Chevron reveales post-merger plan on S.E Asia business units

The following is an excerpt from internal communication distributed to Chevron Corp. employees dated July 8, 2005 and filed by Unocal Corp. to the SEC on July 13, 2005 regarding Chevron?s plan to manage its South and South East Asian assets including Indonesia if it were successful in merging with Unocal.

?Chevron International Exploration and Production (CIEP)

The geographic boundaries of Chevron?s international upstream operating company, CIEP, will be maintained post merger. Where we see significant changes in organization design is with our Asia South and Indonesia business units. The addition of substantial Unocal assets in this region will expand the scale and scope of our business significantly, and our organization design reflects this growth.

Asia South

Unocal has had a long-standing, successful exploration and producing operation in Thailand and more recently in Bangladesh and Myanmar, as well as exploration assets in Vietnam. Chevron also has exploration and producing operations in Thailand and exploration assets in Cambodia. The post-merger Asia South organization places all of these countries under common leadership, designed to efficiently utilize our human resources across the region as well as strategically position the company to compete for regional oil and gas resources and serve a growing regional gas market.

The Gulf of Thailand is the dominant production area in the region for both companies, with 2004 year-end combined production of 202 thousand barrels oil equivalent per day net (mboed). The existing Unocal operation in the Gulf is several times larger than Chevron?s and has a long history of success, so it serves as the basis of the design for the go-forward Thailand business. We plan to basically integrate Chevron?s B8/32 producing operation into the existing Unocal operations. The larger asset base requires split management responsibilities in the form of general managers over Assets and Operations Services. This design should minimize any operational disruption and maximize opportunities for efficiencies.

IndoAsia (formerly Indonesia SBU)

Chevron?s presence in Indonesia has been concentrated on the island of Sumatra through the 80-year-old Caltex Pacific Indonesia (CPI) operations. Gross production exceeds 500,000 boepd from the vast array of fields that include the world class Minas waterflood and Duri steamflood. Activities outside of Sumatra include the nonoperated Natuna Sea operations.

Unocal assets are located at East Kalimantan with existing offshore production on the shelf, and deepwater discoveries, primarily of natural gas, being evaluated for development. This offers the potential for an expanded liquefied natural gas (LNG) portfolio in the region, above the current volumes that Unocal now moves through the Bontang LNG facility.

Both companies also have geothermal assets. Unocal operates geothermal assets located at Salak on West Java in Indonesia and at Mak-Ban and Tiwi in the Philippines. Chevron has a successful geothermal operation and associated power generation assets at Darajat on the island of Java and also operates the Duri cogeneration plant on Sumatra.

The IndoAsia organization design provides for common, high-level leadership across all of the Indonesian assets while maintaining individual operations largely as is. Common management of Unocal?s Indonesia and Philippines geothermal assets with Chevron?s Indonesia geothermal assets will facilitate the sharing of best practices and resources across that unique business. Given a resultant SBU geography broader than just Indonesia, the more regional SBU name IndoAsia is appropriate.

The additional gas resources in both IndoAsia and Asia South provide Chevron with an expanded slate of opportunities to develop a high-impact global gas business. The organization design includes commercial positions for both Upstream and Global Gas, which will work closely together to develop resources and markets for LNG.? (alex)