upset over the lack of jobs for villagers and ecological damage caused by Chevron’s oil operations. The company’s dredging had destroyed the local fishery, fouled village wells and ruined the soil, depriving the villagers of their livelihood, they say. Leaders of the Ilaje ethnic group repeatedly appealed to Chevron for assistance, but received little response. After the rival Itsekiri ethnic group won jobs by staging a protest at the oil platform in March 1998, the Ilaje decided to try a similar tactic. More than 100 Ilaje villagers went to the platform in late May. Boyo Johnson, an Itsekiri who was hired after the earlier protest, testified that he was at the platform when the Ilaje arrived. They were “peaceful and friendly” and company officials did not prohibit them from coming aboard the barge, he said. An armed, five-man military unit stationed at the facility had no trouble with the protesters, he said. Johnson rejected the idea that he and other workers were being held hostage and said that the soldiers continued to patrol the barge armed with their rifles. Their weapons were the only ones he saw, he said. During his testimony, Bowoto wept several times. At one point, he showed the nine-member jury the wound in his elbow where he was shot while holding up his hands and the scar on his side, where a large chunk of flesh is missing. “I was in terrible pain,” he said as he recalled lying wounded on the barge. “I was thinking I would die.”
- The Board of Directors of Chevron Corporation (NYSE: CVX) declared a quarterly dividend of 65 cents per share. The dividend is payable December 10, 2008, to holders of common stock as shown by the transfer records of the Corporation at the close of business November 18, 2008.
- Chevron Corporation (NYSE: CVX) reported net income of $7.9 billion ($3.85 per share - diluted) for the third quarter 2008, compared with $3.7 billion ($1.75 per share - diluted) a year earlier. For the first nine months of 2008, net income was $19.0 billion ($9.23 per share - diluted), up from $13.8 billion ($6.45 per share - diluted) for the same period in 2007. Sales and other operating revenues in the third quarter 2008 were $76 billion, compared with $54 billion a year ago. For the first nine months of 2008, sales and other operating revenues were $222 billion, versus $154 billion in the corresponding 2007 period.
– Chevron Corp. said its third-quarter profit more than doubled on the back of record crude prices this summer, though worldwide production fell during the period. Chevron, the second-largest U.S. oil company, capped off a continued string of robust quarterly profit reports from the world’s major oil companies, including another U.S. corporate profit record for No. 1 Exxon Mobil Corp. Altogether, Chevron, Exxon Mobil and rivals BP PLC, Royal Dutch Shell PLC and ConocoPhillips posted earnings of $44.4 billion for the July-September period, up 58 percent from the same time a year ago. But this period of astounding, sometimes record profits may be coming to an end. Crude prices peaked at $147 near the start of the quarter in mid-July before embarking on a dramatic slide that has continued into the fourth quarter. When the third quarter ended Sept. 30, benchmark crude prices were still around $100 a barrel. In early trading Friday, they slipped below $64 a barrel. San Ramon, Calif.-based Chevron said it earned $7.89 billion, or $3.85 a share, in the three months ended Sept. 30, versus $3.72 billion, or $1.75 per share, at the same time last year. Analysts were expecting average earnings of $3.25 per share based on a survey by Thomson Reuters. Revenue shot up 43 percent to $78.87 billion from $55.2 billion. “Our disciplined capital spending and tight control over costs remain extremely important in today’s uncertain economic climate,” said Chevron chairman and chief executive Dave O’Reilly. “Our strong balance sheet enables Chevron to continue investing in attractive projects that increase the production of oil and gas and improve the efficiency of our refinery network.” Its shares slipped 10 cents to $74.08 in morning trading. Chevron said earnings from its exploration and production, or upstream, business rose about 80 percent in the quarter to $6.18 billion, buoyed by crude prices. However, global production fell nearly 6 percent to an average of 2.44 million barrels of oil equivalent a day, hurt in part from late-summer hurricanes that shut down output in the Gulf of Mexico. At its U.S. upstream arm, Chevron said the average sales price for a barrel of crude and natural gas liquids was $107 in the third quarter, up from $67 a year ago. Chevron said it swung to a profit of $1 billion at its U.S. refining and marketing arm after posting a loss of $110 million a year ago, when ample gasoline supplies made it difficult for Chevron and other refiners to recover higher oil costs at the gasoline pump. During this year’s third quarter, Chevron said it benefited from significantly higher margins on the sale or refined products – largely because of the dramatic drop in crude prices. The company made the turnaround even though branded gasoline sales volumes fell 7 percent from a year ago. Chevron reported capital and exploratory expenditures of $5.5 billion in the quarter, up from $5.2 billion a year ago. It also bought back $2 billion shares of its common stock.
• Upstream news:
- Chevron Corporation (NYSE: CVX) announced that it has started crude oil production from its Blind Faith Field in the deepwater Gulf of Mexico. First oil from Blind Faith was achieved on Nov. 11, 2008. Daily production is expected to ramp up to approximately 65,000 barrels of crude oil and 55 million cubic feet of natural gas over the next three months. Blind Faith utilizes a deep-draft semisubmersible hull located about 160 miles (250 kilometers) southeast of New Orleans, La., on Mississippi Canyon block 650. Chevron's deepest offshore production facility, Blind Faith is located in 6,500 feet (1,981 meters) of water, and with subsea systems located in 7,000 feet (2,134 meters) of water in Mississippi Canyon blocks 695 and 696.
- Chevron Corporation (NYSE: CVX) announced that its wholly owned subsidiary, PT Chevron Pacific Indonesia, has started producing crude oil from the North Duri Field Area 12 in Indonesia, where Chevron produces nearly half the nation's crude oil. First oil was achieved on Nov. 14, 2008, and production is projected to increase to 34,000 barrels of crude oil per day by 2012. Initial production from North Duri Area 12 will increase with the application of steamflood technology next year. North Duri Area 12 represents the latest expansion of the Duri field, the largest producing field Chevron operates in Indonesia. The Duri Field currently produces nearly 200,000 barrels of crude oil per day. Discovered in 1941 on the island of Sumatra, the field is one of the world's largest steamflood projects. Steamflooding is an enhanced oil recovery method that injects steam into the reservoir to increase oil recovery. At the Duri Field, steamflooding has more than tripled oil production, and has enabled the recovery of more than 2 billion barrels of crude oil.
• Downstream news:
- Chevron Corporation (NYSE: CVX) announced that its subsidiary Chevron Africa Holdings Limited has agreed to sell 100 percent of its shareholdings in Chevron Kenya Limited and Chevron Uganda Limited to Total Outre Mer S.A (Total). Under the terms of the sales, Total is to acquire Chevron's marketing businesses in both countries. Chevron Kenya Limited and Chevron Uganda Limited's assets include 165 Caltex-branded service stations, one terminal, seven fuel depots, six aviation facilities, one lubricants blending plant, and a commercial and industrial fuels business. The transactions are subject to obtaining relevant regulatory approvals and are expected to close in the first half of 2009. No additional details of the agreement were disclosed.
• Business/Finance news:
- The Chevron Corporation, the oil company, said that its third-quarter profit more than doubled on the back of record crude prices this summer. Chevron capped off a string of robust quarterly profit reports from oil companies, including another American corporate profit record for the Exxon Mobil Corporation. Altogether, Chevron, Exxon Mobil and their rivals BP, Royal Dutch Shell and ConocoPhillips posted earnings of $44.4 billion for the quarter, up 58 percent from the same time a year ago. But this period of astounding, sometimes record profits may be coming to an end. Crude prices peaked at about $145 near the start of the quarter in mid-July before embarking on a steep slide that has continued into the fourth quarter. When the third quarter ended Sept. 30, benchmark crude prices were still around $100 a barrel. In early trading recently, they slipped below $64 a barrel. Chevron, based in San Ramon, Calif., said it earned $7.89 billion, or $3.85 a share, in the three months ended Sept. 30, compared with $3.72 billion, or $1.75 a share, at the period a year ago. Analysts were expecting average earnings of $3.25 a share based on a survey by Thomson Reuters. Revenue shot up 43 percent, to $78.87 billion, from $55.2 billion. Its shares slipped 10 cents, to $74.08. Chevron said earnings from its exploration and production, or upstream, business rose about 80 percent in the quarter, to $6.18 billion, buoyed by crude prices. Global production fell nearly 6 percent to an average of 2.44 million barrels of oil equivalent a day, however, hurt in part by late-summer hurricanes that shut down output in the Gulf of Mexico. At its American upstream arm, Chevron said the average sales price for a barrel of crude and natural gas liquids was $107 in the third quarter, up from $67 a year ago. Chevron said it swung to a profit of $1 billion at its United States refining and marketing arm after posting a loss of $110 million a year ago, when ample gasoline supplies made it difficult for Chevron and other refiners to recover higher oil costs at the gasoline pump. In this year’s third quarter, Chevron said it benefited from significantly higher margins on the sale or refined products — largely because of the drop in crude prices. The company made the turnaround even though branded gasoline sales volumes fell 7 percent from a year ago. Chevron reported capital and exploratory expenditures of $5.5 billion in the quarter, up from $5.2 billion a year ago. It also bought back $2 billion shares of its common stock.
- Wracked by the global financial meltdown, American businesses, unable to borrow because of the credit crunch and watching helplessly as their stock prices plummet, have been anxiously awaiting a change in administrations - either Barack Obama or John McCain. On Tuesday they got the Democrat, Obama. Is this good or bad for businesses? Economists and business experts, judging by what Obama said during the campaign, said Wednesday that the answer largely depends on the industry a particular company happens to be in. And, said Pearl Kamer, an economist for the Long Island Association, the answer also depends on how much money Obama will have available to spend for new, big programs, given the state of the economy. But companies that could do well under Obama's administration include those in the alternative-energy industry. He has proposed spending $150 billion over 10 years to speed the development of plug-in hybrid cars and "commercial-scale" renewable energy. The nuclear energy industry, however, might not fare so well under Obama. Big Oil is not likely to fare well either, experts said. Exxon Mobil Corp. and Chevron Corp. may face higher taxes under Obama, who supports a windfall profit tax. The big oil companies have posted record profit gains in recent quarters, which is unlikely to help their case with Obama. Labor unions are expected to benefit from Obama and a stronger Democratic majority in Congress. Experts said unions could achieve one of their prime goals: passage of legislation to require companies to recognize unions once a majority of employees sign cards supporting them. The AFL-CIO's Web site Wednesday cheered Obama's victory. "Barack Obama brings new hope to America's working families, and our increased majority in the Senate means we can translate that hope into reality," the Web site said. However, the U.S. Chamber of Commerce opposes any such measure, saying it would prefer a vote on union representation. If money is available, experts said, some of it will be used to boost the health care industry, in particular research into the use of stem cells and the creation of more generic drugs. But defense contractors may struggle as Obama seeks a way out of the Iraq conflict and attempts to make more money available to fix this country's roads, bridges and public transit systems. "There's going to be pressure on him to get out of Iraq and save money" on costly weapons systems, said Don Selkin, chief market strategist for National Securities Corp., investment advisers in Manhattan. The Bush administration is spending about $10 billion a month on the war in Iraq. Hedge funds, which played a major role in the buildup to the financial crisis, will face regulation, experts said. Financial companies and banks also may be more regulated. There may also be more help for the battered auto industry. Obama expressed support recently for doubling a loan program for automakers to develop fuel-saving technology to $50 billion from $25 billion. Experts said automakers may receive some kind of government aid to protect millions of jobs, which could be in danger if General Motors buys Chrysler. Marvin Goodfriend, an economics professor at Carnegie Mellon University in Pittsburgh, said that Obama may try to apply the brakes on America's rapidly growing deficit, which the Bush administration in July forecast would hit a record $482 billion, excluding costs associated with the financial crisis. Kamer said that the process of emerging from the global financial crisis could take two or three years or more, and that money would be tight until the financial clouds lift. "The major constraint [on Obama] will be the scarcity of resources," Kamer said. "That's going to hurt Long Island, because we're a small-business economy," and borrowing has been extremely difficult. Stock markets, however, may be healthier, Selkin said. Since 1900, the Dow Jones industrial average has risen an average of 9.8 percent in the 12 months after the Democrats gained the White House. Under Republicans, the Dow has risen only 2.5 percent in the same time period.
- Abel Garrido has just struck oil and he's not happy about it. Using a tree branch, the weathered farmer probed the edge of a pond that his cattle use for drinking water and soon turned up the smelly black sludge that he says has killed much of his livestock and sickened his family. "I've lost 30 cows," Garrido said. "I cut them open and their insides are black." Paying the medical bills to treat his three children for skin cancer has cost him his meager savings. "Here's the cause," Garrido said, contemplating the dark slime gleaming on the end of the branch. The contamination at Garrido's farm and hundreds of others in a Rhode Island-sized area here in the Ecuadorean Amazon is the basis of a controversial, long-running civil lawsuit in which a verdict is expected early next year. On one side are 30,000 mostly peasant farmers like Garrido who say they are living a health and ecological nightmare caused by careless oil drilling and production methods that contaminated their drinking water and spoiled their lush jungle environment. On the other side is defendant Chevron, the San Ramon, Calif.-based parent company which in 2001 acquired Texaco, which produced oil here from 1972 to 1990, and which the lawsuit claims polluted a vast swath of the Amazon. Chevron says Texaco cleaned up its share of the spills with three years of remediation work and that the Ecuadorean government absolved it of all future responsibility in 1998. The oil giant blames Petroecuador for any ongoing spills and for not following through on its share of the cleanup. Texaco was 37.5% partner in the oil field venture, and Petroecuador owned the rest. The Ecuadorean plaintiffs claim that Chevron never adequately cleaned up hundreds of oil catch basins and spills of drilling muds that continue to contaminate the groundwater. They claim the settlement with the government doesn't preclude individuals successfully suing the oil giant. If Garrido and other residents win, the case could set a worldwide precedent: Foreign plaintiffs have never collected for alleged offshore environmental damage caused by a U.S. company, said Ohio State University environmental economist Douglas Southgate. Last week, U.S. Rep. Jim McGovern (D-Mass.) toured the area and, shocked by the pollution he saw, wrote a letter he said he plans to send today to President-elect Barack Obama asking that the U.S. help Ecuador with cleaning up and direct "relevant departments and agencies . . . to design a plan to help fix this awful situation." In an interview here, McGovern said that "legal wrangling aside, what I saw demands immediate attention. This is a humanitarian and environmental crisis." Transferred from a New York court in 2003, the case may be decided by a superior court judge in Lago Agrio, near Coca, within a few months, attorneys say. The verdict may not be to Chevron's liking. In a report filed in March, a court-appointed investigator estimated that Chevron was liable for up to $8 billion in health and cleanup costs. "Texaco used the pristine Amazon rain forest as a garbage can," said Steven Donziger, a New York-based environmental attorney who represents the Ecuadoreans. Chevron fired back, challenging the scientific methods of the analysis, including the connection it made between oil spills and cancer cases. Economist Southgate, who is a Chevron consultant, said the report also didn't factor in Petroecuador's share of responsibility for the pollution, or evidence that it has continued to contaminate since it took over all ownership and operation responsibilities from Texaco in 1992. In April, Chevron took a public relations blow when local attorney Pablo Fajardo Mendoza and community organizer Luis Yanza won the international Goldman Environmental Prize for leading the legal battle against Chevron, a prize the oil company bitterly criticized. In September, the Ecuadorean government indicted two of Chevron's Ecuadorean lawyers, accusing them of falsifying scientific evidence used to show that Texaco's remediation measures in the 1990s were effective. Chevron denied the charges. Chevron attorneys have petitioned U.S. Trade Representative Susan Schwab to cancel the trade breaks Ecuador receives from the United States for its role in helping fight drug trafficking, claiming that President Rafael Correa had prejudiced the oil contamination case in public statements, limiting Chevron's chances of getting a fair trial. Chevron spokesman Kent Robertson said that if the company lost in Ecuador, it would appeal the verdict, possibly before a World Bank tribunal or at The Hague. Chevron has left the door open for a negotiated settlement, but previous overtures to the Ecuadoreans have been rebuffed, he said. Garrido, who has owned the 80-acre farm since 1981, said he didn't know or care who is to blame; he only wants to be given money to buy a new farm somewhere else, where he can escape the sight, smell and health effects of the oil. "When I bought the farm in 1981, the oil was here, but they told us it was good for us, that it had a lot of vitamins," Garrido said. "That was just to fool us."
- Chevron's "human energy" advertisements are everywhere: TV, magazines, bus stops and newspapers. The commercials -- which end with the words "oil," "geothermal," "solar," "wind," "hydrogen" and "conservation" flashing one at a time between the three bars of Chevron's logo -- encourage us to believe that the company is equal parts clean energy, conservation and oil. But is it really, as the commercials claim, "part of the solution" to the world's climate crises, rather than at the heart of the problem? You'd think the company would be eager to demonstrate its commitment to alternative energy with accessible, easy to understand financial figures. In fact, the details are all but impossible to come by. If you go to the company's website, you'll find cheery reports on various alternative fuels that state: "Chevron has invested more than $2 billion in renewable and alternative energy services since 2002. We expect to invest more than $2.5 billion from 2007 through 2009." But you will not find more detailed breakdowns that attach actual dollar amounts to specific investments in specific years. If you call, you'll be told the same PR message: Some $4.5 billion in once and future green expenditures. And you may also get referred to other postings on the website, which include the company's "corporate responsibility report," annual shareholder reports and 10-K tax filings with the Securities and Exchange Commission.But you won't get specific numbers -- as the company's spokesman told me, Chevron does not "break down spending for individual businesses" or "disclose more than has been disclosed in the 10-K." So what is in the 10-K? I looked at the latest complete filing, which included 2006 and 2007, when Chevron's record-breaking profits, its net income after expenses, were $17 billion and $18.7 billion, respectively. I found page after page of financial information but no charts or chapters that make it possible to document, in any complete way, the company's yearly expenditures on "renewable and alternative energy services." There was, however, an interesting chart to consider -- Chevron's "capital and exploratory" expenditures. It covered a great deal of the company's operations, from oil exploration, refining and marketing to its chemical business and beyond. In 2006, Chevron spent $16.6 billion, and in 2007, $20 billion in this category. Of that, $13 billion and $15.5 billion, respectively -- nearly 80% -- went to searching for, developing and producing crude oil and natural gas. Not exactly green "services." The chart also lists "all other" expenditures, which does include green enterprises: power-generating plants (four are "clean" geothermal operations); "alternative fuels" (the filing isn't more specific); and technology companies, which turn out to include Chevron Energy Solutions, which helps businesses increase energy efficiency and use renewable and alternative power; and Chevron Technology Ventures, which manages investments in emerging energy technology and its integration into Chevron's core businesses. This "all other" category allows us to get a sense of the company's dollar commitment to alternative and renewable energy. Let's be extremely generous (because "all other" also includes dirty businesses too, like coal mining and traditional power plants, and apparently neutral expenditures such as "worldwide cash management") and credit the entire category to the green column: $417 million in 2006 and $774 million in 2007. That's 2.4% and 3.8% of Chevron's total capital and exploratory expenditures. Not even a measly 4%. Another way to look at it? In 2006, Chevron purchased the most expensive offshore oil-drilling rig in history for $600 million -- nearly 1 1/2 times its entire "all other" capital and exploratory expenditure that year. And this is really the crux of the problem. Compared with what it spends producing oil and other environmentally catastrophic fuels in increasingly environmentally catastrophic ways -- scraping through tar sands, burrowing under mountains for oil shale and barreling into the depths of the ocean -- Chevron is spending minuscule amounts on clean alternatives. The "human energy" ads are designed to get us to believe that when we fill up our tanks at a Chevron station, we're supporting clean energy, an assumption that might discourage us from advocating for new taxes on the oil industry or for cuts in its subsidies -- money that could be used for government investments in alternative energy. The ads look nice, and to see Chevron's logo decorated with the words "solar" and "wind" is reassuring. But year in and year out, the energy giant's record-breaking profits don't go to renewable energy, they go to oil. Don't believe Chevron's hype.
-Investors have reason to be thankful for the first time in a while. The stock market stitched together its first four-day rally since May, thanks to an incipient wave of confidence in the federal government's attempts to spur the economy. Measures of small and mid-size stocks, which typically rise in anticipation of economic recoveries, rose more than 5%. Rising stocks outnumbered decliners by more than 5 to 1 on the New York Stock Exchange. As they have in recent days, stocks withstood a gust of bad economic news. Americans cut their spending by 1% last month, the largest decline since the last recession in 2001, while orders for durable goods such as washing machines shrank 6.2%, the Commerce Department said Wednesday. Also, the Reuters/University of Michigan index of consumer sentiment dropped to its lowest level in 28 years. Shares of General Motors Corp. and Ford Motor Co. rallied after a Deutsche Bank analyst predicted that the automakers would present aggressive plans to revamp themselves to qualify for federal bailout money. Citigroup Inc. rose 16%. It is up 87% since getting a second round of government assistance Sunday. The S&P financial index has risen 32% in the last week. Energy stocks surged as crude oil rose sharply for the second time in three days, finishing up $3.94 a barrel at $54.71. Shares of Chevron jumped 4.4% while Exxon Mobil rose 3.6%. The S&P index of energy companies rose 5.7%.
- In the absence of insightful or informed comment in Antonia Juhasz's Op-Ed article, I would like to provide some balance. We communicate not only Chevron's commitment to developing all forms of energy but the critical energy challenges facing us all. Billions of people are being lifted out of poverty who want the things we take for granted -- heat, light and mobility. This demand will require every form of energy. Oil and gas are capital-intensive businesses that deliver energy at a tremendous scale. It takes huge investments to ensure that we don't even think twice that there will be fuel to get us to work or take our kids to school. And yes, we are also investing aggressively in the renewable energy businesses of today and ones that might be viable in the future. Right here in California, Chevron Energy Solutions is helping schools and other public entities reduce energy use and use renewable power. We have also created a series of research and development partnerships to make next-generation biofuels from nonfood sources a reality, but we need to get the science right first. We recognize that the way we use energy today has to change. We don't claim to have all the answers, but we are part of the solution to the world's growing energy needs.Dave Samson, San Ramon, Calif.
The writer is general manager for public affairs for Chevron.
• Upstream news:
• Downstream news:
- Chevron may sell refineries as it continues to focus its downstream business on Asia-Pacific markets, a company vice president said during a presentation to Wall Street analysts. “I won’t advertise any particular rationalization going forward on the refining side,” said John Watson, Chevron’s executive vice president for strategy and investment in a webcast of the presentation, according to Reuters. “There are some possibilities but I’m not going to speculate what they might be.” During his presentation at the Merrill Lynch Global Energy Large Cap Conference, Mr. Watson said Chevron has successfully rationalized other parts of its downstream business by selling marketing and lubricant production assets in South America, Africa and Europe that didn’t fit the San Ramon, California,-based company’s focus on the Pacific Rim. Chevron owns or has ownership interests in 13 major refineries worldwide, 11 of which, including six U.S. refineries, supply the Asia-Pacific markets, Watson said. The two not included as serving the Asia-Pacific markets are refineries in Britain and South Africa, according to slides accompanying the presentation.
- Chevron Eurasia, an affiliate of Chevron Corporation (NYSE:CVX) announced that the Caspian Pipeline Consortium (CPC) shareholders have unanimously approved the key commercial terms for an expansion project that will more than double the capacity of the pipeline. CPC provides an important transportation outlet for the export of crude oil from Kazakhstan and Russia to the Black Sea. The Shareholders' approval also authorizes $50 million funding of additional detailed engineering work required for a final investment decision. Expansion of CPC is expected to increase the annual design capacity of the pipeline from 28 million tons to 67 million tons, or 1.4 million barrels per day). The project plans to use the existing 935 miles (1,505 kilometers) of pipe and expand throughput capacity by the addition of 10 new pump stations (for a total of 15), six new 100,000-cubic-meter storage tanks at the Marine Terminal near Novorossiysk, and additional offshore loading facilities. The project also calls for 55 miles (88 kilometers) of new pipe to be added in Kazakhstan.
- Chevron Energy Solutions (CES), a unit of Chevron Corporation (NYSE: CVX), has been awarded a master contract by the U.S. Department of Energy (DOE) to work with federal agencies to reduce energy and water consumption and increase the use of renewable energy at agency facilities. The Energy Savings Performance Contracts (ESPC), awarded to 16 qualified energy contractors, are intended to ensure quality design, implementation, operation and maintenance services for federal agency energy projects. Each of these new DOE contracts, which have a minimum five year term with the option to increase up to a total of 11 years, provides for a maximum individual contract value of $5 billion over the life of the contract. Federal agencies are allowed to use these contracts for federal facility energy efficiency projects, both nationally and internationally. The Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007 require federal agencies to achieve a 30 percent reduction in energy intensity and a 16 percent reduction in water use by 2015. They also require an increase in renewable energy use by federal facilities to 7.5 percent of electricity needs by 2013. The new DOE contracts are intended to help federal agencies achieve these mandated targets by working in partnership with the private sector. The DOE contract is part of the ESPC program authorized by Congress, which allows energy efficiency projects at federal agencies to be funded by guaranteed energy cost savings and, therefore, requiring no capital expenditures up front. Energy contractors, such as CES, obtain financing to fund energy efficiency upgrades and renewable power systems and are repaid for these improvements by the agencies over a period of years through the savings generated by the project.
• Business/Finance news:
- A federal jury cleared Chevron Corp. of responsibility in the killing and wounding of Nigerian villagers during a protest at an offshore oil platform a decade ago. Plaintiffs said they will appeal, alleging error by the trial judge. The villagers brought the lawsuit under the Alien Tort Claims Act, which allows foreigners to sue American companies in the United States for their actions in foreign countries. The case arises from an incident 10 years ago at Chevron's Parabe oil platform nine miles off the Nigerian coast. Members of the Ilaje ethnic group were upset by Chevron's actions in the Niger Delta, including oil spills and dredging that killed fish, contaminated the soil and fouled drinking water. They also were angered by a lack of jobs or other compensation and Chevron's apparent unwillingness to talk to them. In May 1998, more than 100 Ilaje villagers boated out to the oil platform and occupied an adjoining barge. In an initial attempt to end the protest, a Chevron representative began negotiating with tribal elders onshore. But from that point on, witnesses and experts called by the two sides offered sharply contrasting accounts of how events unfolded. Witnesses for the plaintiffs said the protesters were unarmed and peaceful. They did not interfere with or threaten any of the workers at the facility, witnesses said, and a small armed military unit patrolled the facility without incident. On the fourth day of the protest, they said, helicopters leased by Chevron and flown by Chevron pilots transported soldiers and members of the feared mobile police, known as "Kill and Go" units, to the facility. Upon landing, the police and soldiers began firing almost immediately and shot four people, killing two. Lead plaintiff Larry Bowoto testified that he was holding up his hands and shouting, "Don't shoot," when he was shot in the elbow, side and buttock.
- Stocks fell sharply on fears -- ultimately confirmed -- that a bill to rescue two Detroit automakers would die on Capitol Hill. The pullback followed mostly moderate moves in stocks since mid-November and was a fresh reminder of Wall Street's fears about the economy. Prospects for the $14-billion in loans to cash-starved General Motors and Chrysler dimmed during trading as GOP opposition in the Senate hardened. Ultimately, proponents fell seven votes short of what they needed to move forward with the measure. The House had approved a plan on a vote of 237 to 170 to infuse money within days to the two struggling automakers. Ford Motor has said it does not need aid. Stocks slumped at the opening bell after the government reported a surprise jump in weekly unemployment claims but recovered to trade flat for much of the session until anxiety about the auto bailout sent share prices tumbling. Financial stocks, however, led the way down on worries about their balance sheets after US Bancorp warned that in the current quarter it would designate as much as $650 million in loans as uncollectable. An index of financial shares lost 8.5%. US Bancorp fell 10%, while JPMorgan Chase and Wells Fargo declined 11%. The Dow Jones industrial average slid 196.33 points, or 2.2%, to 8,565.09. The decline left the blue chips with a 0.8% loss for the week going into Friday's session. The broader Standard & Poor's 500 index dropped 25.65 points, or 2.9%, to 873.59, and the Nasdaq composite index sank 57.60 points, or 3.7%, to 1,507.88. The Russell 2,000 index of smaller-company stocks tumbled 5.3% as investors looked for the safety of larger companies expected to fare better in a weak economy. Declining issues on the New York Stock Exchange outnumbered advancers by more than 3 to 1. Even with the pullback, the Dow is up 13% since hitting a multiyear low Nov. 20, while the S&P 500 is up 16%. Some energy stocks advanced as oil prices surged after Saudi Arabia said it made good on promises to cut output and Russia said it might do the same. Oil futures jumped $4.46 to settle at $47.98 a barrel on the New York Mercantile Exchange. Shares of Chevron advanced 1.3%, while Hess climbed 6.8%.
- Chevron Corporation (NYSE:CVX) announced Enrique Hernandez Jr. has been elected to Chevron's board of directors and will serve on the company's Audit Committee. Separately, Gen. James L. Jones (retired, United States Marine Corps) has resigned from the board effective Dec. 5. Jones was recently named President-elect Barack Obama's national security adviser-designate. He joined Chevron's board earlier this year and served on the Board Nominating and Governance and Public Policy Committees. Hernandez, 53, is currently president and chief executive officer of Inter-Con Security Systems, Inc., a commercial, industrial and governmental security services company. Hernandez has been Inter-Con Security Systems' president and chief executive officer since 1986. Hernandez joined Inter-Con Security Systems in 1984 as vice president and assistant general counsel and was named executive vice president in 1985.
- When word leaked that Barack Obama intended to tap former EPA director Carol Browner as energy and global warming "czar," her Washington lobbyist husband Tom Downey, a one-time Long Island congressman, began severing ties with energy and environmental clients, his firm said. Last week, Downey ended his contract with the last one - Securing America's Future Energy, a nonprofit advocacy group promoting conservation and oil exploration to boost U.S. energy independence - his firm and the nonprofit said. "We don't represent them anymore," Kathleen Tynan McLaughlin, chief operating officer of Downey McGrath Group, said yesterday. "We no longer will be accepting energy or environment clients." Downey, who married Browner last year, took a "prudent" step in the "gray area" of government ethics by cutting ties with the SAFE, said Mary Boyle of Common Cause, a nonprofit ethics advocacy group. The emergence of Washington power couples who include a political appointee and a lobbyist with a long list of clients is "fraught with danger," said ethics lawyer Jan Witold Baran. "Spouses [of appointees] have to be very careful how they work and who they accept money from," he said. They must ask are they "valid jobs for services actually rendered or whether they were vehicles to pad the financial well-being of some official couple." Lobbyist spouses have become a sore point for Obama as he assembles his team because he ran a campaign based on bringing change to the lobbyist-driven culture in Washington. Browner, named "czar" by Obama yesterday, is not the only one to have a lobbyist spouse: the wife of Tom Daschle, the pick to head Health and Human Services, is also a lobbyist, for example. Since losing his seat in Congress in 1992, Downey has become a major fundraiser for Democrats including Sen. Charles Schumer (D-N.Y.) as well as a top lobbyist, reporting to the Senate $19.5 million in lobbying fees since 1999. This year alone, his firm reported $2.6 million in lobbying fees, and lists 32 clients other than SAFE on its Web site. But none is a business or advocate on energy or environmental issues, according to McLaughlin. Yet he has represented clients in the past who could raise concerns now. Fannie Mae, at the heart of subprime mortgage crash, paid Downey $750,000 over the past decade before the contract ended in October. Mobil Oil paid his firm $14,000 in 1999, and Chevron USA paid him $160,000 from 2000 to 2002 to lobby for it during its merger talks with Mobil, records show. Questions could arise about other clients, which increasingly includes those involved in health issues, as Obama seeks health care reform. Downey and Browner have shown they are aware of the potential appearance of conflict. In early 2006, Schumer raised alarms about a foreign-based firm, Dubai Ports World (DPW), getting a contract to operate six U.S. ports. DPW was represented in China by the Albright Group, which employed Browner and had hired Downey in 2004 as a lobbyist. Browner and Downey tried, unsuccessfully, to calm the storm by visiting Schumer. The Albright Group then recommended that DPW hire Downey as a lobbyist. It did, paying him, records show, $480,000 over two years. Two weeks after Downey and Browner wed in June 2007, Downey ended his contract with the Albright Group. McLaughlin said, "It was just a coincidence."
- Chevron Corporation (NYSE: CVX) announced that Patricia Yarrington has been appointed vice president and chief financial officer effective Jan. 1, 2009. Yarrington, currently vice president and treasurer, replaces Steve Crowe, who has elected to retire after 36 years with the company. Crowe, 61, joined Chevron in 1972 after attending the University of California at Berkeley and earning a bachelor's degree in finance in 1969 and an MBA in 1970. He was elected a corporate officer and became vice president and comptroller in June 1996. He assumed his current position in 2005. Yarrington, 52, was elected vice president and treasurer in 2007.
- Wall Street finished moderately lower, as further signs of economic deterioration damped investors' earlier enthusiasm about the Federal Reserve's aggressive interest rate cut. Stocks declined in the early going after a larger-than-expected loss from Morgan Stanley offered fresh evidence of the sizable obstacles the battered financial industry still faces. The company posted a loss of $2.4 billion, or $2.34 a share, for its fiscal fourth quarter. The report came a day after rival Goldman Sachs Group posted its first quarterly loss since going public in 1999. Some selling had been expected after Tuesday's huge rally in which the Dow Jones industrial average rose more than 4% and other indexes gained more than 5%. The moves came after the central bank lowered its federal funds rate target to a range of zero to 0.25% -- record lows. But after briefly moving into positive territory, stocks struggled to hold on to the big gains logged the day before as investors grappled with signs of a worsening economy, including more layoffs, and the magnitude of the Fed's actions. "This is a whole lot of new information for people to digest," said David Waddell, chief executive of Waddell & Associates. Some investors also probably took the Fed's sharp rate cut as an indication of how dire the global financial crisis and economic troubles really are. Still, despite the decline, investors have been rather resilient in recent trading sessions, an encouraging sign for analysts who believe the market might be entering a period of stability after the unrelenting selling of the last three months. "Even if the market is down 100 points, the fact that it's been in a narrow trading range I think is very positive," Waddell said. The Dow Jones industrial average fell 99.80, or 1.1%, to 8,824.34, after falling as many as 146 points earlier in the session. The Standard & Poor's 500 index slipped 8.76 points, or nearly 1%, to 904.42, and the Nasdaq composite index fell 10.58 points, or 0.7%, to 1,579.31. The Russell 2,000 index of smaller companies was up 3.74, or 0.8%, to 486.59. New signs of a still-weakening job market only exacerbated investors' concerns that the economy has far to go before pulling out of recession. Cooper Tire & Rubber said it would cut 1,300 jobs and close a plant in Georgia, and Newell Rubbermaid is reducing its salaried workforce by as much as 10%. The maker of Rubbermaid containers also slashed its fourth-quarter and full-year profit guidance. Its shares plunged $3.60, or 27%, to $9.58. Some financial stocks rebounded late Wednesday. After being down by as much as 8% earlier, Morgan Stanley shares gained 37 cents, or 2.3%, to close at $16.50. Goldman Sachs added $2.78, or 3.7%, to $78.78. Energy stocks slumped on falling oil prices. Chevron dropped $2.19, or 2.8%, to $76.82, while Exxon Mobil lost $2.08, or 2.5%, to $81.06. Oil prices traded below $40 for the first time since the summer of 2004 despite an announcement from the Organization of the Petroleum Exporting Countries that it planned a record production cut of 2.2 million barrels a day. Light, sweet crude for January delivery fell 8%, or $3.54, to $40.06 a barrel on the New York Mercantile Exchange. The dollar sank to a two-month low against the euro and a 13-year low against the yen. Gold prices rose. Bond prices extended sharp gains. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.19% from 2.28%.
Go to Oil Company News