ChevronTexaco: Profits Up, Production Down..and What’s With Kazakhstan?

30 July 2004

ChevronTexaco brought in record 2Q net income of $4.1 billion, slightly more than 2.5 times the $1.6 billion on the same quarter last year. Half-year to half-year, net income rose to $6.687 billion from $3.520 billion.

Production of crude and liquids dropped 4.4% quarter-to-quarter (4% half-to-half). The charts below show the volume picture for each quarter (left) and the amount of change for each region. Note again that Africa is the area of only substantial growth.

I was intrigued to see the production drop in Kazakhstan (albeit very slight) and in the Neutral Zone (Saudi-Kuwaiti, not Romulan).

Kazakhstan is one of the critical Caspian Sea region countries, and is expected to be a significant player in world oil markets in years to come. There are three enormous Kazakh oil fields: Tengiz, Karachaganak and Kashagan.

ChevronTexaco has stakes in two of these three (Tengiz and Karachaganak) and is the largest single producer in Kazakhstan. It expects Tengiz eventually to be able to produce 700,000 barrels per day. (Map to the right. Click to enlarge.) ChevronTexaco is the leader of the Caspian Pipeline Consortium, and just recently contracted an engineering study on doubling the capacity of the Tengiz-Novorossiysk pipeline.

So why the drop in production? One would think—given the developmental work and the presumed potential—that output would be increasing.

The Partitioned Neutral Zone (PNZ) is an area between Saudi Arabia and Kuwait. In 1984, ChevronTexaco acquired the Getty Oil Company, including its operations in the onshore PNZ. There it operates on behalf of Saudi Arabia in a joint operation with the Kuwait Oil Company. According to Chevron Texaco (April 2004), production from the PNZ has roughly tripled since 1990; output passed the 1 billion barrel mark in 1997. The PNZ currently has some 700 active wells. Recent area discoveries indicate the presence of significantly lighter crude—excellent for gasoline.

So why the drop in production? Estimates place the total PNZ recoverable reserves at 5 billion barrels—split equally between Kuwait and Saudi Arabia. Conceptually, then, PNZ was almost at the Saudi midway production point 7 years ago. (50% of 5 billion = 2.5 billion. Midway point = 1.25 billion.) Saudi PNZ may have peaked.