ChevronTexaco: Turning Partnership into Energy
Guy Hollingsworth, Managing Director of ChevronTexaco Eurasia Answers Questions from our magazine
ChevronTexaco is one of the world’s biggest energy companies. What are the directions in which your company will be developing?
ChevronTexaco Corporation is one of the world’s largest integrated energy companies. It is involved in every aspect of the energy industry, from oil and gas exploration and production to transportation, refining and retail marketing, as well as chemicals manufacturing and sales and power production. Active in more than 180 countries, ChevronTexaco employs about 53,000 people worldwide. In 2002, ChevronTexaco had more than 11 billion barrels of oil and equivalent gas reserves, 2.4 million barrels per day of refining capacity and average daily production of about 2.6 million oil-equivalent barrels. The company also has 23 refineries and more than 24,000 service stations worldwide.
ChevronTexaco businesses extend beyond producing and refining, with a chemicals venture, Chevron Phillips Chemical Co., an interest in Dynegy Inc., and equity interests in 47 power projects worldwide. The company also looks to the future through the development and commercialization of several advanced energy technologies such as fuel cells for automobiles and industrial use and gas-to-liquids.
Our focus is on delivering industry leading performance in five critical areas across all of our world wide business activities:
• Operational Excellence - We work to provide safe, reliable, efficient and environmentally sound operations
• Cost Reduction - We strive to lower costs through innovation and technology
• Capital Stewardship - We invest in the best project opportunities and execute them successfully
• Profitable Growth - We work to develop new business opportunities in existing and new markets
• Organizational capability - Building a world-class system that combine people, processes and culture to achieve industry leading performance
This year you will celebrate 10 years of partnership with Kazakhstan. What are the results for this period?
ChevronTexaco’s vision is to be the global Energy Company most admired for its people, partnership and performance.
In partnership with the Republic of Kazakhstan (ROK), we are actively pursuing this vision. Over the last ten years, ChevronTexaco has brought financial capital, new technology and international business skills in support of the ROK’s goal to grow and modernize its energy sector and generate economic prosperity for its people.
The benefits to the ROK are significant and include:
• Investment and economic activity – ChevronTexaco has invested more than four billion dollars since 1993. With a continuing positive investment climate, we plan to invest at least 2.5 billion more over the next 3-5 years.
• Significant oil and gas production growth – Since 1993 Tengizchevroil production has increased every year from about 60,000 barrels per day to 285,000 barrels per day today. At Karachaganak production has risen to 115,000 barrels per day and at North Buzachi average daily oil production for 2002 has increased to about 6000 barrels per day. All these projects are under major expansion and will add significantly to Kazakhstan’s future production of oil and gas.
• Significant financial benefits - At TCO alone, about $2.7 billion dollars was paid to Kazakhstan since 1993 including over one billion dollars in 2001 and nearly one billion dollars in 2002.
• Jobs, Training and Development – Over 25,000 people have been employed by ChevronTexaco’s joint venture interests and thousands of Kazakhstan citizens have been trained in operations and management positions. About 80% of the workforce at our joint venture operations are Kazakhstani, up substantially since 1993.
• Local business development - Since 1993, over two billion dollars have been spent on local goods and services.
• Construction of the Caspian pipeline – This pipeline transports almost 40% of Kazakhstan’s crude oil to world export markets ensuring the ROK gets market prices for their products.
What does the future look like for ChevronTexaco in Kazakhstan? Please tell us about the development of any new projects.
ChevronTexaco’s major projects in the ROK are expanding and will provide significant long-term benefits to the people of Kazakhstan.
We want to continue supporting the economic and energy growth goals of the ROK. Our future activity includes:
• Expansion at TCO - Second-Generation (SGP) and Sour Gas Injection (SGI) projects are underway. This $3.5 billion expansion is expected to increase production to about 430,000 barrels (20 million metric tonnes/year) and generate significant additional revenue, jobs, local goods and services, also training and development opportunities for the ROK.
• Expansion at Karachaganak - New processing facilities, gas re-injection, field expansion and pipeline linking Karachaganak to CPC are nearing completion, providing access to international markets and significantly increasing Karachaganak’s production and product value. Upon project completion, production will increase to about 230,000 barrels per day.
• Expansions at North Buzachi - CVX and partners have invested more than $155 million to create infrastructure and drill appraisal wells - 34 wells have been drilled and completed. We are currently completing an additional 10 well program started in 2003. We soon hope to be increasing production from 7,000 to 20,000 barrels per day.
• Economic Diversity - Polyethylene Pipe Plant – This new plant in Atyrau will increase Kazakhstan’s economic diversification, create 100 new local jobs and stimulate new business opportunities for ChevronTexaco and Kazakhstan.
These activities and continued investment create investor confidence that, like a magnet, attracts new investments and stimulates additional growth for the ROK.
In spite of some disagreements, on 25 January Tengizchevroil announced approval of a financial plan to proceed with expansion projects at Tengiz. In your opinion, what mechanisms can be viewed as most effective in resolving possible disputes between foreign investors and Kazakhstan in the future?
We strongly believe that a stable and positive investment climate is critical to the continued development of Kazakhstan’s oil and gas business and the foundation of Kazakhstan’s long-term economic growth and prosperity.
The decision on SGP/SGI suspension was made because TCO partners could not agree on a financial plan for expansion projects that would satisfy the diverse financial needs of all partners and we made the decision to suspend the project. But suspension didn’t mean that everybody gave up on finding a solution. Partners worked hard to find ways of funding the project that fit the desires of every party and honored the terms of existing agreements. I believe there should be three attributes of any mechanism that can be effective in resolving such disputes in the future:
• Contract sanctity – the terms of the contracts are honored
• Negotiating in the spirit of partnership
• Win/win result.
We believe we have met these criteria and today, Tengizchevroil is proceeding with its expansion.
Chevron Munaigas Inc., that is part of your corporation, has constructed a polyethylene pipe plant in Atyrau. What are the prospects for high tech development and the development of petrochemical industry in general in ROK? Does your company plan to participate in new projects in this area?
ChevronTexaco’s polyethylene pipe plant in Atyrau is unique in CIS and represents an expansion of our business activities beyond our upstream and other downstream projects. We held the opening ceremony of the pipe plant on April 4, 2003. The plant uses state-of- the-art technology to produce various sizes of high-density polyethylene pipe for use in developing local infrastructure in the region, and the entire country. Additionally, there are no hazardous materials used to make the pipe, and no emissions from the pipe- making process that are harmful to people and the environment.
The project represents ChevronTexaco’s commitment to the Republic of Kazakhstan’s local content and import substitution initiatives, as well as the training and development of Kazakhstani people where 70-75% of the 300 construction jobs were Kazakh, as are 100% of the plant’s 100 employees.
I am very excited about the potential this plant brings to Kazakhstan as it represents a small, yet very important step in the future industrial diversification of Kazakhstan and that ChevronTexaco is the first company to develop this opportunity. As for future development – we are always open to looking at new business opportunities.
What is your company’s policy on protection of environment and following environmental requirements?
Protecting the Earth’s natural resources is as important to ChevronTexaco as providing the energy sources so essential to improving our quality of life. Beyond meeting the world’s energy needs, our goal is to be recognized and admired everywhere for having a record of environmental excellence.
ChevronTexaco’s values, business strategies and field operations reflect the highest possible environmental standards, which are built on a long history to protect people and the environment.
We also know that a record of environmentally sound operations makes us more competitive in the global marketplace, helps us gain permission to operate and is essential to profitability. ChevronTexaco’s leadership believes strongly in developing a corporate culture that’s committed to protecting the environment in which we live and work.
Contributing to our efforts are strong multi-disciplinary programs that encourage technology innovation, safety, compliance, pollution prevention, community outreach, product stewardship, conservation, advocacy, training, and emergency preparedness and response.
With our Operational Excellence Management System, we apply a systematic and measurable approach to reach world-class operating performance in safety, environmental protection, health, reliability and efficiency. Everyone at ChevronTexaco is held accountable for results against aggressive environmental performance targets.
Your corporation is active in various social programs. Please could you share the most significant ones. In this regard, how is your partnership with local goods and service suppliers and contractors developing?
ChevronTexaco participates in a wide range of projects including safety and environment, education, health and human service, arts and culture. As part of our environmental protection program last year we had a joint project with the National Press Club to clean up the area around the world famous Medeu outdoor recreation center. We started a tree-planting initiative in Astana that we plan to turn into a tradition and expand to other regions of Kazakhstan.
ChevronTexaco has focused much of its effort and resources on Kazakhstan’s next generation supplying computers, textbooks, classroom equipment and teacher training. ChevronTexaco also financed publication of the first macroeconomics textbook to appear in the Kazakh language. The list of ChevronTexaco-sponsored local health initiatives is almost endless including hormone treatment for undersized youngsters, medicine and self-test equipment for patients, TB mobile clinic, medical diagnosis equipment for children’s hospitals and many others. Thanks to ChevronTexaco’s sponsorship, the local television agency Khabar created a pilot project for sign-language translation of the national news helping more than 55 thousand Kazakhstan people better understand the world they live in.
Due to our extensive support of these types of initiatives, ChevronTexaco received the Honorary Diploma for Charitable and Sponsorship Assistance in the Cultural and Humanitarian Spheres awarded by the President of the Republic of Kazakhstan. Additionally, in part due to our reputation in the communities where we operate, ChevronTexaco has been recognized as the Best Foreign Employer by AISEC Almaty – an affiliate of the International Association of Student and Young Graduates in the field of Economics and Management.
We are glad to have been part of the positive changes occurring in Kazakhstan since 1993. I am very excited about the potential of our continued partnership and the success we can achieve together over the next ten years.
I wish you and all the people of Kazakhstan continued growth and prosperity.
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