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2002 ChevronTexaco Corporate Responsibility Report Environmental IssuesSpillsBackground: Addressingan Operational RiskOver the past several decades,ChevronTexaco has taken significantsteps to improve its performancein the area of oil andchemical spill prevention andresponse. We focus first on preventionby assessing our risksand taking necessary steps tomitigate them. Despite our bestA spill drill in Port Dickson,efforts, spills and leaks do occur,Malaysia, brought together governmentgroups and 80 employeesand we have developed a rigorousemergency preparedness andfrom the U.S., Asia, the Middleresponse system. As part of theEast and Africa.system, ChevronTexaco helpsfund numerous industry oil spillcleanup organizations worldwide and sponsors two or three major oilspill drills each year to provide training to several hundred key respondersthroughout the company. In 2002, we conducted major spill exercisesin Malaysia and Grenada. Individual facilities also conductnumerous emergency response drills each year, many in coordinationwith local and national authorities and other industry operators.Approach: Focusing on PreventionOur business units are taking a comprehensive and systematic approachto reducing the risk of spills. For example:> The California-based San Joaquin Valley Business Unit formed an OilSpill Prevention Team with a goal of eliminating spills. The unit establisheda spill-prevention budget to supplement facilities’ operatingbudgets, identified and prioritized the highest spill risks, and appliednew and existing technology to prevent spills. The unit decreased spillsby 700 barrels, or approximately 60 percent, between 2001 and 2002and is sharing its technology and learning across the company.> In Nigeria, ChevronTexaco’s upstream business unit implementeda new process to better assess the risk of leaks from pipelines.Through this analysis, it identified and is implementing more than25 distinct projects designed to achieve a tenfold reduction in therisk of spills related to pipeline corrosion, erosion-induced failure,mechanical damage, operational upsets or equipment failures.> ChevronTexaco’s North American pipeline company is implementinga Pipeline Integrity Management Plan. Under the plan, more than8,000 miles of pipelines that could affect a “high consequence area”will be assessed, half by the end of 2004 and the remainder by the endof 2010. High-consequence areas include populated areas, commerciallynavigable waterways, unusually sensitive ecological areas anddrinking water sources. These assessments will include the use ofinternal inspection tools, called “smart pigs,” to measure and analyzeconditions along the walls of the pipes to pinpoint potential problemsbefore they can become leaks.> In 2002, ChevronTexaco Shipping (CTS) Company led the industryin spill prevention. With an intense focus on spill prevention, CTStransported more than 250 million barrels of crude oil in its controlledfleet of vessels, without a single spill to water.Performance: Establishing a Commitment to ImproveWe were not satisfied with our performance in this area in 2002 becausewe did not make progress in reducing spills from the previous year, andwe did not meet our performance target. In 2002, ChevronTexaco had1,502 oil spills, with a total spilled volume of nearly 55,000 barrels. Thisis in the context of 2002 net production of crude oil and natural gas liquidsof approximately 638 million barrels and product sales totalingapproximately 1.4 billion barrels. Many of these spills were containedwithin areas such as dikes around tanks. We track all spills because theyhave the potential to affect the environment. Less than 1 percent of thespilled oil went to water, and a little more than half of the total spilledvolume was immediately recovered.ChevronTexaco experienced two significant oil spills in 2002: a 14,000-barrel spill at a storage facility in Panama, which was contained withinthe tank dike area, and an 18,000-barrel spill in Nigeria associated witha tank fire ignited by a lightning strike. In the latter case, a smallamount of oil was released from the tank containment area. This eventis a primary factor contributing to our relatively low amount of spilledoil recovered when compared with 2001; oil consumed in the fire wasnot counted as “recovered.”We recognize that even minor spills can have an impact. For example,a relatively small spill (nine barrels) in our upstream operations inCabinda, Angola, had a significant impact on the local community.Fishing in the vicinity was suspended immediately for a number of daysas a health and safety precaution. While the environmental effects wereminimal, and we believe we responded effectively and responsibly, ourreputation nevertheless was damaged as a result of this incident. Duringthe investigation into the cause, it was determined that the underseapipeline involved could not be repaired easily and returned to service© 2003 ChevronTexaco Corporation. All Rights Reserved.45