2004 Corporate Responsibility Report - Chevron

Identifying Issues Taking Action Improving PerformanceChevron Corporation 2004 Corporate Responsibility Report

2 A MESSAGE FROM OUR CEO3 CHEVRON AT A GLANCE4 PERFORMANCE OVERVIEW6 BUSINESS CONTEXT AND CORPORATERESPONSIBILITY8 PRIORITIES, PROGRESS AND PLANS1 0 CORPORATE GOVERNANCE ANDMANAGEMENT SYSTEMS1 3 STAKEHOLDER CONSULTATION1 4 SOCIOECONOMIC ISSUES1 6 SOCIOECONOMIC ISSUES OVERVIEW1 8 EMPLOYEES22 HEALTH AND SAFETY26 HUMAN RIGHTS27 HIV/AIDS28 ETHICS29 GLOBAL SUPPLIER DEVELOPMENT32 COMMUNITY ENGAGEMENT37 REVENUE TRANSPARENCY38 ENGAGING IN THE POLITICAL PROCESS40 ENVIRONMENTAL ISSUES42 ENVIRONMENTAL ISSUES OVERVIEW44 CLIMATE CHANGE AND ENERGYEFFICIENCY5 1 AIR EMISSIONS54 SPILLS56 FLARING57 WATER AND WASTE58 BIODIVERSITY59 ENVIRONMENTAL EXPENDITURES,FINES AND LITIGATION60 DECOMMISSIONING AND REMEDIATION62 GLOSSARY63 GRI AND API/IPIECA INDEX64 ABOUT THIS REPORT

Far left Trainee Mauricio Denga and Health,Safety and Environment specialist Zinga Martineon the North Nemba Platform offshore Angola.Below Fire protection specialist Ray Scott hasa clear overview of the Pembroke Refinery inWales as he stands on the fully extendedhydraulic platform during weekly maintenance.WELCOMEThis is Chevron’s third Corporate Responsibility Report. It covers 2004 data and activitiesand provides a detailed discussion of our progress on a range of issues we have identifiedas important to our company and stakeholders.Our vision is to be the global energy company most admired for its people, partnershipand performance. Corporate responsibility is key to achieving this vision.Our company’s foundation is built on our values expressed in The Chevron Way.They distinguish us and guide our actions. We conduct our business in a sociallyresponsible and ethical manner. We respect the law, support universal human rights,protect the environment and benefit the communities in which we work.Our report is also available on our Web site at www.chevron.com/cr_report/. We welcomeyour comments and feedback, which may be directed to CRReport@chevron.com.1

A MESSAGE FROM OUR CEODavid J. O’Reilly, Chairman of the Boardand CEO of Chevron Corporation.Corporate responsibility, as embodied in The Chevron Way, has long been partof how we operate. In today’s competitive business environment, it has also takenon an increasingly strategic role.To succeed today, our company mustdemonstrate world-class performanceacross every aspect of our business, fromour technical and financial performance toour contributions to and impact on societyand the environment. We are committed toimplementing the right strategies in theseareas and looking for new solutions that helpus responsibly supply energy and improvethe lives of people in the communities inwhich we operate.Developing our Corporate ResponsibilityReport each year provides us with anopportunity to review the efforts we haveunder way to address these issues, assessour performance, and identify issues on thehorizon or opportunities to improve. It alsohelps us demonstrate our commitmentto transparency. This year, we have takensteps to continue to enhance our reporting.You will find some expanded data on issuessuch as corporatewide air emissions andpolitical contributions. You will also readabout how some external organizations viewour company in areas they believe we areperforming well and in those they think wehave opportunities to improve.As you will see, we made progress duringthe year in a number of areas. We had oursafest year ever. We continued to improveour efficient use of energy. We significantlyreduced oil spills. We met our greenhousegas emissions goal. And we issued flaringand venting standards for our internationalupstream operations. We also took stepsto enhance our approach to environmentalstewardship and more clearly identify ouroverall corporate responsibility prioritiesand near-term plans.Although we accomplished much in 2004,the year reminded us of the challenges weface. Seventeen people died while workingon behalf of Chevron. We will not be satisfieduntil we reach our goal of zero incidents.In many of the communities in which weoperate, poverty is widespread and peoplelack the basic necessities of life. We areseeking ways to make a greater and moresustainable contribution to help people attainthe quality of life to which they aspire.Chevron operates in some of the mostcomplex environments in the world.The issues we face are varied and evolving.They range from the ways in which oil andgas operations can positively or adverselyaffect countries’ social and economicdevelopment to concerns about globalclimate change. For our company, helpingfind solutions to these challenges is bothabout living our values and achieving ourbusiness objectives.Going forward in 2005, we will continueour efforts to make meaningful, measurableprogress in those areas most important toour company and our stakeholders. We willcontinue to fund community engagementprograms that build capacity and contributeto economic growth. We will begindeployment of our corporatewide HIV/AIDSpolicy. We will complete internal consultationon our Human Rights Statement and explorethe best ways to deploy it globally. Andwe will begin work to develop a long-termgreenhouse gas emissions forecast forour company.At Chevron, our vision is to be the globalenergy company most admired for its people,partnership and performance. To achieve thisvision, we must be excellent businesspeople,valued and trusted partners, and welcomedmembers of the community. In short, wemust deliver the right results – the right way.We are committed to doing both.Sincerely,Dave O’Reilly2

CHEVRON AT A GLANCEChevron is one of the largest integrated energy companies in the world, based onmarket capitalization. Headquartered in San Ramon, California, we conduct businessin approximately 180 countries. We are engaged in every aspect of the industry,including exploration and production; refining, marketing and transportation;chemicals manufacturing and sales; and power generation.In 2004, Chevron produced an average of2.5 million barrels per day of oil-equivalent,with approximately two-thirds of the volumeoccurring outside the United States in morethan 20 different countries.Upstream Major producing areas includeAngola, Indonesia, Kazakhstan, Nigeria, thePartitioned Neutral Zone (between SaudiArabia and Kuwait), the United Kingdomand the United States. Major explorationareas include Angola, Nigeria, the U.S. Gulfof Mexico, Venezuela, and the offshore areabetween Angola and Republic of the Congo.Chevron holds vast natural gas resourcesin some of the world’s most prolific basins,including Australia, where we are the largestholder of undeveloped natural gas resources.Plans are under way to commercialize theseresources through liquefied natural gas andgas-to-liquids technologies.Downstream With 21 wholly owned andaffiliated refineries, Chevron processedapproximately 2 million barrels of crude oilper day in 2004 and averaged approximately4 million barrels per day of refined productssales worldwide. Strategic focus areas areAsia, the U.S. West and Gulf coasts, LatinAmerica and sub-Saharan Africa. Worldwide,we market products under the Chevron,Texaco and Caltex motor fuel brands. Productsare sold through a network of approximately25,700 retail stations, including those ofaffiliated companies.Other Businesses Chevron, through our50-50 joint venture Chevron Phillips ChemicalCompany LLC, is one of the leadingmanufacturers of commodity petrochemicals.Chevron Oronite markets more than 500performance-enhancing products andsupplies one-fourth of the world’s fuel andlubricant additives. Chevron Energy Solutionsdevelops and constructs energy-savingprojects for external and internal customers.Global Power Generation develops and marketscommercial power projects worldwide.We also develop and commercialize severaladvanced energy technologies, includinghydrogen infrastructure, advanced batterysystems, nanomaterials and renewableenergy applications.Chevron is a publicly traded companylisted on the New York Stock Exchange.More information on our structure andoperations can be found on our Web siteat www.chevron.com/about/.Chevron Global Operations21345Our “Big 5”These upstream projects are new oil andnatural gas developments expected to boostproduction over the next five years. Three ofthe projects are deepwater developments:1 The Agbami Field offshore Nigeria2 The Tahiti Field in the U.S. Gulf of Mexico3 The Benguela Belize–Lobito Tombocodevelopment offshore AngolaAlso among the “Big 5” are:4 An expansion project at our Tengizchevroiljoint venture in Kazakhstan5 The Greater Gorgon Area liquefied naturalgas project offshore AustraliaCountries in which Chevron conducts businessChevron Corporation headquarters, San Ramon, California, United States3

PERFORMANCE OVERVIEWCorporate Responsibility PerformanceThe following summarizes our keyachievements during the year and highlightssome of the challenges we face as we look tothe future.Environmental Management We undertookan extensive effort to enhance environmentalstewardship, with a focus on continueddevelopment of our operating standards,measuring and communicating performance,and demonstrating continuous performanceimprovement. We are also conducting anassessment of our Operational ExcellenceManagement System (OEMS) in order todetermine its alignment with ISO 14001,the international standard relating toenvironmental management.Management System ImplementationWe trained our top 1,800 executives andmanagers on leadership roles and behaviorsto support our OEMS. We also trained 46coaches to cascade this program throughoutthe company.Employee Survey We conducted our firstGlobal Employee Survey since the merger ofChevron and Texaco. We found that 89 percentof employees think the company actsresponsibly in relation to the environment,86 percent think we act responsibly insociety and the communities in which weoperate, and 82 percent say they are treatedwith dignity and respect.Health and Safety Based on Total RecordableIncidents, 2004 was our safest year on record,reflected in six straight years of improvementin our workforce Total Recordable IncidentRate. However, in 2004, 17 people died whileworking on behalf of Chevron. Motor vehiclecrashes are the most common cause offatalities. We are developing severalapproaches to improve the motor vehiclesafety performance of our workforce andin local communities.HIV/AIDS We developed a comprehensiveplan for implementing our global HIV/AIDSpolicy, which was finalized at the end of2004. The rollout of the plan will becoordinated by two full-time staff over thenext two years. We know that implementingthe policy at all Chevron locations will bechallenging. Our operations span a widerange of locations and cultures with variedawareness of and infrastructure to addressthe disease. Despite these challenges, weremain committed to its implementation.Community Engagement We continuedefforts to increase the focus and effectivenessof our community investment activitiesby targeting them toward helping createeconomic growth and helping build humanKey Corporate Responsibility Performance Indicators[Goals are shown in brackets]Percent Year-on-yearSocioeconomic 2003 2004 change performanceFatalities (employees and contractors) 12 [0] 17 [0] 42Days Away From Work Rate (workforce) 0.2 [0.2] 0.18 [0.17] –10Total Recordable Incident Rate (workforce) 0.59 [0.59] 0.51 [0.51] –14Motor Vehicle Incidents (employees per million miles driven) 3.31 3.01 –9Percent of female and non-Caucasian males at thesenior executive-level worldwide 19.5 20.8 7Percent of females at mid-level positions and above worldwide 9.7 9.9 2Percent of employees at senior-level positions andabove working within their country of origin 43 48 12Total corporatewide spending in community investment(US$ million) 60.9 63.8 5EnvironmentalTotal GHG emissions (millions of metric tons of CO 2 equivalent) 63.9 62.5 [63] –2Number of petroleum spills 1,145 986 –14Volume of petroleum spills (barrels) 26,540 15,514 –42Total energy use (trillions of Btus) 880 873 –1Energy efficiency (Chevron Energy Index) 78 76 [78] –3Global SO x emissions (thousands of metric tons) 152.0 133.4 –12Global NO x emissions (thousands of metric tons) 125.6 114.3 –9➔➔➔➔➔➔➔➔➔➔➔➔➔➔➔Global VOC emissions (thousands of metric tons) n/c* 426.8 n/a n/a➔*Not collected Improvement ➔ Unchanged or no significant improvement or decline Decline➔4

Chemist Gustavo Lopez preparesa sample of refinery effluentto test for metals at Chevron’sRichmond Environmental Lab,California, United States.and institutional capacity. We invested nearly$63.8 million in community projects aroundthe world, including launching or expandingkey initiatives in the United States, Angolaand countries in Asia. Finding ways tomeaningfully and consistently measureand evaluate the impact and sustainabilityof our community programs remains a keychallenge going forward.Revenue Transparency Working togetherwith our business partners, host governmentsand others, we continued our support forincreased transparency of energy-relatedrevenues. During the year, we negotiateda Production Sharing Contract withthe Nigeria–São Tomé e Príncipe JointDevelopment Authority (JDA) that includesa clause committing the JDA to publiclydisclose payments companies make to them.Energy Efficiency and Climate ChangeWe beat our energy efficiency target, reflectedin our Chevron Energy Index, by two fullpoints, saving approximately 20.85 trillionBtus of energy and $72 million in costs. Wecut our greenhouse gas emissions by morethan 1 million metric tons of CO 2 equivalentover 2003, meeting our 2004 corporatewideemissions goal. Maturing oil fields, moretechnically challenging reserves and evolvingfuel specifications will present energyefficiency challenges in the years to come.Flaring In Nigeria, we reached a key milestonewith a final commitment to begin constructionon the West African Gas Pipeline, which willreduce flaring by as much as 80 millionmetric tons of CO 2 equivalent over 20 yearswhile delivering gas to customers in Benin,Ghana and Togo. We also reached animportant milestone on our Escravosgas-to-liquids project. In 2005, ChevronNigeria Limited awarded the engineering,procurement and construction contract forthe project, which is another key componentof our plans to reduce flaring from ouroperations in Nigeria. Reducing flaring ofnatural gas, which accounted for 24 percentof our global greenhouse gas emissions in2004, is key to cutting future emissions.Spills Between 1999 and 2004, we reducedthe number of our oil spills by nearly55 percent and the volume of spills bymore than 90 percent, achieving our spillvolume reduction goal one year early.The performance of our shipping companycontinues to lead the industry. In 2004, ouroperated tanker fleet did not experience asingle spill, the second straight year we haveachieved a spill-free record.Financial and Operating HighlightsFinancial HighlightsMillions of dollars, except per-share amounts 2003 2004Operating Highlights2003 2004Net income $7,230 $13,328Sales and operating revenue 1 $119,575 $150,865Capital exploratory expenditures $7,363 $8,315Total assets at year-end $81,470 $93,208Total debt at year-end $12,597 $11,272Stockholder equity at year-end $36,295 $45,230Per-share data 2■ Net income – diluted $3.48 $6.28■ Cash dividends $1.43 $1.53■ Stockholders’ equity $16.97 $21.47■ Common stock price at year-end $43.19 $52.51Return on capital employed 15.7% 25.8%Total debt to total debt-plus-equity ratio 25.8% 19.9%Tax expense■ U.S. income taxes $1,387 $2,301■ International income taxes $3,907 $5,216■ Income taxes on discontinued operations $50 $100■ Taxes other than on income $17,906 $19,821Research and development $228 $242Share repurchases 3 – $2,100Net production of crude oil and natural gas liquids(thousands of barrels per day) 1,808 1,710Net production of natural gas(millions of cubic feet per day) 4,292 3,958Net oil-equivalent production(thousands of oil-equivalent barrels per day) 2,637 2,509Refinery input (thousands of barrels per day) 1,991 1,958Sales of refined products (thousands of barrels per day) 3,738 3,908Net proved reserves of crude oil, condensateand natural gas liquids (millions of barrels)■ consolidated companies 6,280 5,511■ affiliated companies 2,319 2,462Net proved reserves of natural gas (billions of cubic feet)■ consolidated companies 17,553 16,128■ affiliated companies 2,638 3,547Net proved oil-equivalent reserves (millions of barrels)■ consolidated companies 9,206 8,199■ affiliated companies 2,758 3,053Number of employees at year-end 50,582 47,265Total payroll (millions of dollars) $2,816 $2,858Employee benefit costs (millions of dollars) $1,957 $1,3861Excludes discontinued operation amounts2Data reflect a two-for-one stock split effected as a 100 percent stock dividendin September 20043Represents cost of shares purchased under the company’s $5 billion share repurchaseprogram announced on March 31, 20045

BUSINESS CONTEXT AND CORPORATE RESPONSIBILITYAs the global business environment evolves, our company is facing new opportunitiesand challenges stemming from a diverse range of economic, social and geopolitical factors.The New Business Environment >>>>>>>>>>>>Demand for energy around the globe isincreasing. By 2020, global population willgrow by approximately 1 billion people. This isoccurring at a time when many existing majoroil and gas production fields are maturingand their production is declining. Finding newsources of energy to meet growing demandwill be more technically challenging and oftenwill require more energy to extract. Many ofthese new sources are concentrated incomplex geopolitical environments – regionsaffected by poverty, political instability andweak governance systems.Environmental issues also are continuing toaffect energy markets, increasing the demandfor natural gas and cleaner energy sources.Conservation and efficiency will continueto play an important role as the least costly,most reliable and most environmentally soundnew source of energy.While the balance of supply and demandis tighter now than in recent decades, weare confident that global energy needscan be met. Doing so will require increasedefficiency and conservation, technologicaland human ingenuity, and the willingness ofall parts of society to work together to findsustainable solutions.These trends make clear that we operatein an era of interdependence. At Chevron,we recognize that our long-term successdepends on our ability to gain access tonew energy sources, to manage operationssoundly and efficiently in increasinglycomplex environments, and to contributeto global and local economic development.Our values and business strategies positionus to succeed in this new environment.The Right Strategies >>>>>>>>>>>>To remain true to our vision and producesustained, profitable growth in this changinglandscape, our business strategies focus on:■■■■■■Global Upstream – Grow profitability in coreareas and build new legacy positions.Global Gas – Commercialize our equity gasresource base by targeting North Americanand Asian markets.Global Downstream – Improve returnsby focusing on areas of market andsupply strength.Invest in people to achieve our strategies.Leverage technology to deliver superiorperformance and growth.Deliver world-class organizationalcapability and performance in operationalexcellence, cost reduction, capitalstewardship and profitable growth.How Corporate Responsibility Adds Value >>>>>>>>>>>>To execute our business strategies, we mustbe able to access new resources and maintainour ability to operate in the countries andcommunities in which we work. Doing so rests,in large part, on being the partner of choice.Our approach to corporate responsibilitysupports this objective – with hostgovernments, business partners and in thecommunities in which we operate.Grounded in The Chevron Way, our corporateresponsibility efforts are designed to ensurethat our business continues to thrive whilewe effectively manage the socioeconomicand environmental issues we face.Our emphasis in the coming years is onfurther integrating corporate responsibilityconsiderations into how we conduct ourbusiness. This generates value by helpingus attract and retain top talent, reinforcingour capabilities to our shareholders, providingus access to business opportunities, andenhancing our reputation. We also areengaging systematically with stakeholdersto help us identify emerging issues andrespond effectively to evolving challengesand expectations. Additionally, we areapplying what we learn to enhance ourpractices and continually improve ourperformance on specific issues, such ashealth and safety, HIV/AIDS, human rights,and climate change.To meet their business objectives, companiesthat succeed in the 21st century will needto demonstrate exemplary financial, socialand environmental performance and delivercommercial and social value in an increasinglycomplex and interdependent world. We intendto be one of those companies.6

We believe our approach to corporate responsibility will help us manage andcreate value for our company in today’s dynamic business environment.Defining Corporate ResponsibilityAt Chevron, we define corporateresponsibility as:■■■■>>>>>>>>>>>>Consistently applying our core values,set out in The Chevron Way.Maximizing the positive impactof our operations on current andfuture generations.Integrating social, environmental andeconomic considerations into our corepractices and decision making.Engaging with and balancing the needsof our key stakeholders.Elements of Corporate ResponsibilityWe identified these elements by conductingan analysis of our operating environmentand the competitive landscape. We examinedemerging trends to identify the broad issueswe expect will be most important to ourcorporate responsibility performance overthe long term. We also assessed areas ofcorporate responsibility performance andcompetencies that will be most importantin helping us meet our business objectives.To the six core elements initially identifiedand reported, we added a seventh –stakeholder consultation – as a vital elementof how we approach corporate responsibility.The elements we see as central to corporateresponsibility are:■■■■■■■Business ethics and transparencyWorkplace practices and employee relationsEnvironment, health and safetyHuman rightsCommunity engagement and developmentIntegration of corporate responsibility intoour supply chainStakeholder consultationOur vision is to be the global energy company mostadmired for its people, partnership and performance.Corporate responsibility is key to achieving this vision.“Chevron has come a long way since F&C Asset Management’s first questions aboutenvironmental and social risk management were met with stony silence. Today, thecompany has several internal champions to manage tough business issues, engage withstakeholders, and push the company to new levels of disclosure. As of 2002, F&C believedthat Chevron had failed to tackle its most significant social and environmental challengesor communicate with concerned stakeholders. Today, the company has leapfrogged manyof its peers by publishing a substantive corporate responsibility report and enhancingprograms in key areas. F&C has noted significant progress in: climate change measurementand reporting, including a target for total carbon dioxide emissions; discussing its renewableand alternative energy strategy; HIV/AIDS policy development and implementation; andnegotiating new contracts that support revenue transparency in tough markets such asAngola. Chevron’s report is also increasingly data-driven, providing high-quality, year-onyearreporting.But much remains to be done to prove that social and environmental management is notjust the flavor of the month. The company must demonstrate that its commitment extendsbeyond internal champions to senior managers and the board and is actually embedded inboth company culture and compensation. Environmental and social performance targetsmust be established and disclosed, allowing stakeholders to judge if the company is stretching.While human rights initiatives are definitely progressing, they have been slow and may lackconsultation with stakeholders. Finally, to continue to build trust and credibility, the company’sreport should embrace transparency and balance, discussing the hardest questions and themost difficult situations. While Chevron is still in the early stages, we are hopeful it willcontinue on this new trajectory, continually improving its performance and demonstratingincreasing leadership.”Elizabeth Elliott McGeveran, Vice President,Governance & Socially Responsible Investment, F&C Asset Management plc7

PRIORITIES, PROGRESS AND PLANSPRIORITY AREASINTEGRATIONSee pages10–11What we said... 2002 and 2003■■We will develop Corporate Responsibility Expectations to provide employees withoperational guidance.We will conduct initial training on the expectations and materials in a diverse sampleof business units to get feedback.ENVIRONMENTALMANAGEMENT10–12■■Our goal is to be recognized and admired for environmental excellence.We are committed to further integrating environmental considerations intoour business decisions and enhancing how we manage and measure ourenvironmental performance.STAKEHOLDERCONSULTATIONAND REPORTING13■■At the corporate level, we will engage more proactively with stakeholders inimportant global issues that affect our operations.We will publish an annual Corporate Responsibility Report and use the GlobalReporting Initiative (GRI) and other reporting frameworks.HEALTH ANDSAFETY22–25■■■Our ultimate goal is zero incidents.Safety and reliability are the initial priorities in the deployment of our OperationalExcellence Management System (OEMS).Our near-term target is to reduce the workforce Total Recordable Incident Rate bymore than 25 percent annually.HUMAN RIGHTS26■■We will develop a draft Human Rights Statement and consult with major businessunits for input.We will develop materials to support corporatewide deployment of the statement,with deployment beginning in 2004.HIV/AIDS27■We will adopt a corporatewide HIV/AIDS policy and develop other tools andresources to support its implementation by our business units.COMMUNITY ENGAGEMENT32–36■■Our goal is to become more systematic in how we identify, assess and addresscommunity issues and become more focused in the ways we support thecommunities in which we operate.We are working to find ways to better measure and assess our impacts on economicand social development of the communities in which we operate.CLIMATE CHANGE ANDENERGY EFFICIENCY44–50■■■At the heart of our approach to environmental responsibility are conservationand energy efficiency. Our goal is to continue to improve our corporatewideenergy efficiency.We are implementing a robust fourfold strategy to address climate change.Our goal is to reduce greenhouse gas (GHG) emissions per unit of output from ouroperations. We will conduct a third-party verification of our GHG emissions systemand begin establishing an annual GHG emissions goal.8

PRIORITY AREASThe corporate responsibility elements we have identified provide a useful andenduring framework for understanding what corporate responsibility means inpractice. We examined our approach to addressing each of these elements, whichhas allowed us to set specific priorities, outlined in the table below. We are focusedon making meaningful, incremental progress on these issues in the near term.What we did... 2003 and 2004What we plan to do next...Developed draft Corporate Responsibility Expectations and materials to■■support implementation.■Identified business units for initial training.■■Continued deployment of our Operational Excellence Management System, withincreased focus on the environmental components.■Clarified and enhanced environmental expectations to improve performance.■■Increased corporate-level engagement on key global issues, including climate change,HIV/AIDS, revenue transparency, human rights and international development.■Published our first report (2002) and update report (2003), informed by the GRI.■Included a GRI index in our 2004 report.■Played a leadership role in the joint effort of the American Petroleum Institute and■the International Petroleum Industry Environmental Conservation Association todevelop sustainability reporting guidance for the oil and gas industry.■■Achieved our safest two years on record, as measured by workforce RecordableIncident Rate. Very regrettably, we experienced 29 fatalities over the two-year■period, primarily from motor vehicle crashes.■Developed and deployed new tools for motor vehicle safety, contractor safetymanagement and repetitive stress injury prevention. Created “community ofpractice” networks to share successful practices in these areas.■■Initiated internal consultation on the Human Rights Statement.■Developed draft supporting materials.■■■Finalized our corporate policy and developed an extensive implementation plan andsupporting materials.■Appointed two full-time staff to oversee implementation of the policy.■■Completed a global review of our community programs.■Developed and began implementation of a new community engagement theme,focused on capacity building and economic development.■■Created a $5 million fund to assist major business units in aligning their communityefforts with the new theme.■■Launched or expanded major community initiatives in Angola, the United States andcountries in Asia.■■Achieved our highest efficiency levels ever, representing a 24 percent decrease inenergy consumption per unit of output since 1992.■■Continued implementation of our climate change strategy. Completed third-partyverification of our GHG emissions system and established first emissions goalfor 2004.■■Met our 2004 GHG emissions goal and established our 2005 goal.■ Incorporated the analysis of the cost of carbon into our major capital projects.Conduct training with business units on the Corporate Responsibility Expectations,beginning in 2005.Implement our enhanced environmental expectations over the next five years,focusing on continued development of operating standards, measuring andcommunicating performance, and demonstrating continuous performanceimprovement.Continue to consult regularly with stakeholders on key issues at all levels, aswell as develop a more systematic approach to stakeholder consultation at thecorporate level.Develop tools that will encourage a more consistent approach to stakeholderconsultation, where appropriate, across our businesses.Continue annual Corporate Responsibility Reporting, with the goal ofcontinual improvement.Continue to focus on safety, aiming to meet short-term performance targets and thelong-term goal of zero incidents.Expand our motor vehicle safety effort to look at opportunities to help address roadsafety more broadly in the communities in which we operate.Complete consultation on our Human Rights Statement and training materials withmajor business units.Begin corporatewide deployment of the statement by early 2006.Target completion of global implementation by the end of 2006. High-riskcountries with high or rising HIV/AIDS prevalence rates will be the initialimplementation priorities.Continue deployment of our community engagement strategy. Our goal is to havean increased portion of our community investment targeted toward capacitybuilding and economic development programs.Initiate a plan to develop the additional internal capacity and competencies tomanage these programs.Continue to explore mechanisms to monitor and measure the execution and impactof these programs.Continue implementation of climate change strategy, focusing on reducingemissions of GHGs and increasing energy efficiency.Develop a long-term GHG emissions forecast based on our portfolio and businessstrategy. We intend to use that forecast to develop a longer-term emissionsmanagement plan that aligns with our fourfold climate change strategy.Comply with the European Union Emissions Trading Scheme; explore developmentof projects under the Clean Development Mechanism.9

CORPORATE GOVERNANCE AND MANAGEMENT SYSTEMSThe Chevron Way, available on our Web site at www.chevron.com/about/, guides themanagement of our company, articulating our core values and vision. It also describeshow we drive performance toward our vision.Corporate GovernanceSound corporate governance is fundamentalto how we operate our company and acritical part of corporate responsibility.Our Corporate Governance Guidelinesand structures, described in detail on ourWeb site at www.chevron.com/corporate_governance, provide a strong foundationfor responsiveness and accountability. Forexample, all of our directors are independent,as defined by the New York Stock Exchange,except for the chairman, who also servesas CEO, and the vice chairman, who is anemployee director. Governance of corporateresponsibility performance is integrated intostructures and processes at the highest levelsof Chevron (see chart opposite).In 2004, the board appointed an independent,lead director, Carla A. Hills, to chair theexecutive sessions of nonemployee andindependent directors, and consult with thechairman on agendas for board meetings andother matters pertinent to the corporationand the board. We continued to implementglobally the requirements of the Sarbanes-Oxley Act and began a review and updateof our Chevron Business Conduct and EthicsCode (see Business Ethics section, page 28).Management Systems ApproachChevron uses a management systemsapproach to establish strategic direction,assess progress toward our goals, ensureoperational excellence, and measure andevaluate employee performance. Key amongthese are the Strategic and Business PlanningProcess, which aligns actions at all levels ofthe company to common objectives, and theOperational Excellence Management System(OEMS), used to manage essential aspects ofour operations.Strategic and Business Planning ProcessOur Strategic and Business Planning Processis designed to ensure that:■The strategic direction for the companyis discussed and agreed to before tacticalbusiness plans are developed.■ Business plans are aligned with theOEMS clearly defines requirements in eachcorporate strategic direction.■ The same basic process is used for allreporting units.■ The accountability to meet agreed-uponobjectives is clearly understood.Each year, the Board of Directors revisits ourcorporate aspirations and affirms or adjuststhe company’s strategic direction basedon the Strategy and Planning Committee’sthorough review of the external environmentand our internal capabilities. Our reportingunits, their strategic business units and majoroperating companies review and updatetheir strategies to ensure alignment with thecorporate direction. Each business unit thenprepares a three-year business plan alignedwith their strategies. All business plansinclude a section on Operational ExcellenceManagement System implementation plansand milestones.The Strategic and Business Planning Processincludes a framework to support assessingmanagement performance accountability.From the full set of metrics routinely tracked,a critical few “accountable metrics” coveringkey corporate strategic priorities are definedand targets mutually set by the reporting unitand the corporation. Along with key financialmetrics, all business units are measuredagainst targeted health, environment andsafety metrics.Operational Excellence Management System(OEMS)Chevron developed our OEMS system toensure a consistent approach to managingsafety, health, the environment, reliabilityand efficiency to achieve world-classperformance. OEMS is comprised of threemajor parts:■ Leadership Accountability■ Management Systems Process■ Operational Excellence Expectationsof these areas. Operating unit managementis responsible for putting processes andpractices in place to meet these expectations(see page 12). To evaluate OEMS design andeffectiveness across the company, crossfunctionalteams conduct thorough OE reviewsof each operating unit on a regular, three- tofive-year schedule. The teams evaluatehow effectively the unit has designed andimplemented processes to meet the relevantexpectations. Review findings are submittedto the unit reporting officer, after which theunit has 60 days to submit action plans,as appropriate, to improve performance.Action plans are reviewed annually with thereporting officer until they are completed.During 2004, we conducted 21 OE reviewsand five focused reviews. This representsabout 25 percent of our operating units.In 2004, we took several significant steps tostrengthen OEMS.Leadership AccountabilityThe success of OEMS depends on effective,engaged, committed and knowledgeableleaders. In 2004, we launched a trainingprogram focused on leaders’ roles andresponsibilities in OEMS implementation.All members of the Chevron ManagementCommittee and their direct managementreports participated in OperationalExcellence Leadership Roles and BehaviorTraining sessions. To continue leadershiptraining throughout the organization, wecertified selected Chevron employees ascoaches. These coaches are conductingsessions for line managers, supervisors andother key operations personnel throughoutthe company. Overall, more than 1,800 keymanagers were trained in the 170 sessionsheld in 2004. The importance of leadershipin safety performance was confirmed recentlyby an analysis of our Global Employee Surveyresults (see page 12).10

Chevron Chairman Dave O’Reilly(center) and the Board of Directorsvisit operations at the Sanhadeepwater platform in Angola.Chevron Corporate GovernanceGuidanceChevron VisionTo be the global energycompany most admiredfor its people, partnershipand performance.The Chevron WayExplains who we are, what we do, what we believe andwhat we plan to accomplish.Business Conduct and Ethics CodeHow the company conducts day-to-daybusiness activities according to the principlesof The Chevron Way.Board LevelGovernance FrameworkBoard of Directors 1Board Committees All independent 1 directorsCorporate GovernanceGuidelinesCommittee ChartersBylawsCertificate ofIncorporationChairman: David J. O’Reilly, CEO, ChevronVice Chairman: Peter J. Robertson, ChevronSamuel H. Armacost, Robert E. Denham,Robert J. Eaton, Sam Ginn, Carla A. Hills,Franklyn G. Jenifer, Sam Nunn, Charles R. Shoemate,Ronald D. Sugar, Carl WarePublic Policy 2AuditNominating and GovernanceManagement CompensationExecutiveManagementExecutiveCommitteeCorporate CompliancePolicy CommitteeHuman ResourcesCommitteeGlobal IssuesCommittee 2Strategy andPlanning CommitteeManagementCommitteeKey ManagementSystemsStrategic and Business Planning ProcessOperational Excellence Management System1Current Board of Directors as of June 2005. Other than the chairman and vice chairman,all directors are independent as defined by the New York Stock Exchange.One woman and two non-Caucasians serve on our board.2Primary responsibility for oversight of corporate responsibility strategy and performance.Training and CertificationTo further develop OEMS fluency across thecompany, all leaders – including top executivesand line management with key operationalresponsibilities – will be expected tosuccessfully complete four computer-basedtraining modules to attain OE certification.A higher level of certification – called Supremecertification – is being developed for keyleaders and people involved in implementingOEMS throughout Chevron.Standardizing ProcessesDuring 2004, Chevron operating companiesfocused efforts on increasing standardizationof OEMS implementation throughout theiroperations. For example, our InternationalUpstream unit developed and deployed astandardized incident investigation andreporting process and initiated work on anenvironmental, social and health impactassessment process. Our Health, Environmentand Safety organization’s KnowledgeManagement network helps operating unitsshare successful practices and addressspecific issues around effectiveOE implementation.OEMS External AssessmentIn 2004, we initiated an assessment todetermine that our OEMS is aligned withand meets the intent of internationallyrecognized management system criteria(ISO 14001 for the environment andOHSAS 18001 for health and safety).Management of Corporate ResponsibilityThe Chevron Way provides a strongfoundation for corporate responsibility.Our overarching objective is to develop amore systematic approach to integrate thecorporate responsibility issues we haveidentified into our existing systems, processesand decision making.Based on a review of our policies and practices,we determined that developing CorporateResponsibility (CR) Expectations was a keytactic in helping us meet that objective.The draft CR Expectations, previously termedGuiding Principles in our 2002 report, arebased on and support the OE Expectations.They are intended to articulate the company’svision of corporate responsibility and provideoperational guidance.In addition to the CR Expectations, we havedeveloped a variety of materials to supporttheir implementation. We know that gettinginput from a range of employees who addresscorporate responsibility issues every day willbe essential for the long-term success andimpact of our efforts. As a result, we electedto conduct initial training in 2005 in a sampleof our business units to get employeefeedback on the CR Expectations.11

CORPORATE GOVERNANCE AND MANAGEMENT SYSTEMSAt the Tengiz Field in Kazakhstan,a plant worker travels by bicycleto inspect facilities. From March2004 to June 2005 (lateststatistic available at printing),Tengizchevroil employees hadlogged more than 8 million workhours without a safety incident.Operational Excellence Operating ElementsOur Operational Excellence ManagementSystem defines requirements in the following13 operating elements:123456Security of personnel and assetsProvide a secure environment in whichbusiness operations may be successfullyconducted.Facilities design and constructionDesign and construct facilities to preventinjury, illness and incidents and to operatereliably, efficiently and in anenvironmentally sound manner.Safe operationsOperate and maintain facilities to preventinjuries, illness and incidents.Management of changeManage both permanent and temporarychanges to prevent incidents.Reliability and efficiencyReliability: Operate and maintain facilitiesto sustain mechanical integrity andprevent incidents.Efficiency: Maximize efficiency ofoperations and conserve naturalresources.Third-party servicesSystematically address and managecontractor conformance to operationalexcellence.Correlation of Days Away From Work in 2004to Employee Views of Leadership Safety BehaviorsWorkforce Days Away From Work Rate (per 200,000 work hours)Supervisors demonstrateconcern for safetyShutdowns are supportedand recognizedOrganization actsresponsibly inenvironmentCorrective actionis takenOrganization actsresponsibly in communityAdequate safety trainingprovided0.040.050.050.050.090.107 Environmental stewardshipStrive to continually improveenvironmental performance and reduceimpacts from our operations.8 Product stewardshipManage potential risks of our productsthroughout the products’ life cycles.9 Incident investigationInvestigate and identify root causes ofincidents to reduce or eliminate systemiccauses to prevent future incidents.10 Community awareness and outreachReach out to the community and engagein open dialogue to build trust.11 Emergency managementPrevention is the first priority, but beprepared for an emergency and mitigateany incident quickly and effectively.12 Compliance assuranceVerify conformance with company policyand government regulations. Ensure thatemployees and contractors understandtheir safety, health and environmentalresponsibilities.13 Legislative and regulatory advocacyWork ethically and constructively toinfluence proposed laws and regulations,and debate on emerging issues.0.340.340.400.390.390.39Responses to six factors from Chevron’s 2004 Global Employee Survey – in which employeesrated their leadership with ■ low favorability or ■ high favorability – correlated to their unit’sDays Away From Work Rate.Strong Leaders Create Safe WorkplacesGood safety performance relies oncommitted and involved leadership.In 2004, we undertook a study to identifythe workplace factors that led to excellencein safety performance.We analyzed the correlation of actualsafety performance to leadership behaviorthrough a series of questions posed in ourGlobal Employee Survey. The questionsfocused on demonstrated leadership andsupervisory skills; commitment to safety,health and the environment; andcommitment to the work environment.We found that units in which employeesrated their leaders most favorably hadsignificantly better safety performancethan the units with low ratings. A seriesof questions in the “protecting peopleand the environment” category showedthe strongest correlation; the workforceDays Away From Work Rate was up to10 times higher for operating units withlow favorability than for those with highfavorability. Within this category, havingsupervisors who demonstrated care andconcern for the safety of their employeeswas the greatest differentiator in safetyperformance (see chart at left). Additionally,we found that environments in whichleaders had strong supervisory skills anda proactive concern for a respectful workenvironment showed a reduced number ofsafety incidents.These findings reinforce the value of ourinitiatives in 2004 to engage Chevronleaders more fully in implementingour Operational Excellence ManagementSystem and building fluency throughOperational Excellence certification.Additionally, the findings have beenintegrated into our leadership and safetytraining curricula and broadly sharedinternally. Results from individual operatingunits have been shared with their respectivemanagement for integration into individualperformance assessments, as appropriate.12

STAKEHOLDER CONSULTATIONSince 1996, we have supported the Chevron Management Institute, a uniquemanagement training program designed to build capabilities among leaders ofnonprofit organizations. The program is organized in partnership with the Leaderto Leader Institute. In 2004, the institute included for the first time participantsoutside the United States. Participants were nominated by Chevron business unitsin Venezuela, Colombia, Nigeria and Angola. An international group of 24 attendedthe leadership workshop held at Chevron’s headquarters in California. At right,instructor Nadir Muwwakkil, president of Vision Group International, at the 2004Chevron Management Institute.We define our stakeholders as those who affect, are affected by or have a legitimateinterest in our company’s performance. Our stakeholders include the groups describedbelow. We view stakeholder consultation as essential to our business. We engage withstakeholders through a wide variety of approaches at both the corporate and local levels.StakeholderStockholdersEmployeesProfileApproximately 2 billion shares outstanding (as of December 31, 2004)■62 percent owned by institutional investors and mutual funds■38 percent owned by other investors47,265 employees (as of December 31, 2004)Business partners■■Approximately $20 billion spent globally on supplier goods and services in 2004Other national and multinational energy companiesHost governmentsCustomersLocal communitiesCivil-societyorganizationsGovernments in approximately 180 countries where we operateCommodity markets, wholesale and retail customersThousands of communities in which our facilities are located globallyBusiness forums, multilateral institutions, philanthropic foundations, academic institutions, think tanks, faith-based groups,and nongovernmental and development organizationsWe use both formal and informal approachesto stakeholder engagement. Some aresystematic and ongoing, while others aread hoc on specific issues. Existing businessprocesses also integrate stakeholderconsultation, for example:■■We have embedded stakeholderengagement in our Chevron ProjectDevelopment and Execution Process, adisciplined project management methodwe use to ensure we make sound capitalinvestments and execute them well.As part of the process, teams are requiredto engage with and get input from thestakeholders who will be most affected bythe project or activity. We also apply theprinciples of this process to other typesof efforts, which range from designingcommunity development programs toreviewing our environmental strategy.Our International Upstream unit isdeveloping a standard process forconducting environmental, social andhealth impact assessments within itsoperations. The unit is including aprocedure that provides project teamswith guidance on how to effectively andproactively identify, engage with andrespond to stakeholders affected bytheir projects.We consult with a variety of civil-societyorganizations to share information andexchange views, to better understand theirperspectives, and to gain insight intoemerging issues. In recent years, we alsohave taken steps at the corporate level toincrease our engagement with the sociallyresponsible investment community andother Chevron stockholders who havean interest in the company’s corporateresponsibility activities.In 2004, stockholders filed proposals withthe company on climate change, humanrights, biodiversity, animal testing, ongoinglitigation in Ecuador and HIV/AIDS. Followingconstructive dialogue, the filers agreed towithdraw the proposals on climate change,human rights and HIV/AIDS. We believe thisoutcome reflects recognition of our progressin these areas as well as the mutual value ofengagement and information sharing.We also participate in energy industryassociations and other organizations, suchas the World Business Council on SustainableDevelopment and Business for SocialResponsibility, that bring together companiesand other groups to address issues ofcommon interest.Moving forward, we are continuing todevelop a more systematic approach tostakeholder consultation at the corporatelevel. In addition, we plan to develop toolsthat will encourage a more consistentapproach, where appropriate, acrossour business. Business units also willcontinue their engagement using the mosteffective and appropriate mechanisms fortheir locations.Our engagement with stakeholders describedin more detail elsewhere in this report includes:■ Global Employee Surveys (page 20)■ Voluntary Principles on Security andHuman Rights (page 26)■ Supplier Development Forums (page 30)■ Angola Partnership Initiative (page 33)■ Extractive Industries TransparencyInitiative (page 37)■ World Bank’s Global Gas Flaring ReductionPublic-Private Partnership (page 56)■ Energy and Biodiversity Initiative (page 58)13

SOCIOECONOMIC ISSUESSOCIOECONOMIC14

Left LL-652 Field, Lake Maracaibo, Venezuela.Below Our support for education in Nigeriaincludes funding for the Pacelli School for theBlind in Lagos.Chevron’s operations affect and are affected by a broad range of social and economicissues, such as employee relations, human rights, global supplier development andhow we participate in the political process.The company has a wide range of policies, processes and systems to help us addressthe diversity of socioeconomic issues we face. This section provides an overview ofhow we are approaching the social and economic issues we have determined are mostrelevant to our business.15

SOCIOECONOMIC ISSUES OVERVIEWThis diagram provides an overview of Chevron’s core business activities and the keysocioeconomic contributions the company can make at each stage. Additionally, ithighlights the challenges the company faces – those associated with our operations,as well as broader societal issues that characterize our operating environment.Chevron OperationsKEY CHALLENGES KEY CONTRIBUTIONSPROCESSSTAGEDesign andConstructionSourcingInfrastructureJob CreationTraining and DevelopmentHuman RightsCommunity Investmentand PartnershipsTechnologyUPSTREAMOil and Natural GasExploration and ProductionMIDSTREAMOil and Natural GasTransportationDOWNSTREAMRefining andRegasificationChevron is committed to upholding our values, conducting business with the highest ethical standards, and fully complying with the spirit and letter of the law.Health and SafetyEmployment ReductionsDemographic ShiftsIndigenous Communitiesand Cultural HeritageLand AcquisitionCommunity HealthZones of ConflictTaxes and RoyaltiesSourcingInfrastructureRevenue TransparencyJob CreationTraining and DevelopmentHuman RightsCommunity Investmentand PartnershipsTechnologyWeak Governance SystemsHealth and SafetyDemographic ShiftsCommunity ImpactsIndigenous Communitiesand Cultural HeritageLand AcquisitionCommunity HealthZones of ConflictJob CreationTraining and DevelopmentHealth and SafetyLand AcquisitionCommunity HealthTaxes and RoyaltiesSourcingJob CreationTraining and DevelopmentHuman RightsCommunity Investmentand PartnershipsTechnologyHealth and SafetyCommunity ImpactsCommunity HealthKEY CONTRIBUTIONSENERGY AND PRODUCTSProviding Energy For a wide variety of uses andproducts, such as home heating, power generation,transportation, plastics and lubricants.ECONOMIC DEVELOPMENTTaxes and Royalties Payments to governments.Sourcing Payments to local, national andinternational contractors and suppliers. Dedicatedefforts to source from and help develop small andlocally owned businesses.Infrastructure Contributions to local and nationalphysical infrastructure.Revenue Transparency Promoting transparencyand good governance in the management of oil andgas revenues.Job Creation Providing employment, wages,benefits. Focus on hiring and training employeesfrom the communities and countries in which weoperate.EMPLOYEES AND CONTRACTORSTraining and Development Providing employeesand contractors with training and otheropportunities to develop skills.Human Rights Supporting universal human rights,consistent with the role of business.COMMUNITYCommunity Investment and PartnershipsMonetary and in-kind contributions, partnershipsand programs to support social and economicdevelopment where we operate.TECHNOLOGY TRANSFERTechnology Sharing technology and know-how withour business partners.16

The issues listed in the diagram and at each stage are not exhaustive. Rather, we havesought to identify the contributions and challenges most significant at each stagethroughout the life cycle of our operations.TransportationStorageMarkets/End UseDecommissioningand RemediationFUELSPlasticsWaxLubricantsElectricityTechnologyDomesticAutomotiveAviationAgriculturalRailNauticalIndustrialJob CreationJob CreationProviding EnergyJob CreationTraining and DevelopmentTraining and DevelopmentTaxes and RoyaltiesJob CreationTraining and DevelopmentTraining and DevelopmentCommunity Investmentand PartnershipsWe use a variety of processes and systems to ensure compliance with our ethical policies and guidelines and accountability for violations.Health and SafetyLand AcquisitionCommunity HealthHealth and SafetyHealth and SafetyGovernment RevenueReductionsHealth and SafetyEmployment ReductionsDemographic ShiftsKEY CHALLENGESECONOMIC DEVELOPMENTCOMMUNITYWeak Governance Systems Operating inenvironments that lack sound governance systemsand where the rule of law is weak.Government Revenue Reductions Followingclosure of operations.EMPLOYEES AND CONTRACTORSHealth and Safety Protecting the health and safetyof those working on our behalf or affected by ouroperations.Employment Reductions Following completion ofconstruction phase or closure of operations.Demographic Shifts Population migrations andattendant community and economic impacts.Community Impacts Effects of oil and gasdevelopment on the social, political and economicfabric of local communities.Indigenous Communities and Cultural HeritageRespecting the rights, traditions, livelihoods andcultural attributes of indigenous and other localcommunities.Land Acquisition Process and effects of acquiringland for operations, including potentialresettlement.Community Health Effects of new or existinghealth issues, particularly HIV/AIDS, on workforceand local communities.Zones of Conflict Operating in regions affectedby conflict.17

EMPLOYEESSaudi Arabian Texaco HumanResources staff at Mina Saudcamp in the Partitioned NeutralZone between Saudi Arabia andKuwait review a monthly benefitsverification report. From left areHussein Al-Shammari, MadhiAl-Ghobari and Joe La Presta.Chevron is a company of more than 47,000 people worldwide. Our success isintrinsically linked to the capabilities, performance, diversity and engagementof our employees.Geographic Breakdown of ChevronEmployees (2004)North America45%Asia-Pacific23%Africa15%Europe/Middle East10%South America7%At the end of 2004, Chevron had 47,265 employeesworldwide, which represents a 6.5 percent decrease instaffing from the previous year. The staff reductions weredue to reorganizations in some of our operating units andvarious asset sales. Approximately 18.9 percent of our U.S.workforce is represented by unions.Our Global People Strategy is designed tohelp ensure we create a workforce with thecollective organizational capability to achieveand sustain industry-leading performance.In 2004, we reviewed the People Strategy toensure that it appropriately addresses theevolving workforce needs of our businessand continues to be aligned with the strategicbusiness plan. As a result, we will begin toadjust our global recruiting processes in 2005and conduct an assessment to help us projectour staffing requirements for the next decadeand beyond.Training and DevelopmentProviding our employees with meaningfuland relevant training and developmentopportunities helps ensure that Chevronwill continue to have the organizationalcapabilities necessary to meet our futurebusiness needs. We have numerous programsthat help us attract and retain the bestpeople, ensure that employees are positionedto achieve their goals and grow their careers,and close specific competency gaps withinthe organization.Most of our programs are developed andconducted at the operating company orbusiness unit level. They are tailored to meetour overall objectives as well as the specificneeds of local workforces. These includeefforts to:■■■■■Supplement on-the-job training fornew hires.Enhance employees’ skills and technicaland functional expertise.Expand employees’ knowledge of thecompany’s global and multifacetedoperations.Increase employees’ appreciation of beingpart of a global, diverse workforce.Cultivate high-potential candidates forfuture opportunities.Recognizing the importance of strong,effective leaders, Chevron has severaldesignated programs to develop managers.For example:■■■The Chevron Leadership Forum – gearedfor our high-potential managers workingthroughout our global operations, thisprogram seeks to increase the participants’knowledge of the company’s globalstrategies and objectives. In 2004,205 managers participated in the forum.The Chevron Advanced ManagementProgram – a three-week course that includesan on-site development assignment withinthe company’s global operations. In 2004,38 managers completed the program.New supervisor program – a course forfirst-time supervisors. In 2004, 652 peoplecompleted the course.Training New DealersChevron’s Marketing group providestraining for retailers joining the Chevronbrandednetwork through its New DealerBusiness Orientation. The program is anintensive two-week immersion in retailoutletmanagement held at the company’sheadquarters in San Ramon, California.The training is required for all new retailersin the United States who manage companyownedstations or contract directly withChevron for their fuel supply.In the past 10 years, more than 1,200new retailers have received their initialorientation to the Chevron brand fromthis program and have been taught howto effectively manage fueling facilitiesand convenience stores. Training is faceto face as well as technology-based.A unique aspect of the on-site classroomin San Ramon is a mock-up station, witha convenience store, pump island andquick-serve restaurant.Retailer training in a variety of formsexists throughout Chevron for CaltexandTexaco-branded stations as well.The courses encompass a mixture oflocation and classroom training on suchsubjects as customer service, health andsafety practices, and accounting andpayroll management. Virtual-classroomsoftware links people in different locationsto facilitate best-practice sharing.18

Trainer Maxot Kymapob prepares todemonstrate argon welding to AselbekMukhametzhanov at Tengizchevroil’s CraftTraining Center in Atyrau, Kazakhstan.Construction at the Sour Gas Injection/Second Generation Project at the TengizField is creating thousands of new jobs forKazakh nationals.Chevron provides training opportunitiesthroughout employees’ careers.Asset planning supervisor ElizabethSchwarze holds courses for subsurfaceprofessionals. She and colleagues,geologists David Larue (left) and GregSmith, view a 3-D temperature modelof California’s Kern River Field.Chevron Horizons ProgramHorizons is a five-year, developmentaltechnical-training program thatsupplements new hires’ on-the-jobexperiences. Through courses and fieldtraining, participants attain crossfunctionalcompetencies in facilitiesengineering, petroleum engineering,earth science, drilling and informationtechnology. Employees in Horizons areexpected to take up to three differentassignments, which may include relocation,over the program’s five-year duration.In 2004, 400 employees participated inthe program in the United States.Based on its effectiveness, Horizons wasexpanded in 2004 and 2005 to severalChevron locations outside the UnitedStates, such as Venezuela, Thailand,Australia, Indonesia and the United Kingdom.Cultivating High-Potential RecruitsTo sustain and advance the company’sposition as a market leader, Chevron’sGlobal Marketing group boosted its effortsto recruit and develop high-potentialemployees through several new internshipprograms in 2004.The L.T. Jordan Internship and the Living-Abroad Programs, created through apartnership with Texas A&M University,introduce interns to customs, societiesand work environments outside the UnitedStates. In 2004, seven interns took part.The Gateways Global Internship Programis open to students around the world whoare placed in work assignments within andoutside their home countries. The programhosted 26 interns in 2004, includingstudents from Nigeria, Spain, Guatemala,South Africa, the Philippines and theUnited States.To help successful interns make thetransition into permanent positions, GlobalMarketing added the Futures DevelopmentProgram, which provides new hires witha two-year development track to enhancetheir skills and experience. The firstprogram participant was hired in 2004.Another priority of the Global Marketinggroup is to help fill the talent pipeline byenhancing the capabilities of future leaders.Employees selected for the newly createdInternational Marketing Fellows Programspend two weeks on a developmentassignment outside their home country,then three days with global leaders in afacilitated dialogue forum.19

EMPLOYEESCorporate Human Resources’Intercultural Development grouphelps prepare employees forinternational assignments. Beforeleaving for Seoul, employee BillyLeal, his wife, Nancy, and theirdaughter, Leah, attend a culturalorientation session in which fellowemployees share their experiencesof having lived and worked in Korea.Workplace EnvironmentChevron is committed to creating a workplaceenvironment in which our employees arerecognized and valued for their contributionsand treated with dignity and respect. To fosterthis kind of environment, we have severalcommunication channels open to employeesto provide feedback, raise issues or concerns,and resolve conflicts. These include:■ Chevron Ombudsperson – providesemployees with neutral, confidentialsupport and problem-solving assistance.■ Steps to Employee Problem Solution –a program that offers a safe, fast andalternative way to resolve disputes.■ Chevron Hotline – a 24-hour resourceto confidentially or anonymously reportissues or share concerns. It includestranslation services for individuals notfluent in English. In 2004, the hotline wasaccessed 185 times (more information onthe hotline is available on page 28).■ Pulse Surveys – a measure used periodicallyto gain feedback from a sample or subsetof employees on particular topics.■ Global Employee Surveys – a periodiceffort to get comprehensive feedback fromour employees.Chevron recognizes and respects employees’right to join associations or choose unionrepresentation. Where employees chooseunion representation or where it is requiredby law, the company will attempt to establisha positive, cooperative business relationshipwith the authorized representative of choice.2004 Global Employee SurveyIn our first global survey since the merger ofChevron and Texaco, we asked our employeesto share their opinions on a range of topicsidentified as the drivers most likely to affectemployee engagement, meaning they areemotionally and intellectually committed tothe company’s success.An independent, third party analyzed theresults of the global survey conducted inMay 2004. It found that Chevron was on paror above average in five of the nine categoriescompared with high-performing companies inall industries. We outscored our industry peersin all categories. The survey was completedby 67 percent of our employees globally.We intend to conduct the Global EmployeeSurvey approximately every two years.Fostering an Inclusive WorkplaceAs stated in The Chevron Way, diversityis one of our core values. We reflect thosevalues in our commitment to foster aninclusive workplace in which individualdifferences, varied perspectives and uniquetalents are respected and embraced.Chevron’s employment policy states thatin any aspect of employment, no individualwill be discriminated against based onrace, religion, color, national origin, age,sex, gender identity, disability, status as adisabled veteran, political preference, sexualorientation, membership or nonmembershipin any lawful organization, or other basisprohibited by local laws or regulations.The company uniformly enforces allnondiscrimination and anti-harassment lawsapplicable to the workplace, and we applyour own policies in jurisdictions where suchprotections do not exist. Chevron requiresall U.S. employees to take anti-harassmenttraining and does not tolerate retaliationagainst employees who exercise their rightsunder existing anti-discrimination laws.We are committed to increasing therepresentation of women and non-Caucasianmales in senior-level positions corporatewide.At the end of 2004, women representedapproximately 21 percent of our total globalworkforce. At mid-level and above, womenrepresented 9.9 percent of employees.At the senior executive level, women andnon-Caucasian males held approximately20.8 percent of the positions at the endof 2004, up from 19.5 percent in 2003.Developing a Global WorkforceTo succeed in diverse operatingenvironments, we need a skilled globalworkforce that represents the communitiesin which we operate and the markets weserve. Our commitment to hire locally anddevelop our workforce also contributes tolocal economic growth and helps build thelong-term capacity of our host countries.At the end of 2004, approximately97 percent of Chevron’s employees wereworking within their home countries.Outside the United States, approximately48 percent of senior-level positions wereheld by employees working within theirhome countries.While we consistently emphasize an inclusiveand diverse workplace, the nature anddefinition of diversity varies, reflecting theunique cultures and people in the manylocations in which we operate. Therefore,many business units have their own diversitycouncils and other programs focused on theirparticular priorities and challenges. Followingare a few examples.Australia Chevron’s Upstream business unitin Australia is focusing on increasing therepresentation of women at all levels of itsoperations. In 2004, women accounted for29 percent of all employees but only 7 percentof executive leadership positions. As a result,the unit reviewed its hiring practices and tooksteps to ensure it had a more inclusive andtransparent selection process. This includedhaving more women serve on hiring selectionteams. Additionally, the unit improved itsparental-leave policy by expanding itsmaternity-leave benefits, developing the Keepin Touch Program for women on leave, andoffering more flexibility for women returningto work from maternity leave.Nigeria While more than 90 percent ofChevron Nigeria Limited (CNL) employeeswere Nigerian citizens in 2004, theyrepresented a diversity of cultures, ethnicitiesand tribes as well as expatriates from othercountries. CNL’s Diversity Council has soughtto break down some of the language andcultural barriers among its employees.The program Learn a Nigerian Language,open to all employees, was launched atCNL’s facility in Lekki in 2004 and drewapproximately 100 employees interested inthe Yoruba, Igbo and Hausa ethnic languages.CNL also hosted Diversity Day celebrationsat several company locations.CNL continues to focus on hiring anddeveloping the skills of Nigerian citizenswhile cultivating a more inclusive workenvironment. CNL’s strategies includeincorporating diversity metrics in itscandidate slates and selection teams,requiring employees to develop personaldiversity action plans, ensuring diversityis represented in future succession plans,and providing development assignments toemployees. Broad diversity metrics includegender, tribe and state of origin.20

In Puerto La Cruz, Venezuela,company civil engineer LuisanaRamos and geologist Milton Mendezwork on the Plataforma DeltanaBlocks 2 and 3 project.When asked to rate their level of agreement on a range of statements about the company, employeesindicated the highest percentage of agreement on the following statements:■■■■■■■I think Chevron acts responsibly in relation to the environment (89 percent)I believe strongly in the goals and objectives of Chevron (87 percent)I am proud to be a part of Chevron (87 percent)I think Chevron acts responsibly in the society/community in which we operate (86 percent)The people I work with are willing to help each other, even if it means doing something outside theirusual activities (86 percent)I am treated with dignity and respect (82 percent)Chevron is a company that cares about the health and well-being of employees (80 percent)Thailand Chevron’s Asia South businessunit also faces the challenge of fosteringappreciation for the cultural diversity of itsemployees. In Thailand, the Diversity Councilconducted a “cultural audit” to betterunderstand its particular issues and prioritizethe goals of its diversity initiatives. Based onthe findings, the unit launched a new diversityawareness program in 2004 that includeda two-day intensive cross-cultural workshop.More than 90 percent of the employees inthe unit attended the workshop or anothersimilar program.United States In the United States, wehave several strategies to meet our goal ofdeveloping a diverse workforce. In the UnitedStates as required by law, Chevron collectsand submits data annually on our U.S.-basedworkforce to the Equal EmploymentOpportunity Commission (see chart below).Equal Employment Opportunity (2004)Percent of Chevron U.S. workforceMinorities amongtotal employees 34.4Women amongtotal employeesMinorities amongofficials and managersWomen amongofficials and managersMinorities amongprofessionalsWomen amongprofessionalsOverall recruitment for full-time positionswas down in 2004. However, of those wehired in the United States in 2004, 35 percentwere minorities and 37 percent were women.We increased recruitment of interns in 2004,of whom 40 percent were minorities and39 percent were women.In 2004, to further our goal of increasingrepresentation of minorities and women, wespecifically focused on engaging with outsideorganizations that helped us broaden ourslate of minority candidates. This includedpartnering with the INROADS scholarship andinternship program, and recruiting at severalhistorically minority colleges and universities.Additionally, we require employees to developone or more agreements in personal diversityaction plans focused on enhancing theirawareness of and demonstrating theircommitment to diversity.23.223.024.428.230.7Employee NetworksOne of the ways Chevron supports diversityand inclusion in the workplace is throughemployee networks. These are groups ofemployees focused on specific dimensionsof diversity. We now have networks for Asian,African-American, Filipino-American, lesbianand gay, Hispanic, women, Native American,the disabled, and young employees.Chevron Women’s Network, for example,was established five years ago in theUnited States. Today, it has more than1,000 members in 17 countries. Two newgroups have recently joined this network.In the Africa-Pakistan region, a Women’sNetwork was launched in September 2004and already boasts a membership of nearly200 – 14 of them men. The group hasadopted the moniker “OYA,” for the Africangoddess of trade, business and prosperity.“The word is difficult to translate but, inessence, refers to the strength of womenand how we interact and balance allelements of our lives,” comments DelightChandler, the chairwoman for the CaltexSouth and Central Africa network.Chandler’s goals for OYA are specific toher region. She hopes to encourage womenby providing a platform for them to getthe support they need to succeed in theworkplace. Working in tandem with HumanResources, Chandler hopes to introduce anemployee mentoring program specificallytailored to women.The Asia-Pacific Women’s Network also isunder development, with launch targetedfor late 2005. The goal is to embrace thespirit of the other Chevron women’snetworks while reflecting the range ofcultures and issues across the diverseAsia-Pacific region.21

HEALTH AND SAFETYThe health and safety of people who work on our behalf or are affected by our operationsis our highest priority. We want all employees and contractors to arrive home safe at theend of their work day. Regrettably, in 2004, 15 contractors and two employees died whileworking on behalf of Chevron. We are committed to striving to reduce fatalities – and allincidents – to zero.Driving Improved PerformanceWe manage health and safety performancethrough our Operational ExcellenceManagement System (OEMS). OEMS spellsout a range of detailed expectations for ourbusiness units’ health and safety processes.We believe that improving fluency in ourOEMS (described on page 10) and buildinga safety culture will lead to continuousimprovement in our safety performance.Due to the nature of our industry, we oftenrely on contractors to provide specializedexpertise or perform work of limited durationsuch as construction. We have the samehealth and safety expectations for contractorsas for our own employees, and we track ourperformance for both.As part of OEMS, all safety incidents areinvestigated to determine the root causesand steps needed to prevent recurrence.Learning is broadly shared to encourageprevention. Chevron’s chairman, with thehead of the relevant operating company,personally reviews all employee andcontractor fatalities, including thecircumstances surrounding the fatality andthe follow-up actions taken.PerformanceAs measured by our Total Recordable IncidentRate (TRIR), 2004 was our safest year onrecord, reflected in six straight years ofimprovement. Over the five-year period, ourTRIR improved 65 percent (see charts below).Total Recordable Incident RateRecordable incidents per 200,000 work hoursDays Away From Work RateDays away per 200,000 work hours1999200020012002200320041999200020012002200320042.000.451.750.401.500.351.251.000.750.500.250.300.250.200.150.100.05001999 2000 2001 2002 2003 2004ChevronEmployees 1.04 0.82 0.72 0.68 0.60 0.46ChevronContractors 1.80 1.08 0.88 0.74 0.59 0.53EmployeeBenchmark 1.32 1.04 0.93 0.90 0.84 0.66ContractorBenchmark 1.40 1.22 0.90 0.84 0.76 0.73American Petroleum Institute data are used as the industry benchmarks.1999 2000 2001 2002 2003 2004ChevronEmployees 0.38 0.39 0.34 0.25 0.25 0.21ChevronContractors 0.27 0.20 0.26 0.25 0.18 0.16EmployeeBenchmark 0.40 0.34 0.22 0.23 0.22 0.19ContractorBenchmark 0.31 0.28 0.21 0.21 0.17 0.19American Petroleum Institute data are used as the industry benchmarks.22

A critical contribution to improvedperformance has been the involvement of ourworkforce. Hazard and operability studies,pre-start-up safety reviews, behavior-basedprograms, daily safety meetings, and ongoingsafety committees are just some of the waysour employees and contractors have helpedimprove performance. In addition, morethan 2,000 employees and contractors areinvolved in corporatewide health and safetynetworks. Current networks include motorvehicle safety, repetitive stress injuryprevention and contractor safety management.These improvements have also been drivenin part by our aggressive targets for keysafety indicators. In 2004, we met ourtarget to reduce our overall workforce TRIR,though we fell just short of reaching ourworkforce Days Away From Work Rate target.In 2004, 36 Chevron units received our ZeroIs Attainable Award. To earn the award, majorreporting units with at least 100 employeeshad to achieve zero fatalities and zeroemployee recordable incidents during the year.We continue to see dramatic reductions inthe number of repetitive stress injuries inour employee workforce since instituting ourrisk assessment and intervention program in2000. Our year-end repetitive stress injuryrate in 2004 was half that of 2003 and lessthan a third of the rate in 2000.The leading cause of fatalities at Chevronremains motor vehicle crashes, accountingfor six fatalities in 2004. Since 2000, nearlyhalf of all employee and contractor fatalitieshave been due to motor vehicle crashes.We are intensifying our focus on motorvehicle safety in our operations throughprograms such as Project Preserve, profiledon page 25. To help address the issue ofgeneral road safety in the communities inwhich we do business, we are developing theArrive Alive Program. We will implement theprogram in selected countries where we haveoperations and face road safety challenges.We will also seek locations where governmentand nongovernmental organizations arereceptive to partnering with us. We expect tohave our first cooperative road safety initiativeunder way in early 2006.Lost-Time Incident FrequencyIncidents per million work hours1999200020012002200320042.502.001.501.000.500199920002001200220032004ChevronEmployees1.932.001.701.261.261.07ChevronContractors 1.47 1.06 1.37 1.30 0.95 0.87EmployeeBenchmark 2.00 1.70 1.10 1.20 1.08 0.95ContractorBenchmark 1.40 1.45 1.10 1.10 0.90 0.95American Petroleum Institute data are used as the industry benchmarks.23

HEALTH AND SAFETYChevron Canada Resources geophysicist Janis Rose stands in front of a lowground-impactseismic vibrator, which helps ensure our operations leave aminimal environmental footprint in the Canadian Arctic. The Taktuk 3-D seismicprogram in the 2003–2004 winter season was the first petroleum industryseismic program in the Mackenzie Delta to achieve zero incidents. That safetyrecord was repeated in the 2004–2005 season.Work-Related FatalitiesNumberMotor Vehicle SafetyMotor vehicle incidents per million miles driven (company vehicles)199920002001200220032004199920002001200220032004254.00203.0015102.0051.0000199920002001200220032004199920002001200220032004ChevronEmployees442102ChevronEmployees2.522.993.292.943.313.01ChevronContractors 20 14 21 15 12 15Total 24 18 23 16 12 1724

Chevron trains depot managersin Nigeria as part of our ProjectPreserve efforts to reduce thenumber of road accidents.Working to Eliminate Truck Accidents in theAfrica-Pakistan RegionFollowing a series of fatal accidents, Chevronlaunched a rigorous initiative to improvethe safety of the company’s productdelivery fleet in the Africa-Pakistan region.The accidents included a head-on collisionin Uganda that killed 40 people and anincident in Nigeria that resulted in twofatalities. Although the Chevron contractdrivers involved in the accidents werenot deemed to be at fault, the companynonetheless has taken action.Chevron dispatched a five-person ProjectPreserve team to Nigeria to help local fieldoperations improve truck and driver safetystandards. The team worked under thedirection of local management in Nigeria tocraft a program that could be implementedon the spot and enforced to 100 percentcompliance. To achieve immediate results,the team first focused on the basic mechanicalsafety of the trucks. An important key tosuccess was developing a phased planto implement Global Marketing’s truckstandards. For greatest impact, the firstobjective was to implement the “critical few”standards 100 percent of the time. In Nigeria,these included items such as tire quality,working lights and seat belts. When thosebasics are met completely, additional safetystandards will be implemented.This project received the strong supportof senior management, who activelycommunicated its importance to theentire organization.Enforcing the new standard – and notloading any truck that did not comply –inevitably affected product deliveries,and management’s willingness to acceptnearly two weeks of business interruptionssent a clear message that the Nigeria fieldoperations were serious about safety.Since the program was launched in Nigeriain June 2004, no product delivery truckfatalities have been reported. The programis now being implemented throughoutthe 22-country Africa-Pakistan region.“Our objective is nothing less than toimplement and enforce a ‘zero is attainable’culture toward safety-related incidents in allareas of our business,” says Bereket Haregot,vice president of Africa-Pakistan Marketing.25

HUMAN RIGHTSChevron’s support for human rights is one of the core values articulated inThe Chevron Way. We respect human rights in the conduct of our globaloperations, consistent with the role of business.Chevron has long addressed many of theissues that fall under the umbrella of humanrights, such as employment practices,nondiscrimination in employment, healthand safety, and security of employees andcompany facilities. We also are committed toworking with governments, business partners,the communities in which we operate andnongovernmental organizations to continueto help contribute to an environment in whichhuman rights are respected.We have always supported human rightsaround the world, consistent with theUniversal Declaration on Human Rights,and we will continue to do so. Our supportis clearly articulated in The Chevron Way.While the ultimate responsibility for protectinghuman rights rests with governments,we believe that we also have a role toplay consistent with the role of business.Our existing policies and practices, supportfor leading initiatives, and dialogue withstakeholders are part of our commitmentto this objective.As with other aspects of corporateresponsibility, helping our employeesunderstand what support for human rightsmeans in practice is an important priority.We have reviewed our policies, systems andpractices and have consulted with employeesand experts. The first outcome of the reviewwas the preparation of a draft Human RightsStatement. Grounded in The Chevron Way, webelieve the statement will provide guidanceto Chevron employees and act as a frameworkfor constructive dialogue, both internallyand externally. We are consulting with selectbusiness units to ensure that the statementwill achieve the objectives we have laid out.Based on the results of the consultation, weintend to finalize the statement anddetermine whether any additional tools ortraining will be necessary to support ourefforts. Our aim is to finalize the statementand materials and begin corporatewidedeployment in early 2006.In addressing this issue, we also have drawnupon leading initiatives that seek to supporthuman rights. We support the VoluntaryPrinciples on Security and Human Rights,which we helped develop, and we activelyparticipate in a dialogue with other energycompanies, nongovernmental organizationsand governments that are involved inthis effort. We communicate our securityexpectations to host governments wherewe operate, our business partners, and theprivate and public security forces with whomwe sometimes work.Our Global Security group continues to includethe Voluntary Principles in its periodic formalSecurity Management Reviews. IndividualChevron business units are responsible forimplementing the Voluntary Principles inaccordance with local laws and conditions.We also encourage the U.S. government toengage with other countries in the importanceof upholding human rights and the rule oflaw. In 2004, we adopted a new internalguideline that supports the VoluntaryPrinciples. The guideline limits any supportwe provide host country security or lawenforcement organizations to nonlethaldefense and logistics.In addition to the Voluntary Principles,Chevron was one of the original endorsers ofthe Global Sullivan Principles, which addressa wide range of human rights issues, fromequal opportunity to a safe and healthyworkplace. These initiatives are examplesof how Chevron draws on multistakeholderefforts to inform our policies and practices.26

HIV/AIDSDr. Tsola Kpiasi, medical director ofChevron Nigeria Limited, helps in thecompany’s HIV/AIDS effort. In Cabinda,Angola, over a 10-year period ending in2004, our AIDS programs, in cooperationwith the local government, helped reduceHIV rates from 7 percent to 3 percent.In another Cabinda project, a companysponsoredblood bank in the localhospital reduced from 25 percent to1 percent the number of HIV casescaused by transfusions of infected blood.One of the greatest health threats the world faces today is the spread of HIV/AIDS,a disease that has claimed the lives of an estimated 3.1 million people in 2004. In thatsame year, an estimated 40 million people throughout the world were living with HIV,including the nearly 5 million people who had newly acquired the virus. The diseasehas devastating consequences for people, societies and economies across the globe.HIV/AIDS poses a significant risk to Chevronemployees and families, the communitiesin which we operate, and ultimately, ourbusiness. As a company with operations inapproximately 180 countries, including manyplaces with a high prevalence of the disease,we see the effects of HIV/AIDS daily.In 2003–2004, Chevron was proud to beamong the first companies of our size andscope to develop a global HIV/AIDS policy anda comprehensive plan supporting its rollout.Formal implementation of the policy beganin early 2005, building on earlier HIV/AIDSefforts that were well under way within ourSouth Africa, Nigeria and Angola operations.The objectives of Chevron’s global HIV/AIDSpolicy and programs are to reduce exposureto HIV/AIDS; secure support, care andtreatment, where available locally; and engagepartners in international and local communitiesin implementing effective programs toaddress the disease. In developing the policy,we examined the impact the disease hasor may have on our employees and theirfamilies. We considered the expert guidanceof the Global Business Coalition on HIV/AIDS,the International Labor Organization andother agencies.Some provisions in our resulting policy include:■■■■■■Developing education and preventionprograms in areas where we operate.Advancing the company’s intent andlong-term goal to secure treatment foremployees and dependents in theircountry or region of employment.Administering the respective benefitplans so that employees who becomeill with HIV/AIDS are treated like otheremployees with a life-threatening illness.Reconfirming that employees illwith HIV/AIDS are protected fromdiscrimination under the company’sexisting nondiscrimination andnonharassment policies.Ensuring the confidentiality of anemployee’s HIV/AIDS status, unlessotherwise required by law.Refraining from conducting pre-employmentHIV testing, except as required by law.Implementing the Global PolicyWe remain firmly committed to having allChevron locations implement the policy.We recognize that this will be a considerableundertaking. As a first step, each businessunit, operating region or operating companywill conduct a situation analysis tounderstand the health threat posed byHIV/AIDS to employees and the company,as well as to assess the availability oflocal resources for testing, counselingand treatment. Local action plans will bedeveloped for implementation of the policyin subsequent years.At the corporate level, Chevron will provideinitial funding and dedicate full-timeprofessional staff to assist the businessunits in implementing the policy and ensurea coordinated approach. Initial fundingpriority will be given to regions with high orrapidly increasing prevalence rates, such assub-Saharan Africa and parts of Asia andLatin America.We believe this issue is best addressedthrough a collective approach withgovernments, the private sector, communitiesand multilateral organizations. Therefore,Chevron will continue to collaborate onthis issue and explore new opportunitiesfor innovative partnerships that will help usmove forward on implementing our globalHIV/AIDS policy.27

ETHICSBusiness EthicsChevron is committed to upholding ourvalues, conducting business with the highestethical standards, and fully complying withthe spirit and letter of the law in the countrieswhere we do business. The Chevron BusinessConduct and Ethics Code (BC&E Code)outlines our policies on how we conductourselves and operate around the world.Issues covered by the BC&E Code includeconflicts of interest, public-policy activities,gifts to officials, antitrust and competitivepractices, privacy of personal information,and nondiscrimination, among others.The BC&E Code can be viewed online atwww.chevron.com/biz_conduct.The BC&E Code also includes thecompany’s policy to comply fully with theU.S. government’s Foreign Corrupt PracticesAct (FCPA). Payments to internationalofficials or parties for the purposes ofobtaining or retaining business is strictlyagainst Chevron policy, even if refusal to doso may cause the company to lose business.In instances where officials expect paymentto expedite the proper performance of“routine governmental action” – a practiceallowed under the FCPA – Chevron requiresall such requests be forwarded to our chiefcompliance officer for review and approval.Chevron directors and employees arerequired to read or be trained in the BC&ECode. Recognizing that no document canprovide definitive guidance in all situations,we ultimately must rely on our employees’adherence to the company’s high standards.Updating Our Ethics CodeIn 2004, we began updating our BC&E Codeto ensure it clearly conveys our principlesof conduct to our global workforce. Therevised BC&E Code will be translatedinto as many as 12 languages. All Chevrondirectors and employees will be requiredto read, acknowledge and state that theywill abide by the BC&E Code no later thanDecember 31, 2005. The code will becommunicated to all employees by July2005 via the company’s intranet andin booklet and compact disc format.Ensuring Compliance With Our Ethics CodeChevron has an effective compliance programwith a structure of shared responsibility.A corporate compliance policy committeegoverns the companywide complianceprogram. Additionally, in early 2005, Chevronappointed a chief compliance officer whoreports to the company’s vice chairman.Chevron operating companies and corporatedepartments have their own Compliance/Audit committees. Annually, all operatingcompanies and corporate departmentheads submit a Representation Letter to thecorporation confirming they have processesin place that are effective and provide areasonable assurance of compliance withall applicable policies, laws and regulations.Corporate compliance audits are conductedby the Internal Audit department to helpensure that compliance processes arefunctioning properly. The Audit Committee ofthe Board of Directors reviews the company’sinternal auditing practices and is responsiblefor corporate compliance oversight. In addition,the Audit Committee is responsible for hiringthe company’s external auditors and for theiroversight, including approving the overallaudit plan.Internal AuditsAs part of our robust audit process, weconduct numerous rated internal audits eachyear to ensure compliance with applicablepolicies, laws and regulations. Also in 2004,Chevron conducted a number of additionalnonrated audits, which included contractoraudits, investigations, internal controlsconsultation and, for 2004, Sarbanes-OxleyReadiness Reviews. (One requirement ofthe Sarbanes-Oxley Act, passed by the U.S.Congress in 2002, is for companies registeredwith the U.S. Securities and ExchangeCommission to file a Management Report onInternal Control Over Financial Reporting.)The readiness reviews were designed to alertlocations of any actions that needed to betaken in order to be in compliance with theSarbanes-Oxley requirements and pass thecompany’s external audit review. Based on itsassessment, Chevron management concludedthat the company had no “material weaknessesin its internal control over financial reporting,”and the company’s external auditors agreedwith this conclusion. In the future, Sarbanes-Oxley requirements will be reviewed as partof our compliance audits.Reporting ViolationsChevron’s BC&E Code requires that instancesof questionable conduct in any area bereported. Any director, employee orcontractor who believes another director,employee or contractor has violated thecompany’s policies or local laws is obligatedto report the violation to management, legalcounsel, the appropriate operating companycompliance committee or the ChevronHotline. We uphold our policy of protectingwhistle-blowers from retaliation.Any matter submitted to the Chevron Hotlinemay be made anonymously if the caller sochooses. The hotline is operated offsite byGlobal Compliance Services (AlertLine®), anindependent agent. After AlertLine® receivesand logs an incoming matter, it is sent to andinvestigated by the business organization’sappropriate hotline representative. All hotlinematters are reviewed by the corporation’schief compliance officer and law departmentand, if warranted, are elevated to theAudit Committee of the Board of Directors.All subsequent corrective or disciplinaryaction, which may include termination, takenagainst individuals who violate the BC&ECode is handled at the local level.In 2004, AlertLine® received 185 hotlinecalls. While the calls covered a wide varietyof concerns, the largest percentage pertainedto three classifications:■■■Human resources (56 percent)Legal and regulatory (13 percent)Environment, health, safety and security(11 percent).28

GLOBAL SUPPLIER DEVELOPMENTRafael Castellano and Fernando Barbozaview the water injection unit of platformLL-652 in Lake Maracaibo, Venezuela.One way our operations here and inother countries support communities isthrough purchases from local suppliers.Throughout our operations, Chevron relies on a large network of suppliers to meetthe requirements of our global business. In 2004, Chevron spent approximately$20 billion globally on goods and services from our suppliers.Our community of suppliers ranges from largemultinational firms to locally based smallandmedium-size enterprises. Sourcingdecisions are driven by many factors, suchas supplier capabilities, consistency andquality of supply, cost, and demonstratedability to comply with our safety, reliabilityand environmental standards.We are committed to building a globalsupplier base that provides the best,most cost-effective products and servicesthroughout their life cycle. Our sourcingstrategies also focus on developing asupplier base that reflects the diversity ofour customers, host communities and themarkets we serve. This includes targetedefforts to utilize in-country supplier bases.To meet these commitments, Chevron focuseson building the capacity of businesses byproviding resources and opportunities totargeted sectors, including small- andmedium-size enterprises, minority- andwomen-owned suppliers, and local businesses.This approach helps foster economic growthin the communities in which we operate.Supplier Diversity/Small Business InitiativesIn the United States, Chevron’s supplierdiversity program has a strong track recordof extending business opportunities to smallenterprises and companies that are ownedby women, veterans and minorities. This isa result of our strategies that emphasizeoutreach to identify new potential suppliersand the inclusion of small and diverse firmsin the competitive-bidding process.We provide training and support to small anddiverse suppliers, which creates opportunitiesfor them to do business with Chevron andenhances their overall business acumen.For example, we partnered with Cisco Systems;the U.S. Small Business Administration; andthe University of California, Los Angeles,Anderson School of Business to create theManagement Development for EntrepreneursAcademy at San Jose. This innovativeprogram is tailored for small and diversesuppliers of Chevron and Cisco. In 2004,34 suppliers participated in the four-dayintensive certificate program, whichincluded development of individualbusiness-improvement plans.Our commitment to source from small anddiverse firms is reflected in the aggressivegoals we set. In 2004, we spent approximately$1.4 billion on purchases from small businessesin the United States, exceeding our goal ofmaking 27 percent of our total U.S. purchasesfrom small businesses. We also spent acombined total of approximately $450 millionwith women- and minority-owned businesses,although we fell slightly short of our5 percent spending goal for each category.In addition to co-sponsoring the 2004 annualconference of the Women’s BusinessEnterprise National Council and leading apanel on tools for business success, we were:■■■Honored for the second year as a TopCorporation by the Women’s BusinessEnterprise National Council for providingopportunities to women-owned businesses.Voted one of the Top 50 Corporations forMulticultural Business Opportunities bythe DiversityBusiness.com online survey.Named Corporation of the Year by theHouston-based Women’s BusinessEnterprise Alliance.U.S. Small Business/Supplier Diversity ExpenditureUS$ million1999 2000 2001 20021,5001,2501,00020032004Chevron employees also were recognizedfor individual efforts in this area. In 2004,an employee earned the Buyer of the Yearaward from the Northern California SupplierDevelopment Council. Another employeewon recognition as Small Business Advocateof the Year at the Black Expo held inOakland, California.7505002500199920002001200220032004Small business8409841,0151,3641,3101,360Women-ownedbusinessenterprise 244 190 178 212 223 222Minority-ownedbusinessenterprise 216 121 229 209 202 22629

GLOBAL SUPPLIER DEVELOPMENTIn Indonesia, where unemployment for young people is still high,our subsidiary P.T. Caltex Pacific Indonesia supports youth in theirhome communities by offering vocational training programs, suchas the Putri Tujuh Weaving Project in Dumai. Here, Murhayatilearns to weave traditional sarongs. Thus far, the project hasproduced and sold some 2,400 pieces.Sourcing From Local SuppliersIn the communities in which Chevronoperates outside the United States, we seekto source from local businesses wheneverpossible. Chevron has developed programsin many locations that assist local businessesin developing the skills and capacity theyneed to work with our company and theindustry in general to grow their businesses.Our business units’ local-content programsprovide local businesses with a variety oftools, which include skills training andtechnical assistance, market access,business planning, and financing alternatives.The following pages highlight examples ofsome of our programs.Supplier ForumsIn our international upstream operations,supplier forums are used to educate globaland local suppliers on the requirements ofdoing business with Chevron and to supportindividual business units’ local-contentinitiatives. In 2004, our business unitsconducted supplier forums for the first timein Venezuela and Angola and held a secondforum in Kazakhstan. The company hostedsimilar events the previous year, includingone in Nigeria.We also encourage our global suppliers,when appropriate, to partner with localenterprises. The supplier forums helpinitiate relationships between local andglobal businesses. They also educate oursuppliers about operational excellence atChevron, including the safety standardsand reliability requirements that are criticalelements of our sourcing process.The supplier forums serve a broaderpurpose as well. The partnerships thathave developed between local and globalsuppliers have created new opportunitiesfor local businesses beyond supplyingChevron. This is key to their long-termsuccess and helps them contribute to thelocal economies through job creation andincome generation.30

At the Fortuna company, sponsored by Chevronand joint-venture partner Tengizchevroil throughthe Atyrau Business Incubator Program inKazakhstan, Dina Amaniyazova puts logos onuniforms for oil and gas workers.Welder Samson Fregeneparticipated in the ChevronsponsoredTechnical SkillsAcquisition Program for localentrepreneurs in Warri, Nigeria.To protect forest land that might otherwise be tilledfor farming, subsidiary ChevronTexaco EnergyIndonesia Limited works with government andlocal communities to provide alternative means ofgenerating income, such as the Garut sheep breedingand beefing project.Extending Loans to Local Businessesin KazakhstanThe Kazakhstan government has stronglypromoted small business growth as a keystrategy for developing and stabilizing thecountry’s economy. We are continuing tosupport these efforts through the SmallBusiness Development (SBD) Programof Chevron’s limited liability partnershipTengizchevroil (TCO). The program makesloans to local entrepreneurs and companiesthat supply TCO as well as to companiesthat can benefit the local economy. Since1997, 157 small Kazakh enterprises havereceived interest-free loans through theprogram, totaling $5.7 million, which hashelped create nearly 2,000 jobs.For example, Tilekshy, a Kazakh companythat specializes in fishing in the Ural Riverand the coastal waters of the Caspian Sea,needed to make facility improvements andupdate its equipment but did not haveavailable capital. Using $100,000 in TCOfinancial assistance, in 2004 Tilekshyinstalled an automated fish-production line,vacuum-packaging line and mechanizedsmoking chambers. This investment helpedTilekshy improve the quality and diversity ofits products. Since then, TCO has purchasedTilekshy’s fish products to serve in employeecafeterias in Atyrau and Tengiz.Creating a Local Business Opportunityin NigeriaChevron Nigeria Limited (CNL) expects thatby 2007, 90 percent of what it spends ongoods and services will come from Nigeriabasedcompanies. In 2004, CNL spent$435 million, excluding state taxes, withlocal suppliers. Among those providingservices to CNL is Nigeria’s first AdvancedTechnology Center for Subsurface Studies.The center is equipped to conduct high-endtechnical studies, including geostatisticalreservoir modeling and compositional fluidflow simulation, reservoir audits, improvedreservoir characterization, and horizontalwellperformance audits.CNL teamed with a local company, VisionReservoir Management TechnologiesInternational, to help establish the newcenter and acquire the necessary financing.CNL also donated geological equipmentand $150,000 to secure a three-yearleasehold on the facility that VisionReservoir will operate. The center wasawarded a $540,000 contract to provideservices to CNL in 2004.Local Business Development in IndonesiaP.T. Caltex Pacific Indonesia (CPI), aChevron subsidiary, recognized that small,local businesses and cooperatives inIndonesia needed greater opportunitiesto develop supplier relationships withlarge multinational companies. CPI’s LocalBusiness Development (LBD) Programhelps these businesses become reliable,professional and competitive suppliersto the company. It also streamlined itsadministrative process to minimize thebarriers faced by small enterprises.Small businesses new to the programreceive training on CPI purchasing processesand project management, information onindustrial health and safety issues, projectmanagement skills, and advice on financingand taxation issues, with emphasis onCPI’s business ethics. As small enterprisesbecome first-time suppliers to CPI, theytend to learn by doing and gradually gainthe competencies and capacity neededto become long-term CPI businesspartners, as well as suppliers to othermajor companies.Since the program was launched in 2001, CPIhas registered 659 small local enterprises,including 134 in 2004. The collectivevalue of business transactions for LBDparticipants has steadily risen, from$1.5 million in 2001 to $3.9 million in 2004.In 2005, it is estimated that this figure willrise to $4.5 million.31

COMMUNITY ENGAGEMENTChevron sponsored vocationaltraining for 15 boys in an Almatyorphanage. The program wasdesigned in partnership withAlina Limited, a Kazakhstancompany that manufacturespaints, plaster and otherconstruction materials.Discovering, developing and delivering energy takes us to nearly every corner ofthe globe, across a variety of cultures, environments and circumstances. One issuethat remains constant is the importance of developing and maintaining positiverelationships with local communities.Global Community Investments (2004)Amount spent in US$ millionIncludes Chevron’s share inChevron Phillips ChemicalCompany, the Tengizchevroil jointventure, and the KarachaganakPetroleum Operating consortium.North America34.8Africa14.6Eurasia6.6Latin America4.6Asia-Pacific1.7Middle East0.9Europe0.6Total$63.8mApproachOur business success depends on our abilityto gain access to resources and remain awelcome neighbor in the places in whichwe live and work. To earn that, we mustboth be good at our business and distinguishourselves by positively contributing tothe quality of life in the countries wherewe operate.In 2004, Chevron invested an estimated$63.8 million in community initiatives andprojects around the world. A large portion ofthese funds were invested in programs thatbuild capacity, such as health and educationand small business development. A smallerportion of funds were used to support artsand culture and environmental projects.The ChallengeIn many of the places in which Chevronoperates, poverty presents a barrier toachieving a higher standard of living andquality of life. For Chevron, helping combatpoverty is not solely a moral or ethicalimperative, it is also a business imperative.Our success depends on stable operatingenvironments, sound governance systems,trained and skilled employee pools, andthe existence of markets for our products.“Poverty undercuts all of these, and ourapproach to community engagement isdesigned to help address this challenge.Capacity BuildingOur experience with community engagementinitiatives has led us to redefine ourapproach toward a more coordinated andsustainable model. We will increasingly focusour community investment efforts on helpingcreate economic growth through human andinstitutional capacity building. This is drivenby our belief that communities prosper whenpeople are able to help themselves and aresupported by an environment that enablesthem to pursue their ambitions. We willtarget our resources toward the three areaswe consider critical to economic development:■■■Basic human needsEducation and career trainingSmall- and medium-size businessdevelopment and access to creditWe believe this approach will have greaterimpact by helping create sustainable, scalableprojects aimed at removing critical barriers,building human and institutional capacity,and stimulating economic development.We also recognize that strong partnershipswith host governments, local communities,nongovernmental organizations andmultilateral institutions will be essentialin ensuring the success of any project.Going ForwardFinding ways to adequately measure andevaluate our community programs is an areawe seek to strengthen. On some projects,Chevron has begun setting goals andestablishing metrics to measure short-termsuccesses and long-term benefits. Whiledollars spent is one metric, we believe thatthe best measures are based on outcomes.Projects focused on capacity buildingoften take years before the benefits to acommunity are fully realized.We are working to define and develop thenecessary internal capacity to administer,manage, fund and measure these variousinitiatives. We have come to appreciate thatour approach to community engagementdemands significant time and resources aswell as the right skills and competencies ofour employees.Finally, as we focus more of our funding oncapacity building and economic developmentinitiatives, it may mean a shift away fromsome earlier programs not aligned with thisnew emphasis. We are considering ways tothoughtfully and effectively manage theeffects such shifts may have on thosecommunities and organizations.Chevron and USAID have developed a partnership in the truest sense. It is a relationshipbased on sharing the “three R’s”: respect, risk and rewards. As a government developmentagency and a private enterprise collaborating on economic opportunity and growth for theworld’s poorest, we have worked hard to build trust and an understanding of the assets eachbrings to these development challenges. This strong foundation is the base for innovativepublic-private alliances we have forged together across the globe.Chevron’s focus on economic opportunity reaches beyond traditional philanthropy.Investing in people – helping them to attain the skills, jobs and financing they need tosupport themselves – offers the best prospect for sustained impact on families andcommunities. USAID welcomes this focus, and the opportunity to join forces with Chevronin making a difference for those most in need.”Holly Wise, Founder,Global Development Alliance, United States Agency for International Development32

Subsidiary P.T. Caltex Pacific Indonesiahas sent medical teams to refugeecamps in Nangroe Aceh Darussalamprovince to provide health servicesfor victims of the December 26, 2004,earthquake and tsunami catastrophe.NovoBanco, supported withfunding from Chevron, is amicrolending and full-servicebank providing much-neededfinancing for small businessesin Angola.In Angola, we help fund the Discovery ChannelGlobal Education Partnership, which trainsteachers to use technology as a teaching tool andwhich uses interactive teaching methods to involveand interest students in learning. Chevron supporthas helped the program establish six learningcenters in Cabinda province, and the programis expanding to Bengo and Huambo provinces.Responding to the TsunamiAs news of the December 2004 tsunamidisaster spread, Chevron quickly learnedthat all employees in South Asia weresafe, although many of their familymembers were affected. We immediatelytook action to support relief efforts,making early contributions totaling$2 million that were used for urgentlyneeded humanitarian relief in nationshardest hit, especially Indonesia.In the weeks following the tsunami, itbecame evident that while the immediatecrisis was being addressed, a massive andunprecedented recovery and rebuildingeffort would be needed. Chevron respondedby pledging an additional $10 million overthe next three years to fund programsaimed at restoring and strengthening thedevastated communities. We intend toapply our experiences in other countriesto the task, actively developing, managingand participating in collaborative projectsto ensure lasting, positive benefits.Before launching any significant projects,we are conducting a comprehensive needsassessment, consulting with our localbusiness units, engaging key stakeholders,and seeking partnership opportunities inorder to best serve the interests of thosemost affected by the tsunami. The majorfocus will be in Indonesia, where Chevronhas an 80-year history and is a majorproducer. Some projects will helpcommunities in neighboring countries.Angola Partnership Initiative UpdateChevron’s wholly owned subsidiary CabindaGulf Oil Company Limited has successfullymaintained its operations in Angola sincethe 1950s, even through a nationallydebilitating 30-year civil war. When peacetook hold in 2002, Chevron committed tohelp efforts to rebuild the country.At the end of 2002, Chevron announcedthe five-year, $50 million AngolaPartnership Initiative (API), pledging$25 million to the effort. Key API partnersinclude the Angolan government, theUnited States Agency for InternationalDevelopment (USAID), the United NationsDevelopment Programme and severalnongovernmental organizations.The initiative’s overarching goal is to buildhuman and institutional capacity. A varietyof projects are well under way, covering jobtraining and creation, microlending, andbusiness development services to incubatelocal enterprises, including efforts torestart Angola’s agricultural sector.Providing Access to CreditIn August 2004, the first NovoBancobranch opened in the Angolan capital,Luanda, and immediately began providingmuch-needed financing to small enterprises– the first full-service bank in the countryto focus on this need. Supported withfunding from Chevron, USAID and severalEuropean development institutions,NovoBanco makes loans of up to $15,000to Angolan citizens operating their ownbusinesses. Up to 10 new branches areplanned over the next five years to serveall of Angola’s major towns in this way.Bringing Technology to the ClassroomThrough an alliance between Chevron andthe Discovery Channel Global EducationPartnership, local school children in theCabinda, Bengo and Huambo provinces inAngola are experiencing a world beyondtheir own. During 2004, 19 learning centerswere furnished with TV and video equipment.Over the next three years, up to 80,000students will benefit from the technology,and more than 300 teachers will be trainedto operate it. This project supports thegoals of Angola’s Ministry of Educationand Culture to advance professionaldevelopment for teachers and increaselearning opportunities for school children.The words of one Huambo teacher speakvolumes about the project’s impact:“You came to renew in us the trust andconfidence that in this world, shatteredby hate and discord, we are not alone.”Chevron is providing $1.2 million in newfunding to the Discovery Channel GlobalEducation Partnership to expand theprogram in Angola as well as extend it tocommunities in South Africa and Venezuela.Going ForwardChevron is committed to API’s long-termgoal of capacity building and will continueto support efforts that advance this goal.In 2005 and 2006, we will continue topromote commercial seed production inAngola to build the country’s agriculturesector. We will also provide support forthose reintegrating and resettling after theyears of civil war. Finally, we will develop along-term initiative to help develop Angolannongovernmental organizations (NGOs)and governmental development agencies.33

COMMUNITY ENGAGEMENT“Over the years, CNL’s goal has been to contributeto the economy and quality of life of people inthe region,” says Jay Pryor, managing director ofChevron’s Nigerian business unit.The Technical Skills AcquisitionProgram in Warri providedtraining to business centeroffice manager Evelyn Wilkey.Company-sponsored engineering traineesMonisola Odunuga (foreground) andOyenike Oyedele on the Roy ButlerPlatform offshore Niger Delta.Q&A With Jay Pryor, the Managing Directorof Our Nigerian Business UnitQ: Can you comment on the company’s rolein the Niger Delta?A: Chevron Nigeria Limited (CNL) works hardto play a positive role in the Niger Delta, aregion rich in people and resources. Over theyears, CNL’s goal has been to contribute tothe economy and quality of life of people inthe region. In addition to the tax and royaltypayments we make to the government, wehave spent – and continue to spend – millionsof dollars in community investments tobuild schools, furnish scholarships, supportskills development and promote healthcare programs, including the sponsorshipof HIV/AIDS awareness programs for ouremployees and the communities in whichwe operate. We also promote economiccapacity building by creating jobs – ourworkforce is more than 90 percent Nigerian– and by contracting goods and servicesthrough local businesses. Finally, CNLoperations promote the highest ethical andenvironmental standards. However, theNiger Delta presents complex issues.While we believe that the major issues areprimarily the responsibility of the Nigeriangovernment, CNL recognizes that we havea role to play by supporting governmentefforts and pursuing our own corporateresponsibility initiatives.Q: Despite these efforts, communitydissatisfaction in the Niger Delta persists.What are you doing to respond?A: It is important to recognize that no onealone can solve the issues of the region.All stakeholders – including governments,communities and civil society, and companies– need to work together to address theneeds of the region and create a peacefulplace to live and work. CNL is committedto doing its part through dialogue and bytargeting programs to build capacity andcontribute to economic growth. Since theoil industry is more capital-intensive thanpeople-intensive, we are increasinglyfocusing our economic empowermentefforts on such areas as agriculture andsmall-scale business development, includingproviding microcredit opportunities.To leverage expertise and resources,we are also increasingly encouraging moreparticipatory partnership opportunitieswith nongovernmental organizations (NGOs),donor agencies, government developmentagencies – including the Niger DeltaDevelopment Commission (NDDC) – stategovernments, and other oil companies.Q: Are you using any new approaches tomanage the complexities in the region?A: We are constantly looking at new ideas.One new approach is to work with regionaldevelopment councils. This broadens our reachbeyond our immediate host communities.The shift will allow for development to occurregionally, with greater dialogue andtransparency as community membersparticipate alongside representatives ofstate governments, NGOs, donor agenciesand CNL to plan, implement and monitordevelopment initiatives.Q: Does CNL work with the government onthe development of the Niger Delta region?A: Yes, we do. For example, in 2004, CNLcontributed about $30 million from our annualbudget to the NDDC, the lead governmentagency responsible for development of theregion. That is in addition to the communityinvestments CNL makes through our ownprograms. We welcome opportunities towork with state governments to addressspecific needs in the region. Our hope isthat through constant engagement with thestate governments in the area, the 13 percentof oil revenues allocated to them by thefederal government will be used judiciouslyfor development.Q: Does CNL incorporate the VoluntaryPrinciples on Security and Human Rights?A: Yes. The management of our securityoperations is consistent with the VoluntaryPrinciples. For example, despite the fact thatgovernment security forces deployed to ourlocations do not take direct instruction ororders from us, we make it clear that undueuse of force on community members willnot be tolerated and that the rights of allcitizens must be respected at all times.34

In 2004, Chevron donated $1 million to the New Orleans,Louisiana, Public School’s Signature Schools Program, whichprovides students with job-shadowing opportunities, internshipsand field experiences related to their potential career choices.Building Capacity in U.S. CommunitiesIn 2004, Chevron expanded our communityengagement efforts with a nearly $9 millioninitiative aimed at building long-termcapacity through education and trainingin nine U.S. locations.At the end of 2004, major new projects inNew Orleans, Louisiana; Washington, D.C.;Houston, Texas; and four locations inMississippi were funded, and plans wereunder way to initiate projects in severalCalifornia communities in early 2005.All the projects have an educationalcomponent, ranging from early literacyto job-skills training.For example, Chevron contributed $1 millionto advance the New Orleans Public Schools’Signature Schools Program for high schoolstudents.The program provides specialized trainingin areas such as automotive technology,aviation, aerospace science and technology,environmental and medical science,and culinary arts, while allowing studentsto complete their regular courses. Aftersuccessfully completing the program,students should be ready to enter college oran advanced training program, or to obtain ajob. At the end of 2004, approximately 600students were enrolled.Creating Opportunity in Latin AmericaChevron has long invested in education,vocational training, health care and othercommunity programs throughout the LatinAmerican and Caribbean countries in whichwe operate. Our investments help individualsincrease their skills and capabilities,enabling them to contribute to sustainedeconomic growth in their communities.One example is the Majayura Social andBusiness Development Center in Riohacha,Colombia. Chevron is collaborating inthis project with the Pan AmericanDevelopment Foundation, the La Guajirastate government and several othernational and international organizations.The center’s original objective was tohelp 230 vulnerable families displaced byviolence, but it now has a far wider impact,providing an estimated 2,500 people withhealth services and informal job training.During 2004, the center trained nearly700 people for a variety of occupationsin fields such as construction, apparelmanufacturing, commercial baking andcomputers. Since 2003, workers trainedat the center have filled 122 jobs at thecompany’s production units and another520 jobs created indirectly by thecompany’s operations.Chevron has provided 40 percent of thefunding over the project’s three-yearduration – approximately $300,000,of which half was contributed in 2004.To successfully sustain the project,additional resources will be required forworking parents, business developmentservices and permanent housing. We havealready begun efforts to establish a daycarecenter so parents have a safe place toleave their children during working hours.35

COMMUNITY ENGAGEMENTBelow Project director Ben Wallace (left) and a local resident inspectseedlings as part of Good Roots, a project supported by Chevron subsidiaryCaltex (Philippines) Inc. that has helped some 180 household communitieswith farming and tree planting in La Union, Philippines. Each Good Rootsproject spans five years, allowing enough time to train farmers and ensurelong-term sustainability. Right Team member Antonio Garvida.Contributing to the Environment andEconomic Growth in the PhilippinesSupported by Caltex (Philippines) Inc.,a wholly owned Chevron subsidiary,Good Roots takes a hands-on approachto environmental preservation, focusingon regenerating forests while helpingrural farmers improve their livelihoods.It is estimated that at the beginning of the20th century, there were 617 million acres(250 million hectares) of forest in SoutheastAsia. By the end of the century, only148 million acres (60 million hectares)remained. Good Roots addresses this issueby engaging rural farming families andencouraging them to plant a variety ofhardwood and fruit-bearing trees most suitedto the land. Participating farmers are thenprovided seedlings, technology and technicaltraining. As the trees mature, they become arenewable source of income for the farmers.Each Good Roots project spans five years,enough time for project technicians towork with farmers and ensure the project’slong-term sustainability. Recent projectlocations have included Lobo, Batangas,and Pugo, La Union.Since 1992, Caltex has invested more than$850,000 in Good Roots and has committedan additional $280,000 for a new project tobe launched in Baguio in 2005. The U.S.-basedSouthern Methodist University and thePhilippines’ Department of Environmentaland Natural Resources have also contributedto what are now visible results – thousandsof trees thriving in Pagudpud and Lobo.36

REVENUE TRANSPARENCYThe relationship between a country’s natural resource wealth and its social and economicdevelopment has been the subject of attention in recent years among government,industry and nongovernmental sectors. Of particular concern are situations in somecountries and regions in which stagnant or declining economic growth persists despitethe existence of valuable natural resources.Many agree that one strategy for combatingthis phenomenon is through improvedtransparency about the financialarrangements between energy-producingcountries and the extractive industries.Greater transparency of energy-relatedrevenues can lead to better governanceand more accountability and can help createan informed citizenry. Moreover, leadersof resource-rich nations, along with energycompanies and others, have come toappreciate how revenue transparency cancontribute to greater social stability and helpcreate a climate that encourages investmentand fosters economic growth.Chevron continues to advocate for greatertransparency and supports the ExtractiveIndustries Transparency Initiative. Ourposition on this issue is that:■■■Decisions on transparency and disclosuremust be voluntarily made by each energyproducingcountry, as the resources belongto them.Transparency requirements must beinclusive – not unilateral – by applying thesame disclosure standards to governmentsand companies.Transparency processes must honor thesanctity of contracts.During 2004, in partnership with our hostgovernments, we continued our effortsto advance transparency. In Nigeria, thisincludes ongoing participation in theNational Stakeholders Working Group,which is assisting the government in itsefforts to enhance revenue transparency.We also worked constructively with theAngolan government in advance of itsextension of a contract to our company’sAngolan subsidiary. The result was a groundbreakingpublic announcement in 2004 bythe Angolan government and Sonangol, thenational oil company, of the $210 millionsigning bonus and an additional $80 millionsocial bonus, part of which was targeted“specifically for the Cabinda province, paid bythe association partners under terms of theextension agreement.Chevron also negotiated a ProductionSharing Contract (PSC) with the Nigeria–SãoTomé e Príncipe Joint Development Authority(JDA) on Block 1 in the Joint DevelopmentZone. Chevron’s $123 million bid for the blockwas accepted by the JDA, and the contractwas signed in early 2005. The contractcontains a transparency clause that commitsthe JDA to publicly disclose payments madeto them under the contract quarterly.The disclosure of future payments is inkeeping with the transparent manner inwhich the bid round was conducted.Chevron credits the two governments forinitiating the transparency requirements inthe contract, which indicates their resolveand commitment to a new standard ofaccountability. We have long believed thatany effort to address the management ofoil revenues should be led by affectedgovernments, not imposed on them by others.[In the results of the Measuring Revenue Transparency Index, Chevron’s weighted overallscore was 28.7 percent, which placed it fourth out of 25 companies overall.]Of the seven companies with operations in Angola that were surveyed, only Chevrondisclosed details of a payment… While companies argue they cannot act unilaterallyfor fear of damaging their relations with the Angolan government, the approach takenby Chevron shows that it is possible to work with the government to achieve greatertransparency.Chevron… made an important announcement on 1 February, 2005. Chevron JDZ Limitedsigned a production sharing contract (PSC) with the Nigeria–São Tomé e Príncipe JointDevelopment Authority. Chevron will operate the project, and the co-venturers includeExxonMobil and Dangote Energy. The PSC contains a transparency clause which requiresthat all payments (including production bonuses, signature bonuses, and profit oiland lifting costs) be disclosed to the Joint Development Authority, which will then, inaccordance with the terms of the clause, publish this information on its website. This isan important step forward in the drive towards greater revenue payments transparency,and inclusion of this transparency clause in a PSC is an encouraging development. It alsodemonstrates the power of the collective voluntary approach in supporting transparency.While companies must be credited for their collaborative, negotiated initiatives with hostgovernments, this means that progress is slow and proceeds on an ad hoc, piecemealbasis; the good performance demonstrated in one country… is not replicated in othercountries of operation. [The recommended approach] is systematic disclosure ofpayments for every country of operation.”Excerpts from “Beyond the Rhetoric,” a report by Save the Children UK, published in 200537

ENGAGING IN THE POLITICAL PROCESSThrough a constructive, practical approach, Chevron exercises our fundamentalright and responsibility to influence public-policy decisions in ways that are inthe best interests of our company and our stakeholders, which include stockholders,employees, customers and communities.Where permitted by law, we engage in publicpolicydebates; directly and indirectly lobbypublic officials and institutions; and at timessupport political candidates, parties andcampaigns. All of our activities are governedby our commitment to the highest ethicalstandards, transparency, and compliance withall applicable laws and regulations governinglobbying, political contributions and gifts.Participating in Public-Policy DebatesWe believe real value is added to the publicpolicydebate and decision-making processby contributing the opinions of Chevron andour employees, who are encouraged to maketheir views known in the appropriate publicforums and to elected officials. At times wealso engage in policy debates in countriesoutside the United States, but only if permittedby the laws and customs of the particularcountry. This would include taking positionson issues that affect our company or ouremployees.LobbyingLobbying is an essential and constructivepart of the political process. As a stakeholder,Chevron seeks to work ethically, constructivelyand in a bipartisan manner to influencepublic-policy decisions by sharing informationand advocating our view on issues orproposed legislation. We do this throughdirect communication with public officialsand indirectly by encouraging our employees,stockholders and others to communicate withthose officials. Chevron also participates intrade associations or other organizations thatengage in lobbying. Chevron complies with allgovernment-imposed registration and reportingregulations related to our lobbying activities.Political ContributionsWhere permitted by law, politicalcontributions are allowed under corporatepolicy and are subject to strict internalapproval processes and procedures,regardless of the amount or the country oforigin. All requests for these contributionsare planned, budgeted, legally reviewedand approved by management in advance.Chevron makes contributions to politicalcandidates and political organizationsthat support economic development,free enterprise and good governance.In determining our support of candidates,we consider their prior voting records onissues of importance to Chevron, theirleadership or committee assignments,whether they generally have a pro-businessphilosophy, and whether the company or ouremployees have a constituent relationship.In the United States, corporations areprohibited by law from making contributionsto candidates running for U.S. federal officeand certain state and local offices. Wherepermitted, Chevron makes contributions tostate and local candidates and to politicalparties and committees. Contributions alsoare made to support our views on local andstate ballot measures.Outside the United States, it is our practiceto make political contributions only in limitedinstances and in accordance with all laws andregulations governing those contributions.These contributions support candidatesand parties whose public-policy positionsare aimed at encouraging both energydevelopment and broad, sustainableeconomic growth to benefit society.In 2004, Chevron made more than $2.3 millionin corporate political contributions in theUnited States, of which 43 percent wentto politically affiliated candidates andorganizations and the remaining 57 percentwent to ballot initiatives or organizations notaffiliated with a political party.During the year, we also launched a newinternal Web site aimed at providing greatertransparency and fostering participation inthe U.S. political process among employees.The site contains a listing of the company’spolitical contributions, information aboutcandidates, an online voter registrationmechanism and the ability to requestabsentee ballots. It is Chevron’s policy tofurnish a list of all political contributionsto any stockholder upon written request.Chevron Employees Political ActionCommitteeThe Chevron Employees Political ActionCommittee (CEPAC) is a forum for eligibleemployees to voluntarily contribute limitedamounts to a fund that supports the electionof candidates for federal and certain stateoffices in the United States, as authorizedby and in accordance with applicable laws.CEPAC provides a collective mechanism forChevron employees to exercise their rightto participate in the democratic electoralprocess. CEPAC is voluntary and employees’participation is not shared with the company’smanagement. Unless participants designatetheir contributions for a specific candidate,the CEPAC board determines which candidatesto support. By policy, CEPAC does not makecontributions to presidential candidates orpolitical parties.During the 2003–2004 election cycle, CEPACcontributed $457,430 to U.S. federal, stateand local candidates. A list of contributionsmade during 2003–2004 can be viewed onthe Federal Election Commission Web site.38

As part of a larger project with the U.S. Postal Service (USPS) to make energy-efficiencyimprovements at several facilities, Chevron Energy Solutions installed a 403-kilowatt solarphotovoltaic canopy at a USPS facility in Sacramento, California. With upgrades at this facilityand several others in Northern California, the USPS expects to save more than $2 million peryear in energy costs (see case study on page 50). Photo courtesy of PowerLight Corporation.Lobbying for Energy EfficiencyEnergy efficiency is a focus in both our ownoperations and our public-policy efforts. Thisposition is aligned with our commitment toenvironmental responsibility and with ourbusiness objectives. We view energy efficiencyas one of the easiest, most reliable sourcesof “new” energy that minimizes both costsand environmental impacts. Additionally,through our subsidiary Chevron EnergySolutions, we are seeking to expand onenergy efficiency as a business opportunity(see page 50).Recently, Chevron lobbied for a measurethat would allow the U.S. federal government– the largest energy consumer in theUnited States – to continue upgradingfederal facilities and military bases withenergy-efficient equipment under theEnergy Savings Performance Contract(ESPC) Program. This innovative programwas launched in 1995, three years afterCongress passed ESPC legislation as partof the Energy Policy Act of 1992.From 1995 to 2003, private-sector contractorsinvested an estimated $1.7 billion in energyefficiencyprojects, which included installingand maintaining new equipment in hundredsof federal facilities. The contractors arerepaid with the dollars the governmentsaves on its energy and maintenance bills.This program enables the government toupgrade equipment with no upfront costs,conserve energy and, after the investmentis repaid, save taxpayers millions of dollars.When the ESPC program authorizationexpired in late 2003, it stalled approximately$400 million in investments in projectsalready under way and put 4,000 jobs inthe United States on hold. In 2004, Chevron,with a coalition that included groups suchas the Sierra Club, the InternationalBrotherhood of Teamsters, the Edison ElectricInstitute and several other organizations,strongly advocated for the reauthorizationof the ESPC program. As a result, Section1091 of the Defense Authorization Billincluded the provision to do so, which ledto the program’s extension until 2006.Chevron Energy Solutions is one of thecontractors currently performing significantwork under the ESPC program.39

ENVIRONMENTAL ISSUESENVIRONMENTAL40

Left Chevron’s West African Gas Pipeline group uses Ikonos satellite imagery toplan pipeline routes that avoid developed and environmentally sensitive areas.The infrared band here maps biomass as red, making vegetation much easier to see.Below Near the Darajat geothermal field on the island of Java, Indonesia, subsidiaryChevronTexaco Energy Indonesia Limited’s “regreening” program began in 1990 toprotect and restore forest land around our operations. By joining with governmentdepartments and NGOs, the program has grown and, thus far, has successfullyrestored 570 acres (231 hectares) of forest.On the pages that follow, we provide an overview of our environmental issues,descriptions of how we manage them, and a report on our performance. This sectionalso discusses some of Chevron’s innovations in clean fuels and other emergingtechnologies that have environmental benefits. We believe we made good progressin 2004, particularly in the areas of energy efficiency and spill reduction. We alsomet our greenhouse gas emissions goal.During 2004, we undertook an effort to enhance our environmental strategy to improveperformance. The enhanced strategy builds on our existing Operational ExcellenceManagement System (described on page 10). Priorities will be on defining operatingstandards, measuring and communicating performance, and demonstrating continuousimprovement. This effort is a continuation of our long-time commitment to protectingpeople and the environment and integral to meeting our goal to be recognized andadmired for environmental excellence.41

ENVIRONMENTAL ISSUES OVERVIEWEnvironmental IssuesPROCESSSTAGEDesign andConstructionUPSTREAMOil and Natural GasExploration and ProductionPRODUCTSMIDSTREAMOil and Natural GasTransportationDOWNSTREAMRefining andRegasificationPRODUCTSCrude OilDiesel FuelNatural GasLubricating OilAsphaltCokeNatural GasLPGLightAir EmissionsAir EmissionsAir EmissionsGasolineBYPRODUCTSNoiseWasteGHGsLightNoiseGHGsWaterGHGsLightNoiseJet FuelWasteWasteWaterWaterRESOURCESMITIGATIONACTIVITIESOur Operational Excellence Management System provides specific corporatewide expectations for environmental performance and processes.FootprintMinimizationWaste ManagementLight andImpact MinimizationTraffic ManagementEnvironmental, Social andHealth Impact AssessmentsFlare/Vent MinimizationDrilling-Discharge ManagementWater/Gas ReinjectionPipeline-Integrity Management■■ Double-Hull Tankers■■ Energy EfficiencyTank-Truck Driving SafetyClean Fuels■■Journey Management■■■■NoisePipeline-Integrity■■■■Management■■■■Waste/Water ManagementCogeneration■■Furnace NOx MitigationWaste/Water ManagementFlare MinimizationCatalyst RegenerationProtecting people and the environment isa core value for Chevron. Our goal is to berecognized and admired worldwide for safety,health and environmental excellence byinstitutionalizing our Operational ExcellenceManagement System. We strive to continuallyimprove our environmental performance andreduce impacts from our operations.Our primary products are fuels intended tobe used for combustion by our customers.We are providing increasingly cleaner-burningfuels. Additionally, we produce these productswith an emphasis on improving energyefficiency and conserving natural resourceswhile reducing emissions per unit of output.BYPRODUCTSAir Emissions NO x , SO x , CO 2 and particulatesare byproducts of combustion in our operations.The primary sources are flares, furnaces usedto refine our products and internal combustionengines for power generation. The primarysource of VOCs are emissions from tank ventsand rotating equipment.GHGs Direct greenhouse gas emissions,such as CO 2 and CH 4 , are primarily combustionbyproducts from flares, furnaces and internalcombustion engines.Light Lighting is installed throughout ouroperations for workplace illumination and personnelprotection. Flaring also generates light.Noise Combustion equipment, pumps,compressors, valves, seismic equipment and flaresall have the potential to generate noise.Waste Solid or liquid byproducts that have nofurther productive use within our operations.Water Wastewater is generated by operations,including “produced water.” Unplanned incidentssuch as spills can also affect water.42

This diagram provides an overview of Chevron’s core business activities and the keyenvironmental issues we face. The issues listed in the diagram and at each stage arenot exhaustive. Rather, we have sought to identify the byproducts and resources usedor affected that are most significant at each stage in the life cycle of our operations.Additionally, the diagram provides examples of some of the key steps we are taking tominimize impact and protect the environment at each stage.TransportationStorageMarkets/End UseDecommissioningand RemediationFUELSPlasticsWaxLubricantsElectricityTechnologyDomesticAutomotiveAviationAgriculturalRailNauticalIndustrialAir EmissionsAir EmissionsAir EmissionsWasteGHGsGHGsWaterWe seek to manage the environmental, health and safety impacts of our operations and products throughout their entire life cycle.■■■■Double-Hull TankersTank-Truck DrivingSafetyJourney ManagementPipeline-IntegrityManagement■■■■Vent Recovery SystemsDouble-Bottom TanksSecondary ContainmentTank-IntegrityManagement■■■Underground Storage TankIntegrityVapor RecoveryInventory and Supply ChainOptimization■■Property Transfer ProcessSite-Remediation BestPracticesRESOURCESEnergy Energy is consumed within ouroperations. While primarily natural gas, it canbe other fuels, electricity or geothermal energy,wind, solar or other forms of energy.Land Many of our facilities are land-based,and some are based offshore. Offshore facilitiestypically rest on the ocean floor. Use of land canaffect biodiversity, including ecological habitatsand species.Water Use Water is used as an efficientcooling medium in most of our facilities.Chemicals Chemicals are used in oil and gasproduction as well as in refining – to maximizeefficiency, to treat products and byproducts, andas catalysts.43

CLIMATE CHANGE AND ENERGY EFFICIENCYAt Chevron, we share the concerns of governments and the public about climate change.We developed a formal, business-driven climate change strategy in 2001, comprising afourfold action plan outlined in the table below. We have reviewed our approach in lightof developments in science, technology and global policy and believe it continues to berobust and appropriate.Energy Efficiency at ChevronEnergy efficiency provides the easiest,cheapest and most reliable source of “new”energy available today. It also providessignificant environmental benefits in termsof reduced greenhouse gases (GHGs) andother emissions. Chevron believes energyefficiency must be integral to how allcompanies operate and must be centralto any comprehensive energy policy.At Chevron, conservation starts at home.Getting our products – whether natural gas,propane, gasoline, jet fuel, diesel or homeheating oil, to name a few – from the groundto the market takes significant amounts ofenergy. We have long been committed toimproving energy efficiency across ouroperations for the environmental as wellas economic benefits it brings.Energy efficiency is an expectation of ourOperational Excellence Management System(OEMS), discussed on page 10. For the past13 years, we have focused attention onenergy efficiency, have measured theprogress and have seen excellent results.Since 1992, Chevron has reducedcompanywide energy use per unit ofoutput by 24 percent.2004 Energy Efficiency PerformanceWe beat our 2004 energy efficiency targetby two full points on our Chevron EnergyIndex (CEI). This is a two-point improvementcompared with 2003 and represents savingsof approximately 20.85 trillion Btus of energyand $72 million. Our progress in energyefficiency provides real, on-the-groundenvironmental benefits, both globally throughdecreased GHG emissions and locally throughreduced air pollutants such as nitrogenoxides (NO x ) and sulfur oxides (SO x ).Our total energy consumption in 2004 was873 trillion Btus, which is approximatelyequivalent to the amount of energy the U.S.state of Utah uses in a year and less than10 percent of the energy Chevron providesin a year.Energy Efficiency in the FutureGoing forward, three aspects of the operatingenvironment create challenges for continuedprogress in cutting our energy use:■■■Maturing oil fields require more energyinput for each barrel of oil produced.Depletion of oil supplies that are relativelyeasy to extract leads to the need for moretechnically challenging and energyintensivereserves.Increasing demand for clean fuelsrequires us to use more energy duringthe refining stage.Strategy Element1. Reducing emissions ofGHGs and increasingenergy efficiency2. Investing in research,development andimproved technology3. Pursuing businessopportunities inpromising, innovativeenergy technologies4. Supporting flexible andeconomically soundpolicies andmechanisms thatprotect the environmentMore informationKey Actions■ Participate in the public-policy debate on climate change and energy efficiency. page 39 (Political Process section)■Set GHG emissions goal.page 47■Complete an independent review and assessment of our GHG inventory system.page 46■Implement energy efficiency programs.page 44■Pursue projects to reduce venting and flaring of natural gas.page 56 (Flaring section)■Analyze cost-of-carbon scenarios in capital project budgeting.page 46■Initiate work to develop a long-term GHG profile for the company.page 47■Carbon dioxide capture and storage in geologic formations.page 46■Provide expertise to governments on carbon dioxide capture and storage.page 47■Develop proprietary gas-to-liquids technology.page 53 (case study)■Make selective investments in alternative and renewable technologies.page 48 (case study)■Expand geothermal power in Indonesia.page 49 (case study)■Offer services to help organizations implement energy efficiency and renewable and alternative page 50 (case study)energy projects.■Pursue commercial-scale gas-to-liquids projects on three continents.page 53 (case study)■Comply with European Union Emissions Trading Scheme; develop projects under the Cleanpage 45Development Mechanism.■Develop strategy and governance to engage in carbon markets.page 4544

“Our commitment to energy efficiency is acore part of our response to these realities.We expect to sustain the gains made in 2004and have set a CEI target of 76 for 2005.Understanding the Effects of ChangingPoliciesThe Kyoto Protocol, an international treaty toreduce GHG emissions, entered into force onFebruary 16, 2005. More than 140 nations haveratified the treaty, including developed countriesthat account for more than 60 percent ofglobal GHG emissions. Europe has begunimplementation of the Kyoto Protocol bylimiting emissions from its industries and byallowing industries and businesses to tradeemissions allowances under a EuropeanUnion–wide emissions trading program.Chevron’s sources of emissions in theadvanced industrialized countries thathave ratified the Kyoto Protocol (therefore,European nations, Japan and Canada)represent no more than 10 percent of ourtotal 2004 CO 2 -equivalent emissions.We respect the decisions that countries madewith regard to the treaty, and we continueto develop ways to reduce our own emissionsand help our customers and business partnersreduce theirs.The Kyoto Protocol encourages emissionsreductions in developing countries throughthe Clean Development Mechanism (CDM).This mechanism allows emissions reductioncredits from projects that contribute todeveloping countries’ economic, environmentaland social development to be traded todeveloped countries for use in meeting theiremissions limits. Chevron’s projects in severalcountries have the potential to help reduceemissions and generate CDM credits.For example, ChevronTexaco Energy IndonesiaLimited is seeking approvals by appropriateIndonesian and international authorities fortradable credits related to the plannedexpansion of a geothermal power project.These credits can contribute significantly tothe viability of projects that reduce or offsetGHG emissions (see case study on page 49).As part of our strategy for engaging in theEuropean Union Emissions Trading Schemeand other emerging carbon markets, wehave established a carbon markets team.This team will assist our units in achievingregulatory compliance while using the lowestcostemissions credits and maximizing theearnings of emissions credits sold to non-Chevron entities.Chevron has made significant progress in acknowledging the threat posed by climate changeand gauging the risks to its businesses. By setting an emissions goal and assuming a cost forcarbon in the capital allocation process, Chevron has taken key first steps toward mitigatingthese risks. However, as governments, investors and the scientific community are focusingincreased attention on climate change, Chevron will need to do more if it hopes to remaincompetitive in the coming carbon-constrained world.In our opinion, the fundamental challenge facing Chevron and other fossil-energy producersis that global carbon emissions must start to fall in the next two decades to prevent themost severe potential effects of climate change. Given the projected massive increase inglobal energy demand over the coming decades, this is no small task. We believe Chevronwill need to rethink its plans to invest $10 billion a year in oil and gas development, withgreater emphasis on natural gas and substantial new investments in renewable energy –areas where it currently lags some of its peers – as part of a strategy to significantly reduceits long-term emissions profile.We are confident that Chevron will be part of the solution to this problem. The company hastaken some credible first steps in dealing with climate change which indicate it recognizesthe importance of this issue. However, management needs to continue to assess and, asneeded, update its strategy to ensure it is a holistic one that addresses both the risks andopportunities presented by climate change, and it must let investors know how its corebusinesses will be affected.”Andrew Logan, Program Manager, Coalition for Environmentally Responsible Economies (CERES)Chevron Energy IndexThe Chevron Energy Index (CEI) is a keymeasurement tool for our company.We established the index to track energyuse consistently and drive improvedperformance of our operations.Total energy consumption for the companyis affected by disparate factors, includingacquisitions and divestiture, the nature of theresources being extracted and the methodsused to extract them, the type and complexityof crude oil processed in our refining units,the complexity of the refineries themselves,and the mix of products needed to meetlocal market requirements. We, therefore,developed an index that factors out thesemany variables and focuses simply on theefficiency of each type of activity, fromproduction and shipping to refining and evencorporate activities.For each activity, we measure and comparea CEI number – which helps managersbenchmark their performance against similaroperations – then track overall progressby aggregating the results into a single,corporatewide index for which we set ayearly target. The CEI initially includedonly our North American operations but hassince been expanded to include all of ourglobal operations.Chevron Energy Index1992–20041992 1001993 951994 921995 911996 871997 871998 841999 822000 832001 792002 792003 782004 761992–2001 energy usage data are Chevron only, notChevron and Texaco combined.45

CLIMATE CHANGE AND ENERGY EFFICIENCYAccounting for GHGs in Capital ProjectsIncreasingly, governments are employingor evaluating policies to encourage GHGemissions reduction, including carbon taxes,cap and trade programs, voluntary reductiontargets, tax incentives and credits foremissions reduction. These policies have thepotential to affect our investments and theirexpected returns.The company has developed a set ofprocesses and tools and an accompanyingannual workshop to ensure that capitalproject teams analyze, at the earliestplanning stage, the level of GHG emissionsthat will be generated, the potential needfor mitigation, and the potential costs andcredits associated with emissions. One suchtool, the Chevron Projector, is based onSANGEA software for tracking Chevronemissions and allows planners to calculateemissions from a future planned facility.The company requires that all projectscosting more than $5 million conduct aninitial analysis to estimate emissions andnet present value based on values forGHG emissions ranging from zero to $20 permetric ton of CO 2 equivalent or actual values,where they exist. Projects more than$25 million must submit results from thefull assessment before they are funded.This helps ensure that our capital planningaccounts for the potential financial risks andopportunities posed by the development ofGHG emissions reduction policies and themarkets for carbon credits.Managing and Verifying Our DataDuring 2004, we completed an independentreview by KPMG/URS of the quality of our2002 and 2003 GHG data.The review included:■■■Assessment of SANGEA software, whichwe developed for estimating emissionsand have since shared free of charge withothers in the energy industry.Assessment of our GHG emissionsinventory protocol.Site visits to selected locations and reviewof data management and aggregationprocesses.The exercise, completed in August 2004,validated the strengths of our inventorysystem and identified areas for continuingimprovement. It has given us confidence thatany GHG emissions goals can be based onsound and robust baseline data.We are using findings from the review toimprove our overall data collection andmanagement systems. Actions includeadditional training for our business unitsand incorporation of a GHG review into ourOperational Excellence Management System.Our intention is to conduct additionalverification processes periodically to ensurethe integrity of our data and continualimprovement of our data managementsystems. Further information, includingthe KPMG/URS report and our inventoryprotocol, is available on our Web site atwww.chevron.com/greenhousegas/.Researching CO 2 SequestrationCapturing and sequestering CO 2 in geologicformations is an important part of ourresponse to the climate change challenge.This approach, called CO 2 sequestration,has the potential to mitigate CO 2 emissionsassociated with combustion of fossilfuel resources.Total GHG Emissions by SourceMillions of metric tons of CO 2 equivalentTotal GHG Emissions by SectorMillions of metric tons of CO 2 equivalent2002 63.42003 63.92004 62.52002 63.42003 63.92004 62.5200220032004200220032004Combustion38.838.938.1Upstream36.537.035.3Flaring and venting15.816.214.9Downstream24.323.724.0Other8.88.89.5Other2.63.23.2Emissions totals exclude our interests in Chevron Phillips Chemical Company, Dynegy Inc. and Caltex Australia Limited, entities over which we do not have full operational controland which do not follow our corporate GHG inventory protocol or a compatible protocol. Due to rounding, individual figures may not sum to the totals.46

As part of our fourfold action planto address concerns about climatechange, Chevron has beenpartnering with the U.S. NatureConservancy and Brazil’s Societyfor Wildlife Research to helpreverse the deforestation trendnear Antonina in Paraná, Brazil.We continue to participate actively in severalCO 2 sequestration initiatives including:■■■■■■The CO2 Capture Project, a globalcollaboration of eight major energycompanies, the U.S. Department ofEnergy, the European Union, and Klimatek,a program of the Norwegian governmentformed to research and developtechnology to reduce GHG emissions(more information is available atwww.co2captureproject.org).The Carbon Sequestration LeadershipForum, consisting of 17 nationalgovernments and intergovernmentalbodies formed to develop and deployCO 2 sequestration technology(www.cslforum.org).The Intergovernmental Panel on ClimateChange Special Report on CO 2 Captureand Storage.The Cooperative Research Centre forGreenhouse Gas Technologies in Australia,a joint industry-government research efforton CO 2 sequestration.The GEOSEQ Project, a joint venturebetween three U.S. national laboratories.The Weyburn CO2 Project, an initiative ofthe International Energy Agency and of U.S.and Canadian governments and industry.PerformanceFor 2004, Chevron’s total net emissions wereapproximately 62.5 million metric tons of CO 2equivalent. This is based on Chevron’s equityshare in businesses and operations in whichwe have financial interests and either overwhich we have operational control or whichreport GHG emissions using a compatibleprotocol. In 2004, 89 percent of CO 2 -equivalent emissions were from CO 2 , andapproximately 11 percent were from methanewith trace amounts of nitrous oxides.Chevron’s emissions decreased by morethan 1 million metric tons of CO 2 equivalentin 2004 compared with the year before. Weachieved our 2004 corporatewide emissionsgoal of 63 million metric tons or less of CO 2 -equivalent emissions. Although there was aslight increase in emissions due to increasedrefinery throughput, this was more thanoffset by companywide energy efficiencyimprovements and a decrease in productionemissions, primarily due to divestitures.In 2004, flaring and venting accounted for24 percent of CO 2 -equivalent emissions,combustion accounted for 61 percent, andother sources accounted for 15 percent.In absolute numbers, the flaring and ventingemissions of 14.9 million metric tons of CO 2equivalent in 2004 represents a 1.3 millionmetric-tondecline from the flaring and ventingemissions of 16.2 million metric tons in 2003.For 2004, we estimate that the use of ourproducts resulted in GHG emissions ofapproximately 377 million metric tons of CO 2equivalent, which is approximately 1.6 percentof global emissions, based on Key WorldEnergy Statistics, published by the InternationalEnergy Agency.As oil fields age, more energy is typicallyneeded to produce the same amount of oil,resulting in more CO 2 emissions. We expectto partially offset these increases bycontinuing to improve energy efficiencythroughout the company; therefore, weare holding our preliminary corporatewideemissions goal for 2005 flat at 63 millionmetric tons or less of CO 2 equivalent.This goal represents an overall efficiencyimprovement and a decrease in GHGemissions per barrel.We are also initiating work to develop a longtermGHG emissions forecast, based on ourportfolio and business strategy. We intendto use that forecast to develop an emissionsmanagement plan that aligns with ourfourfold climate change strategy.Total GHG Emissions by TypeMillions of metric tons of CO 2 equivalent200220032004Direct62.862.661.8Indirect1.52.11.6Grid-0.9-0.9-0.9Total 63.4 63.9 62.5Direct emissions are emitted by emissions sources within a facility. Indirect emissions accountfor emissions associated with electricity and steam imported by Chevron, less credits foremissions associated with electricity and steam exported by Chevron. Grid credits account forthe electricity exported by certain Chevron facilities that is produced more efficiently than thatfrom the regional or national electricity grid.47

CLIMATE CHANGE AND ENERGY EFFICIENCYAt Chevron, we believe that meeting the world’s fast-growing energy needs requirestapping all potential sources of energy. Our approach is guided by the view thatnew technologies and energy sources must be able to compete in the marketplace,and that such investments must be considered in the context of our broad energydevelopment strategy.Renewable EnergyAs part of our balanced portfolio, we aremaking targeted investments in renewableenergy projects. For several years, we havebeen experimenting with the use of renewableenergy technologies in our own operationsand making venture capital investmentsin innovative technologies. Central to ourstrategy is our integrated approach todeveloping and applying renewable andenergy efficiency technologies. Integratingefficiency measures with renewableenergy projects is a critical step towardmaking them economically competitive intoday’s marketplace.To further identify and develop opportunitiesto create value for the company, in 2004Chevron launched an expanded strategy tointegrate renewable energy applicationsinto the Chevron portfolio. Our strategyis particularly focused on investing in andadvancing wind and geothermal energyprojects. In our view, based on currenttechnological and market conditions, windand geothermal are the renewable energysources with the highest potential togenerate relatively significant energyresources and create economic value.We also are evaluating opportunities insolar energy.As part of the strategy, we are exploringpotential opportunities to invest in renewableenergy projects that could generate carboncredits for the company. While we areprincipally focusing on projects that aretied to and provide energy for our coreoperations, we are looking more broadlyat some potential opportunities that linkto assets in development or future assets.We coordinate our renewable energyactivities across two groups: the EmergingEnergy group (within Chevron TechnologyVentures) and Chevron Energy Solutions(see case study on page 50).Since 1999, Chevron has investedapproximately $60 million in renewableenergy projects, including wind, solar andgeothermal energies. We will continue totake a case-by-case approach to fundingparticular projects but, as part of ourexpanded renewable energy strategy, weexpect to invest approximately $50 milliona year on renewable energy projects inthe near term. This estimate is based onthe projects we are currently incubatingthrough Chevron Technology Ventures.Additionally, through Chevron EnergySolutions, we continue to develop renewableenergy projects for external clients.Chevron also has invested nearly $550 millionsince 1999 in advanced clean-energytechnologies, which include applications forhydrogen fuel processing and storage, fuelcells, and advanced batteries. We also haveinvested hundreds of millions of dollars inenergy efficiency efforts internally, and wecontinue to explore opportunities to expandour external energy efficiency businessthrough Chevron Energy Solutions.The following are highlights of several newinvestments and projects we are incubating.WindIn the U.S. Gulf of Mexico, we are exploringa project reusing former offshore oilplatforms to create new offshore wind farms.The potential 20- to 50-megawatt projectcould generate between 75 million and150 million kilowatt hours annually. Windpower could provide cleaner and lower-costpower for offshore Chevron productionoperations, while excess power could be soldto the grid. At the same time, we would gainvaluable experience in wind energy as a newbusiness opportunity, as a potential use forformer oil platforms and as a cost-effectiveoption for offsetting carbon dioxide emissions.In Texas and Colorado, we are developingproposed projects to install wind generationon or near existing Chevron oil and gasassets in order to offset a portion of theenergy purchased from the local utilities.The projects would develop up to 50megawatts of wind energy in the Midland,Texas, area and 25 to 50 megawatts of windenergy for the Rangely Creek, Colorado,operations. Here we see an opportunityto lower the production costs of ourmidcontinent operations in Midland andRangely by supplying oilfield and gasfieldpower with less expensive and moreconsistently priced renewable energy.The two operations would require anestimated investment of up to $80 million.Installation could begin as early as 2006.These proposed wind projects are in additionto the investment we made in late 2002 in a22.5-megawatt wind farm in the Netherlands.The $23 million project – owned 69 percentby BP and 31 percent by Chevron – is currentlyproducing energy for the companies’ jointlyowned Nerefco oil refinery near Rotterdam.Within Europe, it was the first large-scalewind project on a brownfield refinery site,and it displaces 20,000 tons of greenhousegas emissions each year.48

The fumaroles and hot springs at Darajat, on the islandof Java, Indonesia, first brought geologists to the areamore than 30 years ago to explore this natural sourceof energy. Here, company production engineersFachrul Subarkah and Fernando Pasaribu use electricalmonitoring equipment to monitor surface activity.To demonstrate the safe, practical application ofhydrogen technology in a real-world setting, Chevronand partners built a hydrogen energy station at theHyundai-Kia America Technical Center in Chino,California. The station will fuel a small fleet of fuelcell demonstration vehicles.SolarAt other locations, we are deployinginnovative solar technologies. For example,in 2003, Chevron Technology Venturesinvested in the installation of the first solarpower (photovoltaic) facility in Californiato help power oilfield operations.At 500 kilowatts, this six-acre facility is oneof the largest photovoltaic installations inthe United States and the largest array offlexible amorphous-silicon solar technologyin the world. Chevron Energy Solutions(CES) provided technical assistance andtraining for the project, which continuesto provide us with valuable experience inthe design and development of photovoltaicsystems. CES also has developed andinstalled solar energy facilities for severalof its external institutional clients.To expand our learning and help advancesolar energy technology, Chevron hasinvested in Konarka, a Massachusetts-basedcompany dedicated to the development andcommercialization of versatile, flexible andlower-cost solar photovoltaic products forportable and distributed power needs.GeothermalIn December 2004, Chevron announcedplans to expand our Darajat geothermalpower plant in Garut, West Java, Indonesia.The project will provide clean electricity tomeet growing national and regional demand.It also will help the Indonesian governmentachieve its energy diversification goaland will contribute to the country’ssustainable development.The $128 million expansion consists of anew 110-megawatt electricity-generatingunit, the third unit at Darajat. Chevronprovides the steam for the first unit andowns and operates the second.Geothermal power is clean, renewable andgenerates virtually no GHGs, as steam fromsubterranean volcanic activity is used torun turbines to generate electricity. The newgeothermal plant at Darajat will displaceelectricity from Indonesia’s electricity grid,which is sourced from fossil fuel powergeneration, coal in particular. The new unitis expected to reduce emissions by morethan half a million metric tons of CO 2 eachyear – about as much CO 2 as 100,000automobiles emit annually.ChevronTexaco Energy Indonesia Limitedis working to get the project approved bythe Clean Development Mechanism inorder to earn certified, tradable emissionsreduction credits.HydrogenAs energy demand continues to grow,Chevron is pursuing hydrogen as apromising next-generation fuel. In 2004,the U.S. Department of Energy selectedChevron to lead a consortium that willdemonstrate hydrogen infrastructure andfuel cell vehicles. Over a five-year period,the consortium will build up to six hydrogenenergy service stations, with fuelingfacilities for small fleets of fuel cell vehiclesand capacity to generate high-qualityelectric power from stationary fuel cells.In early 2005, we reached a key milestonewith the unveiling of the first Chevronhydrogen energy station in Chino, California.We also are building a hydrogen energystation in Oakland, California, that willproduce hydrogen fuel for fuel cell busesand future fleets of light-duty vehicles.This station is scheduled for completionin late 2005.Chevron is involved in numerous otherhydrogen infrastructure projects. WithHyundai-Kia America and UTC Fuel Cells,we are a member of the California Fuel CellPartnership, which operates a hydrogendemonstration station in Sacramento,California. We also broke ground in early2005 on Florida’s first hydrogen energystation, which will provide fuel for shuttlebuses at Orlando International Airport.49

CLIMATE CHANGE AND ENERGY EFFICIENCYKeith Parker, Chevron Energy Solutions (CES) project engineer, monitors heatingand hot-water distribution equipment at the U.S. Army depot in Corpus Christi,Texas. The depot is one of several U.S. military bases that have chosen CES toupgrade their facilities. As a result of its contract with CES, the depot in 2004received the Secretary of the Army Energy and Water Management Award.Chevron Energy SolutionsIn addition to focusing on improving energyefficiency in our own operations, Chevronis helping public institutions and otherbusinesses become more efficient.Chevron Energy Solutions (CES), a Chevronsubsidiary, is a thriving, $200 millioncompany with nearly 300 employees in2004. CES provides government, education,and other institutions and businesseswith projects that conserve energy,improve facilities, reduce emissions andensure reliable, high-quality power forcritical operations.CES engineers and installs comprehensiveupgrades, which include renewable andother alternative energy technologies.These upgrades typically result in more thanenough verifiable energy savings to pay forthemselves, enabling public-sector clients tofinance them with little or no up-front costsand more benefit to taxpayers.For example, in 2004, CES was awardedcontracts from the U.S. Department ofDefense and the U.S. Department ofEnergy to engineer and install projectsat three military installations. CES foundfacility improvements expected to saveU.S. taxpayers more than $150 million andreduce greenhouse gas emissions by about1.4 million metric tons over the 18-year termof the contracts.CES has been helping the U.S. Postal Service(USPS) optimize efficiency and conserveenergy resources in Northern California.In 2004, CES completed improvements atthe USPS’s West Sacramento Processingand Distribution Center, which includedthe nation’s largest nonmilitary federalsolar power (photovoltaic) installation.The improvements are expected to reducethe facility’s annual power consumptionby more than 33 percent, or about5.5 million kilowatt hours per year, andwill lower natural gas use by about43,000 therms per year.Together, these reductions would translateto avoided emissions of about 3,900 tons ofcarbon dioxide (CO 2 ) annually, the equivalentof planting 1,100 acres (445 hectares) of trees.In 2004, the USPS announced that CESwould complete major energy efficiencyupgrades and install a hybrid renewablepower plant – including a fuel cell and twosolar electric technologies – at the USPS’slargest processing and distribution facilitiesin San Francisco. The improvements areexpected to lower total annual electricitypurchases by $1.2 million or 10 millionkilowatt hours – a 46 percent reduction.In addition, the energy efficiency upgradeswill reduce the facilities’ heating needs.In total, these improvements translate intoavoided emissions of about 6,600 tons ofCO 2 annually, the equivalent of plantingabout 1,860 acres (753 hectares) of trees.CES also has worked with the city ofRichmond, California, to install energyupgrades, including adding solar electricpanels to the city’s public library. CES’svarious improvements are expected to savethe city more than $9.5 million over the nexttwo decades.In 2004, CES saved its customers more than142 million kilowatt hours of electricity and921 million cubic feet of natural gas. Thisequates to more than 168,000 metric tonsof total CO 2 -equivalent emissions avoided.The success of CES’s business led consultingfirm Ernst & Young to name CES PresidentJim Davis as Northern California Entrepreneurof the Year for Social Responsibility in 2004.As a strategic resource within the company,CES also helps other Chevron units meettheir business goals by improving theefficiency and reliability of their operations.50

AIR EMISSIONSLichen, highly sensitive to airpollution, thrives on trees in anarea of mature woodland closeto the perimeter of Chevron’sPembroke Refinery in Wales.Chevron recognizes that even as we workon global issues such as greenhouse gasreduction and biodiversity management,equally important are local and regionalair emissions from our operations. Like allenergy companies, Chevron’s operationsproduce air emissions such as sulfur oxides(SO x ), nitrogen oxides (NO x ) and volatileorganic compounds (VOCs). Part of beinga good neighbor is to continue efforts tomeasure and minimize these emissions.While we have long tracked these emissionslocally, for 2004 we are able to report totalcorporate emissions of VOCs, along withtotal emissions of NO x and SO x . VOCs deriveprimarily from flaring and venting, fugitiveleaks from equipment (such as valves, pumpsand compressors), and flashing gas. NO x andSO x occur during combustion.Global Air EmissionsMetric tons2004 PerformanceWe estimate all emissions using methodsdeveloped by the U.S. EnvironmentalProtection Agency, the American PetroleumInstitute and other sources. We estimateour global 2004 emissions of NO x to beapproximately 114 thousand metric tons,nearly 10 percent less than in 2003. Thisdecrease in estimated emissions can beprimarily attributed to asset divesture.In 2004, SO x emissions were approximately133 thousand metric tons, a more than10 percent reduction over 2003. Theseemissions fell primarily due to continuedflare reduction. In 2004, the first yearin which we have corporatewide data,VOC emissions were estimated to beapproximately 427 thousand metric tons.Within the U.S. refining operations in 2004,there was a slight reduction in emissions ofVOCs and NO x . On a normalized, per-barrelof-crude-refinedbasis, emissions of bothstayed roughly flat from 2003 to 2004.Emissions levels, both total and normalized,of SO x increased compared with 2003 andreflect refinements in emission estimatesand measurements.In 2004, one of our key air emissionsachievements was in our Tengizchevroil (TCO)joint venture in Kazakhstan, which achievedits lowest total air emissions levels in the pasteight years, despite its production reachingthe highest recorded levels. Furthermore,TCO achieved these reductions even thoughthe number of pollutants required to betracked and reported increased from 37 in1997 to 52 today. These include NO x , SO xand VOCs. TCO has plans to invest more than$300 million in upgraded technology that isexpected to achieve an additional 35 percentreduction in emissions, resulting in total airemissions by 2007 of 2.75 kilograms per tonof oil produced.NO xUpstream 2003100,046NO x Upstream2004 89,764Downstream 200313,1092004 13,877Other 2003200412,47510,656SO xUpstream 2003111,0502004 96,809Downstream 2003200429,01026,091Other 2003200411,90710,499VOCsUpstream 2004402,362Downstream 200424,330Other 20048012003 number restated to include marine transport emissions.2Prior to 2004, VOC emissions were not tracked at the corporate level.51

AIR EMISSIONSIn 2004, Chevron-branded fuel was thefirst in the United States and Canadato be certified by four of the world’stop automakers as meeting “TOP TIER”criteria for gasoline detergency levels.All grades of Chevron met thestandards years before these voluntaryspecifications – more stringent thanU.S. Environmental Protection Agencystandards – were set.Cleaner FuelsChevron looks for opportunities to reduceair emissions from the use of our productsand to develop innovative technologies toproduce cleaner fuels cost-effectively. Morethan 40 percent of refineries around theworld use our proprietary hydroprocessingtechnology that upgrades hydrocarbonsand provides deep removal of sulfur,nitrogen and metals. The result is cleanerthan-everhydrocarbon fuels, more costefficientenergy supplies and a shrinkingenvironmental footprint.One example is in Agra, India, near theTaj Mahal – a famous, world heritagemonument suffering from decay. In recentyears, sulfur-containing emissions fromindustries around the monument and nearbyvehicle emissions have been pitting andyellowing the face of this pearl-whitemonument. The government of Indiainstituted a series of measures to mitigatethese damages, including the production ofa clean, lower-sulfur fuel for the regionalmarket. Chevron was the government’spartner of choice. We licensed ourISOCRACKING® hydroprocessing technologyto Indian Oil Corporation for its Mathurarefinery, near the Taj Mahal, and the refinerybegan producing ultraclean diesel in 2000.In Australia, Chevron is investing $295 millionto reduce air pollution from vehicles.The company is a 50 percent joint-venturepartner in two refineries, Kurnell and Lytton,which are being upgraded to reduce sulfurcontent in diesel fuel and benzene in gasoline.The Kurnell and Lytton refineries producetransport fuel to meet the needs of about60 percent of New South Wales and55 percent of Queensland.In addition, Chevron® gasoline has beenused by leading U.S. automakers for thepast 30 years to help them demonstratecompliance with the U.S. EnvironmentalProtection Agency’s (EPA) stringent50,000-mile and new 100,000-mileemissions durability requirements. In 2004,Chevron with Techron® gasoline was thefirst in the United States to meet the new“TOP TIER” specifications – an even morestringent, voluntary standard jointlydeveloped by General Motors, Honda, Toyotaand BMW for reducing fuel-related deposits.52

Artist’s rendering of the future Escravosgas-to-liquids plant, a project of ChevronNigeria Limited and the Nigerian NationalPetroleum Corporation. Chevron’s jointventure Sasol Chevron is providingmanagerial, operating and technicalservices. When operational, the projectwill help reduce flaring from our operationsand will further the viable use of Nigeria’svast natural gas resources.Gas-to-Liquids – a Cleaner-Burning FuelGas-to-liquids (GTL) fuel is a clean, highperformancefuel derived from natural gas.We believe GTL fuel offers great potentialboth to improve engine performance and toreduce environmental impacts. This is whywe are taking action to bring this importantproduct to market.In 2000, Chevron established Sasol Chevron,a 50-50 joint venture with Sasol Limited, aglobal energy company headquartered inJohannesburg, South Africa, to producegas-to-liquids (GTL) products using the SasolSlurry Phase Distillate process (Sasol SPD).The GTL process creates clean, high–performance products – primarily GTL dieseland GTL naphtha – from natural gas. GTLdiesel is a significantly higher-quality fuelthan diesel derived from crude oil and ischaracterized by low sulfur and othercleaner-burning properties. The performancebenefits include improved cold-startproperties, reduced noise, more-efficientand cleaner-burning fuel, and a substantialreduction in exhaust emissions.Qatar Petroleum and Sasol Chevronannounced plans in early March 2004 toevaluate the expansion of the ORYX GTLplant in Qatar (owned by Qatar Petroleumand Sasol) from 34,000 barrels per day to100,000 barrels per day. Sasol Chevron alsois providing management, operating andtechnical services in Nigeria for EscravosGas-To-Liquids, a partnership betweenChevron Nigeria Limited and the NigerianNational Petroleum Corporation. Finally,Sasol Chevron is actively evaluating thepossibilities of GTL production in Australia.Sasol Chevron’s involvement withcommercial-scale GTL projects on threecontinents gives it the most global approachof any GTL producer, giving it a premierposition in this new industry.Product StewardshipChevron seeks to manage the environmental,health and safety impacts of our productsthroughout their life cycle. This conceptis known as “product stewardship” and isformally integrated into our OperationalExcellence Management System (OEMS). Aspart of OEMS, business units are required toimplement processes and systems to identify,minimize, manage and communicate potentialrisks throughout the product life cycle.We also work to educate customers and thepublic on safe and responsible handling ofour products. In 2004, Chevron completeddeployment of a Web-based global systemfor managing material safety data sheets(MSDSs) and other health, environment andsafety information. These documents provideinformation on safe handling proceduresfor each of Chevron’s products. The systemcurrently stores more than 150,000 MSDSs.We also have a 24-hour-a-day global hotlinethat provides public access to on-calltechnical specialists who can answerquestions about our products.U.S. Refining EmissionsMetric tonsU.S. Refining EmissionsMetric tons per million barrels processed19992000200120022003200419992000200120022003200415,0004010,00030205,0001000NO x199911,955200011,733200111,35820028,21320037,99020047,303SO x 10,745 12,411 11,295 11,356 10,501 11,637VOCs 10,105 9,326 7,793 8,535 8,555 7,153NO x199935200035200133200224200324200423SO x 32 37 32 33 31 36VOCs 30 28 22 25 25 22The 2003 data contain 2002 data for the Hawaii Refinery and 2002 VOC data for the Pascagoula Refinery.53

SPILLSChevron has a strong track record in oil spill prevention and response, a reflection of ourcommitment to this key issue. During the period 1999 to 2004, we reduced the number ofoil spills by nearly 55 percent and the volume of spills by more than 90 percent.When it comes to oil and chemical spills,our first priority is prevention. Througha combination of strategic investmentsand building the knowledge base of ouremployees, contractors and partners, wehave made significant progress. In 2002,we set an ambitious goal of achieving a20 percent reduction in oil spill volume ineach of the subsequent three years and,in 2004, achieved our goal one year early.In 2004, we spilled 15,514 barrels of oil, whichis 42 percent less than in 2003. This figurerepresents fewer than ten barrels spilled forevery million barrels processed. During theyear, we had a total of 986 spills, representinga 14 percent reduction in the number of spillscompared with 2003. The largest incidentwas due to Hurricane Ivan, which hit the U.S.Gulf Coast and caused a spill of 3,148 barrelsof crude oil and 124 barrels of gasoline andlube oil.Petroleum Spills200,000150,000100,00050,00001999200020012002Chemical spills encompass accidental releasesof all nonpetroleum materials, which includedrilling fluids, contaminated water and otherchemicals, such as those used as catalysts.Chevron had 43 chemical spills in 2004,with a total volume of 450,000 kilograms ofspilled chemicals, less volume than in 2003.A total of 87,000 kilograms of chemicalswere recovered, and the remaining chemicalsin the soil were contained and disposed ofproperly. The largest of these was a spillof 273,000 kilograms of water that had analkaline strength of 1.5 percent, which leakedthrough a corroded tank bottom to thesoil below.In shipping, Chevron’s environmentalperformance continues to lead the industry,based on benchmarking data from largecompetitors that operate tanker fleets. In 2004,Chevron’s operated fleet did not experiencea single spill, the second year in a row thecompany has achieved a spill-free record.20032004We have achieved this track record byfocusing first on ship design. We operate afleet of 23 vessels, including one liquefiednatural gas and two liquefied petroleum gascarriers. In 1993, in compliance with the U.S.Oil Pollution Act, we commenced a plan toreplace all single-hull tankers with doublehulls.The regulatory deadline for retirementof single-hulls is 2010. As of the close of2004, Chevron owned only one single-hullvessel in the fleet. That vessel will be retiredin advance of the deadline. When charteringvessels in 2004, we used double-hulls80 percent of the time, whereas the currentworld tanker fleet used double-hulls60 percent of the time.Knowledge and training are equally important.Our third annual Oil Spill Prevention Forumwas attended by 75 operations managers,maintenance planners, field foremen,scientists, construction superintendentsand engineers from around the world, andit focused on field practices, proceduresand the improved implementation of oil spillprevention programs.If accidents do occur, our first line of defenseis secondary containment, which meansberms are built around tanks or facilities sothat spills can be contained locally. Oil spillresponse is also an important performancecomponent. In 2004, we recovered 64 percentof all oil spilled – 9,905 barrels recoveredout of 15,514 barrels spilled, a significantimprovement compared with 2003.199920002001200220032004Volume ofspills (barrels)164,68634,46054,83454,69626,54015,514Volumerecovered(barrels) - - 48,348 27,805 10,659 9,905Numberof spills 2,169 1,553 1,428 1,502 1,145 986Prior to 2001, volume recovered was not tracked at the corporate level. Data include spills tosecondary containment.54

The performance of our shippingcompany continues to lead theindustry. In 2004, our operatedtanker fleet did not experience asingle spill, the second straight yearwe have achieved a spill-free record.Below The new Chevron-operatedNorthwest Swan liquefied natural gastanker moves its first shipment out ofport at Karratha, Australia.Prevention First in New Mexico,United StatesOur spill reduction teams working insoutheastern New Mexico demonstratethe progress that is possible by combiningstrategic investments with employeetraining. In 1999, the teams began meetingevery month to discuss spills and nearmisses in New Mexico and in other Chevronoperating areas so that they might learn,develop and adopt spill prevention bestpractices. The teams next invested inrebuilding more than 100 productionfacilities (from 1999 to 2004), reconditioningalmost 600 wellheads and replacing othercritical equipment such as flow lines – thepipelines that begin at well sites.The results have been dramatic. In 1999,New Mexico operations spilled 123 barrelsof oil per million barrels produced. By 2003,that number had dropped to just 9 barrels ofoil spilled per million barrels produced, andin 2004, spills decreased again with only6.6 barrels spilled per million barrelsproduced. The New Mexico spill preventionteams received the 2004 EnvironmentalMerit Award from the New MexicoEnergy, Minerals and Natural ResourcesDepartment’s Oil Conservation Division.We will continue to share what we havelearned. Our New Mexico division createda set of spill prevention standard operatingprocedures that will soon be adopted byChevron’s Mid-Continent business unit.55

FLARINGDuring construction, a giant crane at a shipyard in Kure, Japan, lifted intoplace what are now the living quarters at the Sanha Condensate Complex,offshore Angola. The Sanha Condensate Project is key in Chevron’s strategyfor achieving our goal to eliminate routine flaring from our Angola operations.When crude oil is brought to the earth’ssurface, gas associated with such oil extractionusually comes to the surface as well. If oilis produced in areas of the world that lackgas infrastructure or a nearby gas market,this associated gas is often released intothe atmosphere ignited (flared) or unignited(vented). Reducing flaring and ventingconserves a finite resource, reducesgreenhouse gas (GHG) emissions, supportsthe growth of domestic gas markets inemerging economies, and reduces barriersto gas market access elsewhere. At thesame time, technological, infrastructure andmarket challenges affect the pace at whichflaring can be reduced or eliminated.Chevron is pursuing a range of activities toeliminate or reduce venting and flaring and iscommitted to achieving our long-term visionof conducting operations without continuousgas flaring and venting. Increased demandoffers business opportunities to commercializenatural gas. At the same time, reducing flaringand venting of associated gas provides amajor opportunity to reduce GHG emissions.Reducing Flaring at ChevronFlaring currently accounts for 24 percentof our total GHG emissions (see page 46).As part of our effort to reduce or eliminateflaring, we are focusing on technologicalinnovations and creating stronger marketsfor natural gas products. In the United States,continuous flaring accounted for fewer than1 percent of total upstream emissions in2004, in part due to regulatory requirementsand good access to gas markets. Further, wecontinue to partner in the U.S. EnvironmentalProtection Agency’s Natural Gas Star Program,in which we have been recognized in prioryears for our greenhouse gas reductionefforts. The program also helps us find waysto cost-effectively reduce the occurrence ofnonroutine flaring and venting.In our non-U.S. operations, we select andinvest in projects with the maximum potentialfor capturing natural gas and reducingflaring. Market access is critical to thesolution for our operations where pipelinesare less available to move natural gas intoproductive use. In Nigeria, we reached a keymilestone in 2004 with a final commitmentto begin construction on the West AfricanGas Pipeline. A detailed final projectdesign will be developed prior to pipelineconstruction, and startup is expected inDecember 2006. This $590 million projectwill reduce flaring by as much as 80 millionmetric tons of CO 2 equivalent over a 20-yearlife of the project while it delivers the gas tocustomers in Benin, Ghana and Togo.Flaring and Venting Standard for OurUpstream OperationsChevron participates as a steering committeemember of the World Bank’s Global Gas FlaringReduction Public-Private Partnership,designed to help address barriers to reducingflares such as uncertainty about tax andregulatory issues and clarity on carbon creditsfor flare-reduction projects. In 2004, thepartnership released a new Global Gas Ventingand Flaring Reduction Voluntary Standard.Chevron is conducting a comprehensiveevaluation of all major flares and ventsources across our international upstreamoperations, a critical first step in developingan associated-gas recovery plan asrecommended in the World Bank’s voluntarystandard. In 2005, the company finalizedour own flaring and venting standard forinternational upstream operations.Sanha Condensate ProjectThe Sanha Condensate Project is key inChevron’s strategy for achieving our goalto eliminate routine flaring from our Angolaoperations. It also is one of the mosttechnically challenging and complex capitalprojects Chevron has ever undertaken.The floating production, storage andoffloading vessel is a first-of-its-kindstructure to process, store and offloadliquefied petroleum gas (LPG) coming outof the wells. The structure produces butaneand propane that can be sent directly tomarkets. Total Chevron investment in theproject is $1.9 billion.In addition to adding production, it willreduce flaring. After being stripped ofhigh-value condensate and LPG, the drygas – 500 million cubic feet per day – willbe reinjected into the Sanha reservoir.This reinjection will reduce routine flaringin Block 0 by more than 50 percent, withan associated reduction in greenhousegases of 2.2 million tons per year.56

WATER AND WASTEOperator James Farrellsamples water frombioreactor ponds at theRichmond, California, refinery.WaterAvailability of and access to fresh water isan environmental challenge for communitiesand industries. Chevron’s challenge is touse water efficiently – especially where itis scarce – and protect its quality for otherusers. Fresh water or sea water are majorinputs to almost every stage of our operations,in particular during upstream oil and gasexploration and production, as well as duringthe downstream refining process for coolingand steam generation. Additionally, ouroperations generate wastewater that must betreated and discharged, including “producedwater” that is brought to the surface whenoil and gas are extracted.Conservation and MitigationOur Operational Excellence ManagementSystem requires business units to evaluatetheir use of and impact on all natural resourcesand to identify and implement conservationopportunities. In arid environments, such asCalifornia’s Kern River region, where freshwater is limited, the company’s upstreamoperations provide appropriately treateddischarged water to a local utility foragricultural irrigation. Also in California,our Richmond and El Segundo refineries use“reclaimed water,” which is treated domesticsewage, to supplement fresh water forcooling in the manufacturing process.In our new deepwater production facilities inAngola and Nigeria, we are reusing producedwater through reinjection to improve thevolume of oil produced and minimizeenvironmental impact. Additionally, tocontinue to minimize the impact of wastewaterdischarge, our offshore upstream operationsare implementing new technologies orprocesses for wastewater reinjection, waterbaseddrilling fluids, cleaning secondarydrilled cuttings, and better separation ofoil and water to reduce the oil contentof discharged water.To date, Chevron has not tracked wateruse or discharges to water corporatewide.In 2005, we will evaluate consistent internalwater metrics, with the goal to begin collectingbaseline data in 2006. Additionally, ourinternational upstream operating companyis continuing to develop processes andstandards for produced-water management.WasteOur business generates solid and hazardouswastes, such as drill cuttings, used catalystsand general office waste. Our OperationalExcellence Management System requiresbusiness units to develop waste managementplans and continually improve processesto minimize pollution and waste. Our basicapproach encompasses a hierarchy ofactions, which include source reduction,recycling, treatment and safe disposal.For existing facilities, we use controltechnologies at all phases of production tominimize risks from wastes. As we design newfacilities, we integrate pollution prevention andwaste minimization measures so that theygenerate fewer and less hazardous wastes.To date, Chevron has not tracked wastevolumes or types corporatewide. In 2005,we will evaluate consistent internal wastemetrics, with the goal to begin collectingbaseline data in 2006. In addition, as partof our increased focus on performancestandardization, our international upstreamoperating company is developing an onshorewaste management standard.57

BIODIVERSITYIn 2004, Chevron celebrated the 50th anniversary of our annual Conservation AwardsProgram, originally founded by the late Ed Zern, a notable sportsman, humorist, authorand columnist for Field and Stream magazine. Chevron has proudly underwritten theprogram for nearly two decades, making it North America’s oldest privately sponsoredconservation award. At right is scientist Terri Roth – a 2004 award winner – with Emi,the first Sumatran rhinoceros in 112 years to produce a calf in captivity, thanks to Roth’sgroundbreaking work in establishing a successful captive-breeding protocol at theCincinnati Zoo, Ohio, United States.Chevron works to protect sensitive ecologicalhabitats and species around our operationsby focusing on biodiversity conservation.Biodiversity covers the diversity of life onearth, including species, genes, ecosystemsor habitats, and the ecological processesthat support them. Oil and gas operationsmay affect biodiversity through both directimpacts (such as physical footprints) andsecondary impacts (such as enabling accessto previously inaccessible areas). We viewbiodiversity protection as having importantenvironmental value while providingsignificant social and economic benefits,particularly for local communities.Integrating Biodiversity Into Core OperationsCurrently at the field level, biodiversity isprimarily managed on a project-specific andoperation-specific basis. We also are takingsteps to encourage a more consistentapproach across the company, includingcontinuing to further incorporate biodiversityinto our corporatewide Operational ExcellenceManagement System. For example, ourinternational upstream operating companyis incorporating biodiversity considerationsinto its new environmental, social andhealth impact assessment process forcapital projects.We have devoted particular attentionto expanding our understanding of theopportunities and challenges involved inoperating in protected areas. The first phaseof this effort is a project to identify andgather more comprehensive informationabout the company’s exploration andproduction operations around the globe inlegally designated protected areas, includingthose in World Conservation Union categoriesI–IV. With this information, we will be able tobetter assess the implications of operatingin protected areas at the earliest stages ofproject planning and implement appropriatemitigation measures.Support for Local BiodiversityChevron’s operations in Venezuelademonstrate how opportunities forbiodiversity conservation can emerge inthe context of ongoing oilfield operations.We operate Campo Boscán, an approximately115,000-barrel-per-day field in westernVenezuela. Although local land use isprimarily agricultural, we recognized thearea as being important habitat for migratorybirds. Although not required by regulations,the local business unit hired Fundación LaSalle, a well-known Venezuelan researchinstitute that has partnered with Chevronelsewhere, to conduct a biological survey ofthe field.One of the first of its kind in the LakeMaracaibo Basin, the study found that portionsof the 247-square-mile (640-sq-km) oil fieldsupport valuable habitat, including relicttropical dry forests, gallery forests, wetlands,and a large number of plant and animalspecies. Many of these species live only inthe Lake Maracaibo region. The study resultswill be shared with the Venezuelan scientificcommunity and used by our local businessunit to develop a biodiversity action plan forthe field.Our refinery in Pembroke, Wales, is workingwith the Countryside Council for Wales torestore soil. This project, at Trehill Farmnear Marloes, will restore intensively farmedagricultural land to its original state of mildlyacidic heathland. The project’s challengewas to find a way to lower the pH of the soilto allow plants such as heathers to survive.Acidifying the soil by conventional meanswas prohibitively expensive, but Chevronwas able to provide sulfur from our refineryoperations to lower the soil’s pH. The projectwon the first Wales Biodiversity Award,presented in 2004.In Angola, we undertake counts of olive ridleyturtles nesting at our Malongo operations.The species is listed as endangered underinternational treaty and is subject toprotection under international law. The oliveridley breeds every year and always returnsto the same nesting beaches near ouroperations between November and January.We use a variety of measures to preventdisturbance to the turtles, and the Chevronvolunteer effort to perform annual countsmakes an important contribution to internationalresearch databases for these turtles.We also have partnered with other energycompanies, the U.S. Minerals ManagementService, U.S. Navy, National ScienceFoundation, and International Association ofGeophysical Contractors to support multiyearstudies on the behavior of sperm whales in theU.S. Gulf of Mexico in order to increase ourknowledge of whether the whales aredisturbed by noise from industrial activity.The research uses selective tagging ofwhales to track their distribution patternsand short-term behavior when they are closeto potential disturbances.PartnershipsWe participate in the Energy and BiodiversityInitiative (EBI), a collaborative project begunin 2001 with industry and conservationorganizations. Drawing on shared bestpractices, the partners have created a setof practical guidelines and tools to minimizeimpacts to biodiversity and maximizecontributions to local ecosystems inconnection with oil and gas development.We are planning to test some of EBI’s toolsand guidelines in several major projectsunder development, such as our Angolaliquefied natural gas project.We are an active participant in energyindustry efforts on biodiversity, includingthe Joint Biodiversity Working Group ofthe International Petroleum IndustryEnvironmental Conservation Association andthe International Association of Oil and GasProducers. Key efforts in this regard areencouraging broader industry testing anduse of EBI tools and guidelines, and holdingworkshops in a number of regions to buildrelationships with key stakeholders and sharebest practices on biodiversity conservation.For example, partners – which includeChevron – in the Angola liquefied naturalgas project are planning to host one of theseregional workshops for the central andwestern Africa regions in late 2005.58

ENVIRONMENTAL EXPENDITURES, FINES AND LITIGATIONEnvironmental ExpendituresUsing definitions and guidelines establishedby the American Petroleum Institute, Chevronestimated our worldwide environmentalspending in 2004 at approximately $1.1 billionfor its consolidated companies. Included inthese expenditures were $285 million ofenvironmental capital expenditures andapproximately $810 million of costs associatedwith the prevention, control, abatement orelimination of hazardous substances andpollutants from operating, closed or divestedsites, and with the abandonment andrestoration of sites.Fines and SettlementsAt times in 2004, some of our facilities maynot have met all government environmental,health and safety requirements, resulting infines and penalties. We remain committed toimproving and learning from these instances.Environmental, health and safety fines andsettlements rose from nearly $5 million in2003 to more than $6.3 million in 2004.The most significant expense in 2004 was$3.74 million, which related to multipleair exceedances in our joint venture inKazakhstan due to acid and sour gas flaringfees. Two wastewater discharge fines, also inKazakhstan, totaled $1.78 million in 2004.The number of such settlements remainednearly constant – 470 in 2003 versus 469 in2004. Health and safety settlements accountedfor 379 of the total, representing nearly$80,000, while the remaining 90 fines andsettlements were for environmental issues.Environmental LitigationChevron remains the subject of litigation inEcuador stemming from the involvement ofa subsidiary in an oil producing consortiumfrom 1964 to 1992. The lawsuit, which wasfiled in 2003, alleges environmentaldamage, and is now in a phase in which theEcuadorian court is inspecting up to 122 oilsites. The company is vigorously challengingthe lawsuit on both scientific and legalgrounds. Because Texaco PetroleumCompany conducted an effective remediationprogram approved by the government ofEcuador and was fully released from anyfurther claims by the government, we havemet all our obligations. Chevron makesconsiderable effort to communicate aboutthe case, including maintaining a regularlyupdated Web site in English and Spanish atwww.texaco.com/ecuador.Environmental, Health and Safety Fines and Settlements1999 2000 2001 2002 2003 2004Total paid(US$ million) 0.94 1.44 0.95 4.28 4.69 6.33Total number 792 519 388 278 470 46959

DECOMMISSIONING AND REMEDIATIONAs part of our commitment to protect peopleand the environment, we manage potentialrisks related to our products and operationsthroughout their life cycles, from designand construction to operation anddecommissioning. For new projects, we seekto continually improve our processes andoperations to minimize pollution and wasteand prevent environmental problems beforethey occur. We assess and manage potentialenvironmental liabilities prior to any propertytransaction. Finally, where releases to land orgroundwater occur, we expect our businessesto evaluate the potential risks and mitigatethem through site cleanups.To manage and strengthen our remediationand decommissioning activities, we createdChevron Environmental ManagementCompany to improve the quality ofremediation activities and speed up theircompletion while reducing the costs andenvironmental risks. The company focusesprimarily on U.S.-based sites but also workswith Chevron business units worldwide toshare lessons learned and innovativeapproaches to cleanups, decommissioningand the prevention of future liabilities.Managing CleanupsAs of the end of 2004, Chevron was cleaningup more than 2,200 sites in the United States,including current or former service stations,refineries, oil and gas fields and chemicalfacilities. These cleanup activities included210 sites at which Chevron has beenidentified as the potentially responsible partyor otherwise by the U.S. EnvironmentalProtection Agency (EPA) or other regulatoryagencies under the federal Superfund lawor analogous state laws. Chevron has spentmore than $3.5 billion on such cleanups since1980, often working in partnership with othercompanies or in voluntary cooperation withregulatory agencies. Chevron does not collectcorporatewide data on numbers or costs ofsite cleanups worldwide.In 2004, we completed 204 service stationcleanups in the United States, for a totalof 1,353 such cleanups since 1999. In ourinternational marketing operations, we are inthe process of evaluating and standardizingthe management of underground storagetank systems for storage of gasoline at fuelstations. This evaluation effort covers 10,000systems in 73 countries.In our downstream business, for example,we have worked with the Napa County FloodControl and Water Conservation District inCalifornia to remove former terminal facilitiesand clean up sites along the Napa River toenhance flood control and restore the area tonatural river marsh and flood plain. In 2004,the Wildlife Habitat Council again recognizedChevron for outstanding work associatedwith habitat restoration, wetland creation andcommunity outreach.Our upstream operations have conductedcleanups to address oil leaks and otherissues. For example, in March 2004,Cannery Hamilton Properties, LLC (CHP),a company 50 percent-owned by Chevronand 50 percent by ConocoPhillips, was oneof the first responders to an oil release froman abandoned oil well in Huntington Beach,California. Despite the fact that CHP ownedonly surface rights, not underground oil rights,CHP cleaned up the well production area andremoved aboveground storage tanks; steamcleaned all surrounding streets, sidewalks andhouses; provided lawn remediation and pooland car cleaning; undertook environmentalair quality monitoring; and paid for damageclaims while local officials worked to locatethe well’s owner. CHP mobilized more than 90people from Chevron, ConocoPhillips and theircontractors, many of whom were from outsideCalifornia. CHP, Chevron and ConocoPhillipsreceived letters of appreciation andcommendation from the mayor and fromthe fire chief of the city of Huntington Beach,as well as recognition from the variousregulatory agencies involved.In another upstream project, Chevron’soperations in Russia and the Caspian PipelineConsortium (in which Chevron has a 15 percentinterest) developed a project with Russianscientists and regulators to test and evaluatemethods for using plants to clean upcontaminated soils. This “in-situ bio/phytoremediation” method can be moreenvironmentally sound than removing soilfor treatment or disposal. Chevron offeredour expertise, established test facilities andtrained more than 20 Russian regulators. TheU.S. Department of Energy jointly funded andconducted the program under its Initiativesfor Pollution Prevention, a program aimed atcreating long-term nonmilitary employmentfor former weapons researchers.“The interests of big businesses, environmentalists and society as a whole coincide moreoften than you might guess. The case of Chevron Niugini illustrates how it is possible foran oil company to operate in a way that delivers environmental benefits to an area ofoperations and to the people there. I discovered to my astonishment that these [wildlife]species are much more numerous inside the Chevron area than anywhere else that I havevisited on the island of New Guinea except for a few remote uninhabited areas. The Kutubuoil field functions as by far the largest and most rigorously controlled national park inPapua New Guinea.”From Collapse: How Societies Choose to Fail or Succeed, by Pulitzer Prize–winning author and ecologistJared Diamond (New York: Viking Books, 2005). In 2003, Chevron Corporation sold its interests inPapua New Guinea.60

In Cincinnati, Ohio, United States, anatural wetland flourishes where arefinery once stood, following a Chevronland restoration program commendedby the U.S. Environmental ProtectionAgency. Deer and other wildlife quicklymade the site their home.DecommissioningIn our upstream operations, we close oiland gas wells that are no longer productive,dismantle surface equipment and pipelines,and remove offshore platforms at the endof their service life. In the United States,we removed 18 platforms in 2004, all ofwhich were in the U.S. Gulf of Mexico. Whereenvironmental restoration is needed, it ispart of our closure projects.For example, in 2005, we will complete ourrestoration of the McKittrick Mine. Duringthe early 1980s, Getty Oil Company (nowowned by Chevron) used diatomaceous earthnear the town of McKittrick, in Kern County,California, for test mining and extractionof crude oil. To restore the mine, Chevronworked to return the land to approximatelythe original topography, re-establish drainagepatterns, and plant native grasses and shrubsover the affected areas. As a result, the minedland will be suitable for grazing livestock.Our downstream operations occasionallyclose facilities. For example, in Panama in2004, we prepared to close a refinery andreopen the facility as a marketing terminal.One of the closure requirements was toconduct an assessment of changes to thesite’s ecosystem during refinery operation,focusing on its ecologically importantmangrove wetland habitat. However, norequirement to establish an ecologicalbaseline existed when the refinery was built.Chevron Energy Technology Company andChevron Environmental ManagementCompany specialists developed and carriedout an assessment using historical recordsand current sampling to evaluate changesat the landscape, habitat and species levels.The assessment showed that the mangroveecosystem had not been damaged; in fact,mangrove coverage increased 49 percentduring the period of refinery operation.Remediation and Redevelopment in theUnited StatesWhen we cease operations at one of ourfacilities, it often means just the beginningof a long process to thoroughly remediatethe site and, when possible, redevelop it forits next use.In 1994, Chevron initiated a program forthe remediation and redevelopment ofa 228-acre refinery site in Toledo, Ohio.A decade later, after a successful publicprivatepartnership that helped protectthe environment and benefited the localcommunity, we received final approval fromthe Ohio Environmental Protection Agency(OEPA) of the remediation work there in2004. In 2005, we sold a parcel to its nextowners and are actively marketing the restfor industrial reuse.Remediation activities included stabilizingaffected soils and sludges, consolidatingaffected soils within a 40-acre area of theexisting contamination, installing a slurrywall and groundwater treatment system toremediate affected groundwater, and placingan earthen cap on affected soils within theconsolidation area.Chevron worked closely with the OEPA inthe development of the rules package andrisk-based cleanup standards that wereincorporated into the agency’s VoluntaryAction Program. The program was designedto facilitate the remediation and reuse ofindustrial sites. Along with working closelywith regulators throughout the process, wealso engaged the local community in orderto keep them informed and bring new jobsto the area.OEPA has used the success of the ToledoRefinery remediation as a model for itsVoluntary Action Program. In addition,the governor selected the site to kick offa State of Ohio bond program for industrialsiteredevelopment.61

GLOSSARYBarrels of oil-equivalent (boe) A unit of measureto quantify crude oil and natural gas amountsusing the same basis. Natural gas volumes areconverted to barrels on the basis of energycontent. See Production.Biodiversity Refers to the diversity of life onearth. It encompasses genes, species, habitatsand ecosystems, and the processes thatsupport them.Business unit A Chevron management groupaccountable for achieving specific objectivesand strategies.Byproduct Secondary or incidental productderiving from a manufacturing process orchemical reaction, not the primary productor service being produced. A byproduct can beuseful and marketable, or a waste or emission.Capacity building A key area of focus forChevron’s community engagement efforts,which means targeting support toward programsthat help individuals and institutions developthe skills, capabilities and expertise they needto succeed.The Chevron Way Explains our values: who weare, what we do, what we believe and what weplan to accomplish.Condensates Liquid hydrocarbons producedwith natural gas, separated by cooling andother means.Corporate level In this report, refers to activitiesor initiatives coordinated or conducted bycorporate departments, rather than by operatingcompanies or business units.Corporate responsibility At Chevron, corporateresponsibility is defined as consistently applyingour core values, as set out in The Chevron Way;maximizing the positive impact of ouroperations on current and future generations;integrating social, environmental and economicconsiderations into our core practices; andengaging with and balancing the needs of ourkey stakeholders.Country of origin An employee’s home country,which can be used as a measure of the extent towhich operations are staffed by local people.Downstream The industry term used to referto all petroleum activities, from the process ofrefining crude oil and natural gas into petroleumproducts to the distribution, marketing and salesof the products.Exploration Searching for crude oil and naturalgas through the use of geologic and topographicalstudies, geophysical and seismic surveys,visualization technology, and the drilling of wells.Flaring and venting The burning or release ofnatural gas that is often produced in associationwith oil, a process that typically occurs whenthere is no market or on-site use for the gas.Gas-to-liquids (GTL) A process that convertsnatural gas into high-quality transportation fuels.Global Reporting Initiative (GRI) Self-definedas a multistakeholder process and independentinstitution whose mission is to developand disseminate globally applicablesustainability reporting guidelines.Greenhouse gases (GHGs) Gases that trap heatin the earth’s atmosphere; such gases includecarbon dioxide, methane, nitrous oxide,hydrofluorocarbons, perfluorocarbons andsulfur hexafluoride.Integrated energy company A companyengaged in all aspects of the energy industry:exploring for and producing crude oil andnatural gas (upstream); refining, marketing andtransporting crude oil, natural gas and refinedproducts (downstream); manufacturing anddistributing petrochemicals (chemicals); andgenerating power.Liquefied natural gas (LNG) Natural gas that isliquefied under extremely cold temperatures tofacilitate storage or transportation in speciallydesigned vessels.Liquefied petroleum gas (LPG) Light gases,such as butane and propane, that can bemaintained as liquids while under pressure.Local content The portion of the company’ssuppliers – or the spending on goods andservices with those businesses – that areconsidered local to the communities in whichwe operate.Microcredit or microlending Small-scale creditor loans typically extended to small businessesor individual entrepreneurs as a means offostering local economic development.Midstream Industry term referring to thetransportation of crude oil and natural gasfrom the exploration and production operationsto the refining and marketing operations.See Downstream and Upstream.Nongovernmental organization (NGO)An organization that is independent from thegovernment, generally a nonprofit organizationdevoted to providing assistance to or advancinga particular cause or issue.Operating company A major Chevron companyorganized for a specific business purpose.Operational Excellence Management System(OEMS) Chevron’s standard approach tosystematic management of safety, health, theenvironment, reliability and efficiency in orderto achieve world-class performance.Operator Term used to describe a companyappointed by venture stakeholders to takeprimary responsibility for day-to-day operationsfor a specific plant or activity.Partner In this report, partner is used in itsbroad sense to mean a person or organizationassociated with another in a common activityor one that shares a mutual interest. It does notimply a member of a contractual partnership inwhich the partners jointly own and carry on abusiness and proportionally share in liabilities,profits or losses of the business.Production Total production refers to all thecrude oil and natural gas produced from aproperty. Gross production is the company’sshare of total production before deductingroyalties. Net production is gross productionminus royalties paid to landowners. Oil-equivalentproduction is the sum of the barrels of liquidsand the oil-equivalent barrels of natural gasproduced. See Barrels of oil-equivalent.Renewable energy Energy resources that arenot depleted when consumed or convertedinto other forms of energy (for example, solar,geothermal, ocean and tide, and wind).Reserves Crude oil or natural gas contained inunderground rock formations called reservoirs.Proved reserves are the estimated quantitiesthat geologic and engineering data demonstratecan be produced with reasonable certainty fromknown reservoirs under existing economic andoperating conditions. Estimates change asadditional information becomes available.Revenue transparency Refers to the practice ofdisclosing certain financial arrangements relatedto energy industry operations by industry andhost governments.Socioeconomic A category encompassing thebroad range of social and economic issuesthat affect and are affected by our operations.In many cases, social and economic issues areclosely linked.Stakeholder At Chevron, defined as those whoaffect, are affected by, or have a legitimateinterest in our company’s performance.Transparency Making relevant and accurateinformation available to those with a legitimateinterest in the organization.Upstream Industry term for oil and natural gasexploration and production activities.62

GRI AND API/IPIECA INDEXThis index refers to:■ Global Reporting Initiative (GRI) core indicators and those additional GRI indicators on which we have fully or partially reported.■ American Petroleum Institute/International Petroleum Industry Environmental Conservation Association (API/IPIECA) sustainabilityreporting indicators.For a more detailed indicator index, go to www.chevron.com/cr_report/.VISION AND STRATEGYGRI(Additional indicators in italics)1.1 1.2API/IPIECA(Additional indicators in italics)Where reported2, 6–9PROFILEOrganizational Profile 2.1 2.2 2.3 2.4 2.5–2.9Report Scope 2.10 2.11–2.13 2.14 2.15 2.16Report Profile 2.17 2.18 2.19 2.20 2.21 2.22ENV-A83, 131, 51, 6464GOVERNANCE STRUCTURE ANDMANAGEMENT SYSTEMSStructure and Governance 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8Stakeholder Engagement 3.9–3.12Overarching Policies and Management Systems 3.13 3.143.15 3.16 3.17 3.18 3.19 3.20GRI Content Index 4.1ENV-6 H&S-110–121310–12, 26, 28, 29,37, 42–43, 53, 5863ECONOMICCustomers EC1 EC2Suppliers EC3 EC4Employees EC5Providers of Capital EC6 EC7Public Sector EC8 EC9 EC10Indirect Economic Impacts EC13ECO-A2ECO-2 ECO-3 ECO-A3ECO-1 ECO-A1 SOC-A4529555, 32, 3729ENVIRONMENTALMaterials EN1 EN2Energy EN3 EN4 EN17Water EN5Biodiversity EN6 EN7 EN25 EN27Emissions, Effluents and Waste EN8 EN9 EN10 EN11 EN12EN13 EN30Products and Services EN14 EN15Compliance EN16Transport EN34Overall EN35ENV-5 ENV-A8ENV-A7ENV-A9ENV-1 ENV-A1 ENV-2 ENV-A2 ENV-3 ENV-A3ENV-4 ENV-A4 ENV-A5 ENV-A6––45, 48––5846–47, 51, 53–54,5642–43, 475942–4359SOCIALLabor Practices and Decent WorkHuman RightsSocietyProduct ResponsibilityEmployment LA1 LA2Employee SatisfactionLabor/Management Relations LA3 LA4Health and Safety LA5 LA6 LA7 LA8Training and Education LA9Diversity and Opportunity LA10 LA11Strategy and Management HR1 HR2 HR3Nondiscrimination HR4Freedom of Association and Collective Bargaining HR5Child Labor HR6Forced and Compulsory Labor HR7Disciplinary Practices HR10Security PracticesIndigenous RightsCommunity SO1Bribery and Corruption SO2Political Contributions SO3 SO5Competition and Pricing SO7Customer Health and Safety PR1Products and Services PR2Respect for Privacy PR3SOC-A3SOC-A2H&S-2 H&S-3 H&S-4SOC-5SOC-1SOC-4SOC-7SOC-6SOC-9SOC-A6SOC-A4 SOC-A5 SOC-A7 SOC-8SOC-2SOC-3 SOC-A1H&S-518, 2020–211822–241820–212620–2120––––2026––32–362838285353––Key to IndicatorsFully Reported in 2004 Partially Reported in 2004Not Covered in 2004Not Applicable63

ABOUT THIS REPORTAbout This ReportThis report covers 2004 data and activities.Occasionally, we mention events that tookplace in 2005 when they help provide aclearer picture of our performance. Ourprevious report was published in September2004 and covered 2003 data and activities.On May 9, 2005, we announced the changeof our company name from ChevronTexacoCorporation to Chevron Corporation, whichis the corporate name used in this report.Unless indicated otherwise in this report,1999–2001 data are combined from the premergedcompanies Chevron Corporation andTexaco Inc., whereas 2002–2004 data arefrom the merged corporation.This report covers our owned or operatedbusinesses and does not address theperformance of our suppliers, contractors orpartners, unless otherwise noted. All financialinformation is reported in U.S. dollars.Information contained in the report has notbeen subject to external assurance, with theexception of data included in the company’sconsolidated financial statements and our 2002and 2003 greenhouse gas emissions data.We refer to various resources in thepreparation of this report. We continue to beinformed by the Global Reporting Initiative(GRI) Sustainability Reporting Guidelines.Over the past year, we also participated inthe development of the Oil and Gas IndustryGuidance on Voluntary SustainabilityReporting, published in 2005 by theInternational Petroleum IndustryEnvironmental Conservation Association(IPIECA) and the American PetroleumInstitute (API), which also informed thedevelopment of this report. We have includedan index to help readers find informationcorresponding to the GRI and API/IPIECAindicators (see page 63).Cautionary Statement Relevant toForward-Looking InformationThis Corporate Responsibility Report byChevron Corporation contains forwardlookingstatements relating to the mannerin which Chevron intends to conduct certainof our activities, based on management’scurrent plans and expectations. Thesestatements are not promises or guaranteesof future conduct or policy and are subject toa variety of uncertainties and other factors,many of which are beyond our control.Therefore, the actual conduct of ouractivities, including the development,implementation or continuation of anyprogram, policy or initiative discussed orforecast in this report may differ materiallyin the future. The reader should not place anyundue reliance upon such forward-lookingstatements, which speak only as of the dateof this report. Chevron undertakes noobligation to publicly update any statementscontained in this report.Legal NoticeAs used in this report, the term “Chevron”and such terms as “the company,” “thecorporation,” “their,” “our,” “its,” “we” and“us” may refer to one or more of Chevron’sconsolidated subsidiaries or affiliates or to allof them taken as a whole. All of these termsare used for convenience only and are notintended as a precise description of any ofthe separate entities, each of which managesits own affairs.64

Above Pembroke Refinery, Wales. Front cover OperatorDarnelle Choi at the Hawaii Refinery.Chevron Corporation6001 Bollinger Canyon RoadSan Ramon, CA 94583-2324www.chevron.comThis report is printed using soy-based ink on Forest StewardshipCouncil–certified Neenah environment®, which is 100 percentpost-consumer recycled paper and processed chlorine-free.© 2005 Chevron Corporation. All rights reserved.913-0386B 20M 7/05Design by Flag www.flag.co.uk