6001 Bollinger Canyon Road
San Ramon, California 94583
Telephone: (925) 842-1000
Fax: (925) 842-3530
Web site: https://www.chevron.com
Founded: 1879 as Pacific Coast Oil Company
Incorporated: 1926 as Standard Oil Company of California
Sales: $134.78 billion (2017)
Stock Exchanges: New York
Ticker Symbol: CVX
NAICS: 324110 Petroleum Refineries; 211120 Crude Petroleum Extraction; 424690 Other Chemical and Allied Products Merchant Wholesalers; 423520 Coal and Other Mineral and Ore Merchant Wholesalers; 213112 Support Activities for Oil and Gas Operations
The Chevron Corporation is the second-largest integrated oil company in the United States, and a leader worldwide. The company is involved in almost every aspect of the energy industry. Besides the exploration, production, and transportation of crude oil and natural gas, Chevron is involved in refining, marketing, and distributing transportation fuels and lubricants. The company also has its hand in power generation and the production of petrochemicals and additives.
Chevron's oldest direct ancestor is the Pacific Coast Oil Company, founded in 1879 by Frederick Taylor and a group of investors. Several years before, Taylor, like many other Californians, had begun prospecting for oil in the rugged canyons north of Los Angeles. Unlike most prospectors, Taylor found what he was looking for, and his Pico Well #4 was soon the state's most productive. Following its incorporation, Pacific Coast developed a method for refining the heavy California oil into an acceptable grade of kerosene, then the most popular lighting source, and the company's fortunes prospered. By 1900 Pacific Coast had assembled a team of producing wells around Newhall, California, and built a refinery at Alameda Point across the San Francisco Bay from San Francisco. It also owned railroad tank cars and the George Loomis, an oceangoing tanker, to transport its crude from the field to the refinery.
One of Pacific Coast's best customers was the Standard Oil Company of Iowa, a marketing subsidiary of the New Jersey–headquartered Standard Oil Trust. Iowa Standard had been active in Northern California since 1885, selling both Standard's own eastern oil and large quantities of kerosene purchased from Pacific Coast and the other local oil companies. The West Coast was important to the Standard Oil Company of New Jersey not only as a market in itself but also as a source of crude for sale to its Asian subsidiaries.
Jersey Standard thus became increasingly attracted to the area and during the late 1890s tried to buy the Union Oil Company (later Unocal), the state leader. The attempt failed, but in 1900 Pacific Coast agreed to sell its stock to Jersey Standard for $761,000 with the understanding that Pacific Coast would produce, refine, and distribute oil for marketing and sale by Iowa Standard representatives. W. H. Tilford and H. M. Tilford, two brothers who were longtime employees of Standard Oil, assumed the leadership of Iowa Standard and Pacific Coast, respectively.
Drawing on Jersey Standard's strength, Pacific Coast immediately built the state's largest refinery at Point Richmond on San Francisco Bay and a set of pipelines to bring oil from its San Joaquin Valley wells to the refinery. Its crude production rose steeply over the next decade, yielding 2.6 million barrels a year by 1911, or 20 times the total for 1900. The bulk of Pacific Coast's holdings were in the Coalinga and Midway fields in the southern half of California, with wells rich enough to supply Iowa Standard with an increasing volume of crude but never enough to satisfy its many marketing outlets. Indeed, even in 1911 Pacific Coast was producing a mere 2.3 percent of the state's crude, forcing partner Iowa Standard to buy most of its crude from outside suppliers such as Union Oil and Puente Oil.
By that date, however, Pacific Coast and Iowa Standard were no longer operating as separate companies. In 1906 Jersey Standard had brought together its two West Coast subsidiaries into a single entity called Standard Oil Company (California), generally known thereafter as Socal. Jersey Standard recognized the future importance of the West and quickly increased the new company's capital from $1 million to $25 million.
Socal added a second refinery at El Segundo, near Los Angeles, and vigorously pursued the growing markets for kerosene and gasoline in both the western United States and Asia. Able to realize considerable transportation savings by using West Coast oil for the Pacific markets of its parent company, Socal was soon selling as much as 80 percent of its kerosene overseas. Socal's head chemist, Eric A. Starke, was chiefly responsible for several breakthroughs in the refining of California's heavy crude into usable kerosene, and by 1911 Socal was the state leader in kerosene production.
Socal's early strengths lay in refining and marketing. Its large, efficient refineries used approximately 20 percent of California's entire crude production, much more than Socal's own wells could supply. To keep the refineries and pipelines full, Socal bought crude from Union Oil and in return handled a portion of the marketing and sale of Union kerosene and naphtha.
In the sale of kerosene and gasoline, Socal maintained a near-total control of the market in 1906, supplying 95 percent of the kerosene and 85 percent of the gasoline and naphtha purchased in its marketing area of California, Arizona, Nevada, Oregon, Washington, Hawaii, and Alaska, although its share dipped somewhat in the next five years. When necessary, Socal used its dominant position to inhibit competition by deep price cutting. By the time of the dissolution of the Standard Oil Trust in 1911, Socal, like many of the Standard subsidiaries, had become the overwhelming leader in the refining and marketing of oil in its region while lagging somewhat in the production of crude.
In 11 short years the strength of Standard Oil and a vigorous Western economy combined to increase Socal's net book value from a few million dollars in 1900 to $39 million. It was in 1911, however, that Jersey Standard, the holding company for Socal and the entire Standard Oil family, was ordered dissolved by the U.S. Supreme Court in order to break its monopolistic hold on the oil industry. As one of 34 independent units carved out of the former parent company, Socal, sporting a new official name of Standard Oil (California), would have to do without Standard's financial backing, but the new competitor hardly faced the world unarmed.
The years leading up to World War I saw a marked increase in Socal's production of crude. From a base of about 3 percent of the state's production during the early part of the century, Socal rode a series of successful oil strikes to a remarkable 26 percent of nationwide crude production in 1919. The company expanded further in 1926 with the acquisition of the Pacific Oil Company, a division of the Southern Pacific Railroad Company, a merger that led to the adoption of the name Standard Oil Company of California.
As the national production leader, Socal found itself in a predicament that would be repeated throughout its history: an excess of crude and a shortage of outlets for it. For most of the other leading international oil companies, the situation was reversed, crude generally being in short supply in a world increasingly dependent on oil. Particularly in the aftermath of World War I, there was much anxiety in the United States about a possible shortage of domestic crude supplies.
Several major oil companies began exploring more vigorously around the world. Socal took its part in these efforts but with a notable lack of success, namely 37 straight dry holes in six different countries. More internationally oriented firms, such as Jersey Standard and the Socony-Vacuum Oil Company, soon secured footholds in what was to become the future center of world oil production: the Middle East. However, Socal, with many directors skeptical about overseas drilling, remained content with its California supplies and burgeoning retail business.
During the late 1920s Socal's posture changed. At that time the Gulf Corporation was unable to interest its fellow partners in the Iraq Petroleum Company in the oil rights to Bahrain, a small group of islands off the coast of Saudi Arabia. Iraq Petroleum was then the chief cartel of oil companies operating in the Middle East, and its members were restricted by the Red Line Agreement of 1928 from engaging in oil development independently of the entire group. Gulf was therefore unable to proceed with its Bahrain concession and sold its rights for $50,000 to Socal, which was prodded by Maurice Lombardi and William Berg, two members of its board of directors. This venture proved successful. In 1930 Socal geologists struck oil in Bahrain, and within a few years, the California company had joined the ranks of international marketers of oil.
Bahrain's real importance, however, lay in its proximity to the vast oil fields of neighboring Saudi Arabia. The richest of all oil reserves lay beneath an inhospitable desert and until the early 1930s was left alone by the oil prospectors. Yet at that time, encouraged by the initial successes at Bahrain, Saudi Arabia's King Ibn Saud hired a U.S. geologist to study his country's potential oil reserves. The geologist, Karl Twitchell, liked what he saw and tried on behalf of the king to sell the concession to several U.S. oil companies. None were interested except the now adventurous Socal, which in 1933 won a modest bidding war and obtained drilling rights for a £5,000 annual fee and a loan of £50,000.
Socal and the Texas Company agreed to market their products under the brand name Caltex and developed excellent representation in both Europe and the Far East, especially in Japan. However, the new partners realized soon after the end of World War II that the Saudi oil fields were too big even for the both of them. To raise further capital, they sold 40 percent of the recently formed Arabian American Oil Company (Aramco) for $450 million in 1948, with 30 percent going to Jersey Standard (later Exxon Corporation) and 10 percent to Socony-Vacuum (later Mobil Corporation). This left the two original partners with 30 percent each. With its crude supply secure for the foreseeable future, Socal was able to market oil around the world, as well as in North America's fastest-growing demographic region: California and the Pacific Coast.
A true jackpot, Saudi Arabia supplied Caltex markets overseas with unlimited amounts of low-priced, high-grade oil. By the mid-1950s Socal was getting one-third of its crude production out of Aramco and, more significantly, calculated that Saudi Arabia accounted for two-thirds of its reserve supply. Other important fields had been discovered in Sumatra and Venezuela, but Socal was particularly dependent on its Aramco concession for crude.
On the domestic scene, Socal by 1949 had grown into one of the few U.S. companies with $1 billion in assets. No longer the number-one domestic crude producer, Socal was still among the leaders and had made plentiful strikes in Louisiana and Texas, as well as in its native California. Besides its original refineries at Point Richmond and El Segundo, Socal had added new facilities in Bakersfield, California, and in Salt Lake City, Utah.
Socal's marketing territory included at least some representation in 15 western states and a limited foray into the northeastern United States, mainly as an outlet for some of its inexpensive Middle Eastern oil. The heart of Socal territory was still west of the Rocky Mountains. There, the company continued to control about 28 percent of the retail market during the postwar years, easily a dominant share in the nation's leading automotive region.
In the two decades following the war, the U.S. economy became completely dependent on oil. As both a cause and an effect of this trend, the world was awash in oil. The Middle East, Latin America, and Southeast Asia all contributed mightily to a prolonged glut, which steadily lowered the price of oil in real dollars. The enormous growth in world consumption assured Socal of a progressive rise in sales and a concomitant increase in profits at an annual rate of about 5.5 percent.
By 1957 Socal was selling $1.7 billion worth of oil products annually and ranked as the world's seventh-largest oil concern. Its California base offered Socal several advantages in the prevailing buyer's market. By drawing on its own local wells for the bulk of its U.S. sales, Socal was able to keep its transportation costs lower than most of its competitors, and California's increasing population and automobile-oriented economy afforded an ideal marketplace. As a result, Socal consistently had one of the best profit margins among all the U.S. oil companies during the 1950s and 1960s.
California crude production began to slow, however, and along with the rest of the world Socal grew ever more dependent on Middle Eastern oil for its overall health. The rich Bay Marchand strike off the Louisiana coast helped stem the tide temporarily. By 1961 Socal was drawing 27.9 million barrels per year from Marchand and had bought the Standard Oil Company of Kentucky to market its gasoline in the southeastern United States. However, the added domestic production only masked Socal's increasing reliance on Saudi Arabian oil, which by 1971 provided more than three-quarters of Socal's proven reserves.
As long as the Middle Eastern countries remained cooperative, such an imbalance was not of great concern, and by vigorously selling its inexpensive Middle Eastern oil in Europe and Asia, Socal was able to rack up a record number of profit increases every year during the 1960s. By 1970, 20 percent of Socal's $4 billion in sales was generated in the Far East, with Japan providing the lion's share of that figure. The firm's European gas stations, owned jointly with Texaco until 1967, numbered 8,000.
The sudden shift in oil politics revealed several Socal shortcomings. Although it had 17,000 gas stations in 39 U.S. states, Socal was not a skilled marketer either in the United States or in Europe, where its former partner, Texaco, had supplied local marketing savvy. In its home state of California, for example, Socal's market share was 16 percent and continuing to drop, and Socal had missed out on both the North Sea and Alaskan oil discoveries of the late 1960s. Furthermore, the OPEC-spawned upheaval included the nationalization of several Caltex holdings in the Middle East, and in 1978 Caltex Oil Refining (India) Ltd. was nationalized by the government of India. A further blow to Socal's overseas operations came in 1980 when the government of Saudi Arabia nationalized Aramco.
Socal responded to these problems by merging all its domestic marketing into a single unit, Chevron USA, and began cutting employment, at first gradually and later more deeply. Also, Socal stepped up its domestic exploration efforts while moving into alternative sources of energy, such as shale, coal, and uranium. In 1981 the company made a $4 billion bid for AMAX Inc., a leader in coal and metal mining, but had to settle for a 20 percent stake. In 1984 the Standard Oil Company of California changed its name to Chevron Corporation, tying the company more directly with its main marketing brand. Also in 1984, after a decade of sporadic attempts to lessen its dependence on the volatile Middle East, Chevron met its short-term oil needs in a more direct fashion by buying the Gulf Corporation.
The $13.2 billion purchase, at that time the largest in the history of U.S. business, more than doubled Chevron's proven reserves and created a new giant in the U.S. oil industry, with Chevron the leading domestic retailer of gasoline and, briefly, the second-largest oil company by assets. Certain factors made the move appear ill-timed, however. Oil prices had peaked around 1980 and begun a long slide that continued until the Gulf War of 1990, which meant that Chevron had saddled itself with a $12 billion debt at a time of shrinking sales.
As a result, it was not easy for Chevron to sell assets as quickly as desired, both to reduce debt and to eliminate the many areas of overlap created by the merger. Chevron eventually rid itself of Gulf's Canadian operations and all of Gulf's gas stations in the northeastern and southeastern United States, paring 16,000 jobs in the meantime. However, oil analysts pointed to key figures such as profit per employee and return of capital as evidence of Chevron's continued poor performance.
During the early 1990s Chevron began publicizing its environmental programs, a response in part to public pressure on all oil companies for more responsible environmental policies. From 1989 to 1993 the Chevron Shipping Company had the best overall safety record among the major oil companies. In 1993, while transporting nearly 625 million barrels of crude oil, Chevron Shipping spilled an amount equaling less than four barrels. During this same period, the Chevron utilities supervisor Pete Duda recognized an opportunity to convert an abandoned wastewater treatment pond into a 90-acre wetland. Fresh water and new vegetation were added to the site, and by 1994 the area was attracting a variety of birds and other wildlife, as well as the attention of the National Audubon Society, National Geographic, and the California Department of Fish and Game. The conversion saved Chevron millions, as conventional closure of the site would have cost about $20 million.
Financially, the company began the 1990s with less than glowing returns. Chevron's 1989 results were poor, and in that year's annual report, Chair Kenneth Derr announced a program to upgrade the company's efficiency and outlined a five-year goal to offer stockholders a return on investment that surpassed its strongest competitors. The company also took on important new initiatives. In 1993 Chevron entered into a partnership with the Republic of Kazakhstan to develop the Tengiz oil field, one of the largest ever discovered in the area.
In 1994, five years after Derr's announcement, Chevron had met its goal for stockholders, largely through restructuring and efforts to cut costs and improve efficiency. From 1989 to 1993 Chevron cut operating costs by more than $1 per barrel and the company's stock rose to an 18.9 percent return, compared with an average of 13.2 percent for its competitors. The company celebrated this achievement by giving 42,000 of its employees a one-time bonus of 5 percent of their base pay.
Chevron also cut its refining capacity, where margins were especially low during the early 1990s. Capacity dropped 407,000 barrels per day from 1992 to 1995. The company helped reduce its refining capacity by selling its Port Arthur, Texas, refinery in February 1995 to Clark Refining & Marketing Inc. Chevron controlled 10.2 percent of U.S. refining capacity in 1992 but just 7.5 percent by 1995. These measures seemed to improve the company's fortunes, as its earnings jumped in 1996 to more than $2.6 billion, an all-time high. Stockholder return for the year was 28.5 percent.
High gasoline prices also contributed to Chevron's huge profits. The company was able to take advantage of high crude prices by increasing production at its Kazakhstan and West African facilities. Also in 1996 Chevron sold its natural gas gathering, processing, and marketing operations to the Houston-based NGC Corporation, gaining a 27 percent stake in the Houston-based energy marketer and trader, which changed its name to Dynegy Inc. in 1998. Chevron retained ownership of its gas fields and its gas production operations. Late in 1997 Chevron sold the marketing side of Gulf Oil (Great Britain) Limited to a unit of Royal Dutch/Shell Group in a deal that included 450 service stations in the United Kingdom and three fuel terminals.
Cracks in the OPEC cartel and more efficient energy exploration technologies led to an oil glut and plunging oil prices in 1998 and 1999. With prices falling to as low as $10 per barrel, several major oil companies responded with a wave of megamergers that transformed the industry. Chevron, however, completed only two smaller acquisitions in 1999, picking up the Rutherford-Moran Oil Corporation, a small U.S. independent with proven oil and gas reserves in the Gulf of Thailand, and Petrolera Argentina San Jorge S.A., the number-three oil company in Argentina.
The company made unsuccessful bids for both the Atlantic Richfield Corporation and the Amoco Corporation (both of which were eventually subsumed within BP plc, the successor of British Petroleum Company plc) and entered into advanced merger talks with Texaco in mid-1999. The latter discussions failed at least in part because the two sides could not agree on who should head the combined firm. Meanwhile, Chevron exited from offshore California production in early 1999, when it sold its share of the Point Arguello project, located offshore near Santa Barbara, and the rest of its California offshore properties to Venoco Inc. In late 1999 Derr retired from Chevron after 11 years as chair and CEO, with Vice Chair Dave O'Reilly taking over those positions.
Besides the spate of megamergers, the period around the end of the millennium was also noteworthy for the number of major joint ventures that were formed between various petroleum companies. For its part, Chevron combined its worldwide chemicals operations with those of the Phillips Petroleum Company (later ConocoPhillips) to form the 50-50 joint-venture Chevron Phillips Chemical Company LLC. Created in July 2000, the new venture began with about $6.1 billion in total assets and $5.7 billion in annual revenues. The two companies anticipated annual cost savings of about $150 million from the combination, partly from the elimination of about 600 positions, or 10 percent of the combined workforce.
A few months after the consummation of this merger, Chevron belatedly joined the megamerger bandwagon with the announcement of the merger of Chevron and Texaco. The deal was struck despite a spike in oil prices, which had reached about $30 a barrel by the time of the merger announcement in October 2000, and the paramount rationale for the combination was the potential for substantial cost savings. Initial estimates were for $1.2 billion in annual savings. Structured as a Chevron takeover of Texaco, the merger was completed in October 2001, with Texaco shareholders receiving 0.77 shares of common stock in the ChevronTexaco Corporation, the new name adopted by Chevron. The final value of the deal was $45 billion, including $38.3 billion in Texaco stock and $6.7 billion in Texaco debt.
In approving the merger, the Federal Trade Commission ordered the divestment of stakes in two refining and marketing joint ventures that were inherited from Texaco: Equilon Enterprises LLC and Motiva Enterprises LLC. These interests were transferred to a trust prior to completion of the merger. Then, in February 2002 the Shell Oil Company and Saudi Refining, Inc., purchased the interests for $2.3 billion in cash and the assumption of $1.6 billion in debt.
Meanwhile, in October 2001 the development of the Tengiz oil field in Kazakhstan received a boost when a new pipeline came online. Previously, much of the crude oil from the field had been shipped by rail through Russia to the seaport of Ventspils, Latvia. The new 900-mile, $2.6 billion pipeline, built by the Caspian Pipeline Consortium, 15 percent owned by ChevronTexaco, ran from the Tengiz field westward through Russia to the Black Sea port of Novorossiysk. This represented a much less costly form of transportation for exporting the crude oil.
Another development in late 2001 came through ChevronTexaco's equity stake in Dynegy. The energy trading giant Enron Corporation was on the verge of bankruptcy, with its stock price plunging, amid allegations of accounting and other improprieties. In November Dynegy announced an agreement to buy Enron for about $9 billion, and ChevronTexaco committed to inject an additional $2.5 billion into Dynegy in support of the merger. However, with the continuing collapse in Enron's stock price, Dynegy canceled the deal later in November. This led to Enron declaring bankruptcy and also suing Dynegy for withdrawing from the takeover, with a countersuit soon following. Dynegy turned financially troubled itself in 2002 and pulled out of the energy trading market. ChevronTexaco was forced to write off about $2.2 billion of its investment in Dynegy that year. The company sold its Dynegy stake in 2007, resulting in a gain of $680 million.
The initial postmerger integration efforts led Chevron-Texaco to suffer a net loss of $2.5 billion for the fourth quarter of 2001. This included $1.2 billion in charges related to the merger, including severance payments for some of the 4,500 employees who lost their job because of the merger, facility-closure costs, and other expenses. The company took an additional $1.9 billion in write-downs of energy, mineral, and chemical assets as it looked closely at the combined operations and pared back on investments. ChevronTexaco eventually increased its estimate of the annual cost savings derived from the merger to around $2.2 billion. In its full-year results for 2001, ChevronTexaco reported a net income of $3.3 billion on revenues of $104.4 billion.
In a plan launched in 2003 to boost profits, the company divested a substantial portion of its North American oil and gas fields. Most of these were mature fields with steadily declining production. Chevron-Texaco elected to concentrate more of its resources on higher growth and potentially more lucrative projects overseas, including fields in West Africa, Venezuela, Australia, and Kazakhstan. That same year the company reached a settlement with the U.S. Department of Justice and the U.S. Environmental Protection Agency to spend around $275 million to clean up emissions from five of its U.S. oil refineries, located in California, Mississippi, Utah, and Hawaii.
Soaring oil and natural gas prices propelled ChevronTexaco's profits up 84 percent in 2004, to $13.3 billion. The revenue total of $155.3 billion represented a 28 percent increase. Despite these prodigious numbers, ChevronTexaco faced significant challenges, particularly on the upstream side, as both its production and reserves were trending downward. The takeover of Texaco had produced its share of disappointments, including the discovery that some of Texaco's oil fields contained less oil than expected and the cropping up of political hurdles overseas that delayed the development of certain Texaco-originated projects, including a highly touted field off the coast of Nigeria. The desire to bulk up its production and reserves led ChevronTexaco to pursue another major acquisition.
A politically tinged takeover battle ensued, which Chevron managed to win after whipping up anti-Chinese sentiment within what had been a solidly free-trade-backing Congress and by sweetening its original bid. When Chevron closed the deal in August 2005, the deal was valued at $17.3 billion. Unocal had accepted the lower bid after lawmakers in Washington inserted into an energy bill a provision requiring that a study be conducted into the economic and national security implications of a CNOOC takeover of Unocal. The required study would have left Unocal in a state of limbo for several months.
At the time of its takeover, Unocal was one of the world's largest independent oil and gas exploration and production companies. Acquiring Unocal boosted Chevron's oil and gas reserves by about 1.7 billion barrels, or roughly 15 percent, and added 400,000 barrels to its daily production output. Chevron gained several major long-term projects that were on the verge of paying off.
The majority of these projects were in Asia, where half of Unocal's proven reserves had resided, and included Attaka, the largest oil and gas field in Indonesia; significant natural gas production in Thailand, which powered 30 percent of Thai electricity production; the Pattani oil field in Thailand, where production doubled to 15,000 barrels per day in 2005; and the firm's 10 percent interest in a consortium that controlled 4 billion barrels of oil in the Caspian Sea. Besides the Southeast Asian properties, which served both local markets and oil-hungry China and India, and the Caspian Sea project, which was situated to supply the European and Russian markets, Unocal also had valuable properties in the Gulf of Mexico to supply the U.S. market.
By 2007 Chevron had leveraged soaring oil prices into record profits of $18.7 billion on record revenues of $220.9 billion. Profits would have been still higher, but the high cost of oil hurt the company's downstream operations, which were further affected by downtime at its U.S. refineries. During the year, Chevron's main regions for oil exploration included the offshore area of West Africa, the Gulf of Mexico, offshore northwest Australia, and the Gulf of Thailand. The company was also selected by PetroChina Company Limited to help develop a major natural gas field in Sichuan province.
Chevron's involvement in certain risky projects also came to the fore in 2007, when authorities in Kazakhstan slapped a $609 million fine for environmental violations on the Chevron-led consortium that was developing the Tengiz oil field. Oil from this field contained deadly hydrogen-sulfide gas, and the authorities contended that the consortium was improperly storing the sulfur that it was stripping from the oil after its extraction. Also in 2007 Chevron sold its fuels marketing businesses in Belgium, the Netherlands, and Luxembourg to Delek Group Ltd. of Israel for about $516 million.
In early 2008 Chevron gained further prestige on Wall Street when its stock joined that of its main U.S. rival, Exxon Mobil, as one of the 30 components of the Dow Jones Industrial Average. For much of the year, Chevron enjoyed a continuation of a months-long gusher of profits stemming from record crude oil prices that peaked during the third quarter at a historic high of $145.29 per barrel. However, the global economic crisis that arose suddenly that same quarter quickly undermined demand for petroleum products and pulled oil prices into a swift decline, down to around $45 per barrel by year-end. Although Chevron's downstream side benefited from this sudden reversal, the company eked out only the barest of profit increases for the fourth quarter. The full-year totals were nevertheless new records of $23.9 billion in profits on sales of $273 billion.
During this volatile year, Chevron pushed ahead with major projects around the world. In March Chevron and its partners announced their intention to begin construction of a new $3.1 billion natural gas project in the Gulf of Thailand, with production expected to commence in early 2011. In August a Chevron-led consortium reached an agreement with the Canadian province of Newfoundland and Labrador to develop the Hebron offshore oil field, which was estimated to contain 700 million barrels of heavy oil. The project, the cost of which was estimated at $6.6 billion, was expected to come onstream as early as 2016. Among the projects in which first production was achieved in 2008 was the deepwater Blind Faith project in the Gulf of Mexico, which was estimated to contain more than 100 million barrels of oil equivalent in the form of both crude oil and natural gas.
In March 2009 Chevron announced it had decided to curtail its spending on some oil- and gas-producing projects. Because the costs of certain goods and services had not fallen in concert with the decline in oil prices, the company concluded it made economic sense to delay certain investments until these costs came down. The result would be a short-term decline in production. While grappling with the consequences of an economic downturn that began in late 2007, Chevron, along with its industry rivals, was gearing up to fight several initiatives from the nascent administration of Barack Obama, including proposals for a new excise tax on production in the Gulf of Mexico and the elimination of various tax breaks worth billions of dollars to the oil and gas industry. A centerpiece of President Obama's agenda was an effort to transition the country to clean-energy sources both to reduce dependence on foreign oil and to combat global climate change.
Chevron's production capacity from the Tengiz oil field in Kazakhstan doubled following the completion of the five-year, $7 billion Sour Gas Injection/Second Generation Plant. This was among the projects that bolstered overall production volumes in 2009. That same year O'Reilly retired following 10 years as Chevron's chair and CEO. He was succeeded by Watson. Chevron ended the year by agreeing to pay $45.5 million to settle claims that Texaco and Unocal had violated the False Claims Act by underpaying natural gas royalties to Native Americans and the U.S. government.
In 2010 Chevron announced it would trim 2,000 jobs from its downstream workforce and divest some international operations in a reorganization of its oil refinery, transportation, and marketing operations, which had struggled in the wake of sluggish demand. A noteworthy development took place in 2011, when Chevron acquired Atlas Energy, Inc., for $3.2 billion, marking its entry into southwestern Pennsylvania's Marcellus Shale, one of the largest shale formations in the United States. Thereafter, the company ramped up its efforts to develop oil and natural gas from domestic shale and tight rock formations in the Permian Basin, as well as in Canada's Duvernay Shale and Argentina's Vaca Muerta Shale.
In mid-2011 Chevron spent $340 million to acquire the Four Allen Center, a 50-story office tower in Houston, from Brookfield Office Properties, Inc. That same year it sold its fuel distribution operations in the Cayman Islands, Bahamas, Turks, and Caicos to the French company Rubis. During the middle of the decade production continued to increase at Chevron's Jack/St. Malo project in the Gulf of Mexico, which featured the company's largest floating production unit, with a capacity of 177,000 barrels of oil per day. According to the company, the Jack and St. Malo oil and gas fields were among the largest ever discovered in the Deepwater Gulf.
In 2014 Chevron became a top producer of premium base oil, following the completion of a new refinery in Pascagoula, Mississippi. Production began at the plant during the middle of the year, doubling the output that was already occurring in Richmond, California, and Yeosu, South Korea. The new facility, which could produce 25,000 barrels per day, primarily served customers in Europe, Latin America, and the eastern United States.
Chevron added roughly 1 billion new barrels of resources to its holdings in 2014, thanks to approximately 30 oil discoveries made throughout the world. Progress continued in 2015, when a significant discovery was made at the company's Anchor prospect in the Gulf of Mexico. That same year Chevron sold its network of service stations in New Zealand to Z Energy Limited for $568 million. These included 73 Caltex diesel fuel stations for trucks and 147 regular Caltex service stations.
At that point Chevron also focused significant effort on its Gorgon and Wheatstone liquefied natural gas (LNG) projects in Western Australia. The Gorgon project began delivering gas to the Japanese company Chubu Electric Power in early 2016. The two LNG projects positioned Chevron to be a leading provider of LNG to the Asia-Pacific region. It was also in 2016 that Chevron struck a deal to sell its natural gas liquids logistics system to Phillips 66 Partners LP, including 500 miles of pipelines and a related storage facility. Another divestiture occurred at the beginning of 2017, when Chevron sold its geothermal operations in the Philippines and Indonesia to a consortium that was led by Indonesia's Star Energy Geothermal (Wayang Windu) Limited.
In mid-2017 Chevron won a legal victory in a high-profile pollution lawsuit it had been contending with since 1993, when Texaco was sued by U.S. attorneys for contaminating water and soil in the rain forests of Ecuador between 1964 and 1992. The case was dismissed by a U.S. court, but resumed a decade later in Ecuador, where in 2011 a court ruled that Chevron was liable for $19 billion in damages. Chevron then sued the New York public interest attorney Steven R. Donziger and representatives of Ecuador's Lago Agrio region after uncovering evidence of bribery, fraud, and racketeering in the case. In 2014 a U.S. district judge ruled in favor of Chevron, and the decision was upheld by the U.S. Court of Appeals for the Second Circuit in 2016. The following year the U.S. Supreme Court refused to hear Donziger's appeal. Although Donziger's efforts failed in the United States, the attorney began pursuing enforcement actions against Chevron in other countries, including Canada.
Chevron's capital and exploratory spending program for 2018 totaled $18.3 billion, down from $19.8 billion in 2017. This total included $3.3 billion for operations in the Permian Basin. In a related December 2017 article in US Petroleum & Gas, Watson remarked that the company's production in the Permian Basin was “exceeding guidance.” Toward the end of the decade, it appeared that Chevron would maintain its position as one of the world's leading integrated oil companies for the foreseeable future.
Updated, Terry Bain; David E. Salamie; Paul R. Greenland
Cabinda Gulf Oil Company Limited (Bermuda); Chevron Argentina S.R.L. (Argentina); Chevron Australia Pty Ltd.; Chevron Australia Holdings Pty Ltd.; Chevron Brasil Petróleo Ltda. (Brazil); Chevron Canada Limited; Chevron Global Energy Inc.; Chevron Global Technology Services Company; Chevron Investments Inc.; Chevron LNG Shipping Company Limited (Bermuda); Chevron Malampaya LLC; Chevron Nigeria Limited; Chevron North Sea Limited (UK); Chevron Oil Congo (D.R.C.) Limited (Bermuda); Chevron Overseas Company; Chevron (Overseas) Holdings Limited; Chevron Overseas Petroleum Limited (Bahamas); Chevron Petroleum Company; Chevron Petroleum Limited (Bermuda); Chevron Petroleum Nigeria Limited; Chevron Philippines Inc.; Chevron Thailand Exploration and Production, Ltd. (Bermuda); Chevron (Thailand) Limited (Bahamas); Chevron Thailand LLC; Chevron U.S.A. Holdings Inc.; Chevron U.S.A. Inc.; Chevron Venezuela Holdings LLC; PT Chevron Pacific Indonesia; Saudi Arabian Chevron Inc.; Star Petroleum Refining Public Company Limited (Thailand); Texaco Inc.; Texaco Overseas Holdings Inc.; Texaco Venezuela Holdings (I) Company; Union Oil Company of California; Unocal Corporation; Unocal International Corporation
China Petroleum & Chemical Corporation; Exxon Mobil Corporation; Royal Dutch Shell plc.
“Chevron Announces $18.3 Billion Capital and Exploratory Budget for 2018.” US Petroleum & Gas, December 11, 2017, 4.
“Commercial Production Begins at Chevron's New Premium Base Oil Plant.” M2 Presswire, July 21, 2014.
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