ALICE — For a city that always has lived and died by the oil field, life is good right now.
Flush with cash generated from sales and hotel occupancy taxes — all bringing in money associated with the oil and gas boom — the town is planning something most South Texas cities couldn’t contemplate even a few years ago: paying for a new event center without dipping into reserves and without taking on debt.
In the past two fiscal years, Alice set aside more than $4 million in seed money for the project, envisioned as a multipurpose convention center and natatorium. It has committed $70,000 to an assessment to determine the type and scale of facilities the community wants.
This phase included a town hall meeting Tuesday night, dominated by the community’s swimmers, including swim team coaches and student athletes lamenting the practice time lost on hourlong bus rides to and from Corpus Christi, site of the nearest pool that serves their training needs
Years from now, Alice swimmers may not draw a connection between the convenience of a modern, hometown pool and the heavy oil field trucks that lumber to and from town with loads of sand, water and drilling equipment. But to project planners and city leaders, that connection is everything.
Alice sits just south of the Eagle Ford Shale, a 400-mile long underground rock formation in Central and South Texas unleashing ancient stores of natural gas and crude oil with new technology called hydraulic fracturing. In the past two years, oil field service companies have expanded their Alice facilities, brought hundreds of jobs and filled up every hotel room in Alice, prompting more to to be built.
“If Eagle Ford Shale was not in play to the level it is, there would still be a need (for a multipurpose center), but it would not be as big,” City Manager Ray De Los Santos said. “There would still be funding available, but it would not be as much.”
For the fiscal year ending Sept. 30, Alice budgeted $650,000 a month in sales tax revenue. Only one month came in under $1 million, giving the city a $6 million surplus.
The event center project was being considered even before the Eagle Ford boom started in earnest in 2009. But the facility almost surely will be larger than what was initially imagined because the city can afford it, and because it anticipates the demand will be there to support it for years to come.
Oil boom and bust cycles notoriously are unpredictable and, at least in the past, short-lived on the boom end. But with Eagle Ford, analysts are expecting a ramp-up in production to last as long as 10 years, with production remaining steady at least another decade.
“This has changed the model for communities in South Texas because they have a long-term horizon where they can plan for capital improvements,” said John Michael, project engineer for Naismith Engineering. Naismith is conducting the needs assessment in Alice and has contracts with governments throughout the region.
Michael said there has been a dearth of new swimming pools in South Texas in the past 30 to 40 years because the last bust cycle drained the financial resources of communities and they never fully recovered.
De Los Santos said Alice isn’t taking Eagle Ford longevity for granted. Other South Texas cities have struggled with keeping convention centers and similar venues afloat. Last fiscal year, the American Bank Center convention center and Selena Auditorium in Corpus Christi posted a $1.3 million loss. And in Aransas Pass, the convention center has become a political football as officials try to figure out how to make it profitable.
It’s unclear how much the Alice multipurpose center would cost, where it will be built or exactly what it will entail. Project planners want to spend more time gathering input before making decisions.
The $70,000 study includes market analysis, financial projections, economic impact analysis, and aquatic and convention center complex conceptual analysis, De Los Santos said.
The general vision is a campuslike setting with meeting facilities, room for a privately-developed hotel, walking trails in a parklike area, and, of course, the pool.
Swim team coaches, members and athletes told the planners Tuesday that the city, with only one six-lane municipal pool that’s at least 30 years old, sorely needs a facility ready for competition, for family relaxation and for general health in a community suffering high obesity rates.
The town has a nonprofit swim group of more than 100 participants in the summer, and its school swim teams regularly compete at the state level.
Alice High School‘s senior class president, Horacio Rangel, said he rides two hours on the bus every day to keep up his swim training, but the bus isn’t the best environment for homework. He recently dropped to No. 22 in academic ranking in his senior class.
“I’d be top 20,” he said, “if I had more time to study.”
Ask anyone on the bayou if they know about Port Fourchon, and you’ll no doubt get a yes. “That’s where my daddy works.”
“That’s where we launch our boat.” “That’s where oil comes from.”
But when you ask the average person how Port Fourchon works or what the Greater Lafourche Port Commission does, the answer is not so clear. Most people don’t know what a great gem we have here in our community, so here is a brief rundown: who we are, what we do, how we’ve worked our way into being one of the nation’s most important economic engines and why it is vital to keep that engine running.
The Greater Lafourche Port Commission is a political subdivision of the state of Louisiana, formed in 1960 and governed by a nine-member board, the only elected port commission in the state of Louisiana.
We have 37 employees that do an outstanding job of handling the day-to-day operations, maintenance and administration of Port Fourchon and the South Lafourche Leonard Miller Jr. Airport. The commission operates predominantly as a “landlord” providing basic infrastructure to its tenants.
We construct roads and waterlines, dredge channels, construct bulkheads and provide basic land at Port Fourchon.
We provide basic airport infrastructure like a runway, parallel taxiway, road access, waterlines, etc. Once the basic infrastructure is in place, the commission leases the property to businesses looking to serve the needs of industry.
At both the port and now the airport, the commission operates with its mission statement in mind: to facilitate the economic growth of the communities in which it operates by maximizing the flow of trade and commerce. We do this to grow our economy and preserve our environment and heritage.
Port Fourchon sits at the mouth of Bayou Lafourche, where it empties into the Gulf of Mexico and is easily accessible from any area in the Gulf. Located near the end of La. 1, Port Fourchon is in the center of one of the richest and most progressive industrial areas in the Gulf region.
We are constantly expanding to meet the needs of business and industry. Under the direction of the commission, the port is fortunate to have the knowledgeable leadership, available land and irrefutable logistical advantage that enable it to be the nation’s premier port for the continued support of oil-and-gas activity in the Gulf of Mexico.
Port Fourchon has grown from humble beginnings in 1960 into 1,700 acres in the most efficient location to service the needs of the Gulf oil-and-gas industry, with state-of-the-art facilities that exist nowhere else in the world.
The port’s tenants provide services to 90 percent of all Gulf deepwater activity and about 50 percent of drilling rigs in the entire U.S. Gulf, both shallow and deepwater. This activity, coupled with Port Fourchon being the service base for the Louisiana Offshore Oil Port, means that Port Fourchon plays a strategic role in furnishing this country with about 18 percent of its entire oil supply.
The South Lafourche Leonard Miller Jr. Airport in Galliano has proven to be a valuable element of the transportation system of Lafourche Parish and the state. Recognizing the potential major importance of the SLA in providing air transportation services to support the continued development of Port Fourchon and offshore mineral exploration and production, the Port Commission acquired the SLA in 2001. The GLPC also acquired the 1,200 acres surrounding the airport, which is open for industrial development and industrial housing. The airport has rapidly increased aircraft traffic since completion of its 6,500 foot runway with 75,000 pound wheel-load capacity, resulting in a 300 percent increase in jet traffic. We continue to expand the airport, with plans to add new navigational aids, hangars and taxiway.
In January 2010, after working for the commission since September 2005, I was afforded the opportunity to become the executive director, only the second person to do so since the port’s inception. I knew it would be a challenge, with the tough economic times the country had been in, all of the construction projects we were involved in at the port and airport and the planning of the port’s 50th anniversary celebration, but never did I imagine what would be coming. Obviously, I am talking about the terrible tragedy of April 20, 2010, when the Deepwater Horizon exploded, killing 11 men and causing the worst oil spill in our nation’s history.
Port Fourchon was at the epicenter of the response, recovery and subsequent cleanup effort for this disaster. Since facilities at the port were the base for the Deepwater Horizon, the evacuated rig workers were brought to Port Fourchon en route to getting back to their families.
With that began the influx of media and all that entails. Once it was realized that there was a major problem with the well and the oil was being emitted uncontrolled, we were tasked with preparation.
We began working with Lafourche Parish President Charlotte Randolph and her emergency preparedness staff to formulate a plan of action for protecting the parish’s coastline and keeping the vital economic activity at Port Fourchon operational throughout cleanup and waterway closures.
We spent countless hours meeting and planning, coordinating breach closures and ways to continue keeping Belle Pass, the port’s main waterway, open even though oil was approaching. When we knew that it was only a matter of time before we saw oil impacting our coast, we offered the commission’s Port Fourchon Operations Center for response collaboration efforts.
At that point, our Ops Center became the Lafourche Parish Emergency Operations Center for the oil-spill response. Our approach to the response was not “us against them,” but “How can we help?” That proved to be very successful. The collaborative group was comprised of the United States Coast Guard, BP, Governor’s Office of Homeland Security, Louisiana National Guard, Louisiana Department of Wildlife and Fisheries, Lafourche Parish Government, Lafourche Parish Sheriff’s Office, Port Fourchon Harbor Police and Port Commission executives.
Just when we were beginning to get a handle on the oil spill, the president and his administration decided to issue an arbitrary six-month moratorium on drilling and permitting in the deepwater Gulf of Mexico.
This action brought our region, a region of constant growth and record low unemployment that was not seeing much negative impact from the struggling national economy, to a screeching halt. Knowing that the tenants of Port Fourchon were going to be severely impacted by the federal government’s careless actions, the Port Commission proactively chose to freeze escalation fees and reduce basic land rental rates by 30 percent for one year.
This action served its purpose effectively, even though it meant millions of dollars of lost revenue for the port commission, because it helped our port tenants, especially the small, growing companies, to have a little breathing room to develop their financial strategies and to cope with the sudden moratorium-induced loss of current and future business. It was scary to many of us when the cranes stopped moving in Fourchon. We wanted to let our tenants know that we were right there with them in the trenches, fighting against the one-two punches of oil spill and moratoriums.
The moratorium was lifted on Oct. 12, 2010, and despite a horde of new regulations, rules, processes and acronyms, still no permits were issued for deepwater drilling. Moratorium became “permitorium.”
To this day, permit issuances for both deepwater and shallow water activities remain few and far between. Based on the Department of Interior’s own statistics, permits for deepwater activities are 40 percent off the mark, shallow-water permits are 60 percent down, and overall turnaround time for all permits is 40 percent slower. I, for one, believe that this is unacceptable.
These permitting issues that continue to inhibit the oil-and-gas industry have a cascading effect on this nation as a whole, not just “Big Oil,” as the Obama administration would say. It starts at the top with the oil-and-gas companies, then gets transferred through the supply chain.
The industry purchases supplies, equipment, high-end technology, geological and other services from vendors in every corner of the United States. It reaches each household in some form or fashion. The downturn in energy exploration and production in the Gulf of Mexico has affected not only Port Fourchon but the entire country.
Because of the importance of the oil-and-gas industry to our way of life, the commission helped organize the Gulf Economic Survival Team. This organization, through the leadership of Department of Natural Resources Secretary Scott Angelle, has been instrumental in facilitating what progress has been made on the permitting front. GEST and its Executive Director Lori Leblanc must be applauded as they have brought industry executives and BOEMRE staff together in an attempt to work out the regulatory/permitting issues. There is a still huge “activity gap” between the regulatory regime’s willingness and ability to issue much-needed permits and the oil-and-gas industry’s capabilities to invest in the energy security of our nation.
According to a study commissioned by GEST, if the bureau could close the “activity gap,” 2012 could see 230,000 American jobs, $44 billion added to the U.S. gross domestic product, $12 billion in tax and royalty revenues, 400,000 barrels more of oil produced per day, and a reduction of $15 billion in imported oil costs to the nation. In a time in this country when we have a jobs problem, a revenue problem, a spending problem and an energy problem, the answer is clear. Issue the permits now! There are thousands of workers in Port Fourchon who just want to see the cranes moving again.
Obviously, the last two years for the commission, Port Fourchon, and its tenants have been a roller-coaster ride. Personally, it has been an enormous learning experience. From federal, state, and local agency head visits to television interviews and testifying at congressional hearings, the first two years of my tenure as executive director have molded the future and set a path for what is to come.
We at the commission stand ready and able to tackle any challenge that comes our way.
We do this with the mindset of what is best for our community. That is why in looking toward the future, we plan to continue to expand Port Fourchon and the South Lafourche Leonard Miller Jr. Airport.
The issues we currently face will be resolved, and we stand poised to capitalize on the activity that will follow. We will continue to support our tenants in every way possible as a sign of appreciation for the prosperity that they have given to our community. Port Fourchon works. Period!
Chett Chiasson is the executive director of Port Fourchon.
6 August 1957
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The first successful oil well in Louisiana was drilled in Jennings in late 1901, spawning an industry that dominated the state for decades. The strike came about nine months after the massive Spindletop find in nearby Beaumont, Texas, set off oil fever throughout the Southwest.
A group of Jefferson Davis Parish businessmen went to Beaumont to recruit oilman W. Scott Heyward to drill a well at the site of a natural gas seep. The plan was to quit after drilling 1,000 feet. But undeterred by nervous investors, Heyward kept going until he was down to his last piece of drill pipe at 1,700 feet. Soon a four-inch geyser spewed from the well and Jennings was in full production by 1902.
By the late 1920s, the oil rush turned to south Louisiana. Tens of thousands of workers descended on the area from across the country, digging pipelines, erecting rigs and servicing wells.
After fevered drilling in west and north Louisiana, the shallow marshes of South Louisiana became the center of the nation’s oil production in the 1930s. Oil production on land and in state-controlled waters peaked in 1969. The state is the sixth largest producer today.
To get to the oil fields, canals were dredged through the marshes. Today, those canals are seen as a huge environmental blunder, as the spoil banks interrupt the natural flow of the water and the canals channel grass-killing salt water inland.
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Susan Buchanan Sunday, September 11, 2011
Marine Management, LLC managing member Cliffe Laborde (left), with Peter Laborde
As seen in the August edition of MarineNews, Susan Buchanan updates readers on the GOM oil production situation.
BP’s gushing well was capped more than a year ago but life is hardly back to normal in the U.S. Gulf–where rigs and vessels remain underutilized. At least ten rigs have moved overseas since last summer. Gulf oil production is below pre-spill levels and won’t recover anytime soon, analysts say. Issuance of drilling permits picked up this spring as operators agreed to use oil-containment systems but permitting lags earlier rates.
Paul Candies, president and CEO of Otto Candies, LLC, in Des Allemands, La., said offshore activity has increased recently, and “we expect to see a slow trend toward more drilling “ But the marine industry shouldn’t get lulled into a false sense of security. “We need to continue to push for more permitting of rigs and simplification of that process,” he said. Candies gave a positive report about his company, saying “all of our platform supply vessels are committed at present for extended periods. We have three inspection, maintenance and repair vessels on long-term commitments, and should have a fourth IMR vessel committed by year end.” Otto Candies is a marine transportation and offshore services company.
At Laborde Marine Management, LLC, in New Orleans, managing member Cliffe Laborde said “I think the worst is over, but we’re a long way from getting back to where we were shortly before the Macondo spill.” Laborde Marine, with operations in Morgan City, La., services the deep and shallow water drilling industry.
- Gulf Assets Move Overseas
Laborde provided some recent history, and explained how promising times in the Gulf had turned sour. “In early 2010, as the economy emerged from a two-year recession, the Gulf energy industry was beginning to bloom,” he said. “Utilization rates for deepwater support vessels were high, and charter rates were rising again. The outlook was very good, but then came the spill and the market has languished since.”
Laborde continued, saying “many deepwater vessels and rigs have moved out of the GOM to foreign areas, and many vessels and rigs that stayed in the Gulf are idle now, waiting on BOEMRE to issue new permits.” The granting of new drill permits has been “alarmingly anemic,” he added.
Rigs are underutilized in the Gulf this summer. The fleet utilization rate for all 52, offshore Gulf platforms was 40.4% on July 22, less than half the worldwide usage rate for platforms, according to ODS-Petrodata, Inc. Utilization of mobile rigs in the Gulf stood at 53.7% on July 22.
Meanwhile, other drilling regions in the world are closer to full capacity. In Europe and the Mediterranean, 96.3% of all platform rigs and 87.7% of mobile rigs were in use in late July. Oil and marine companies can’t afford to keep assets in waters where they’re not needed. Since the start of the deepwater moratorium in May 2010, at least ten rigs have left the Gulf of Mexico, and headed to Angola, Egypt, Congo, Nigeria, French Guiana, Liberia, Brazil and Vietnam. One of those rigs returned to the Gulf in March, however, and another is slated to come back this fall.
- Shallow Water Activity Could Slow Further At Late Year
In Morgan City, La., Dave Barousse, business development director at Fleet Operators, Inc., said “in the shelf market, or non-deep water at depths of 1,000 feet and less, we have not seen an increase in business because of the end of the moratorium. However, business has been steady as a result of the normal construction and maintenance work offshore that generally takes place during the summer months.” But, he said, activity is considerably slower than before the deepwater moratorium.” Fleet Operators owns and charters supply vessels for the offshore oil and gas industry. And Barousse said “we’re preparing for things to slow down tremendously once winter weather is upon us. The outlook is not very positive at the moment, and will be even worse by the end of the year.”
- Gulf Oil Output Projected To Decline This Year and Next
Crude oil production from the federal Gulf of Mexico is expected to shrink from 1.64 million barrels per day in 2010 to 1.49 million bpd this year and 1.38 million bpd in 2012, according to the U.S. Energy Information Administration‘s short-term energy outlook, released in July. Gulf output should drop by 150,000 barrels a day this year and another 110,000 bpd in 2012.
The EIA said this year’s decline stems from lower production in existing fields, last year’s drilling moratorium and a subsequent delay in issuing new drilling permits. Even before the BP spill and the drilling ban, the EIA expected Gulf oil output to fall this year.
- Issuance of Drilling Permits Lags Pre-Moratorium Pace
Jim Adams, president and chief executive of Offshore Marine Service Association, an industry group in Harahan, La., said the Administration’s approval rate for exploration and development plans is down 85% from pre-moratorium levels, and the number of drilling permits covered by exploration and development plans is off nearly 65%. He cited a study called “Restarting the Engine–Securing American Jobs, Investment and Energy Security,” released by IHS CERA and IHS Global Insight in late July.
Adams said “no industry can operate with that kind of shutdown.” He said the Obama Administration is sending rigs, boats and jobs overseas in an indefensible policy. OMSA represents more than 250 member companies, including about 100 firms that own and operate marine-service vessels. “The offshore marine industry remains in a state of crisis, almost as if the drilling moratorium was never lifted, and the only relief from excess capacity is overseas opportunities,” Adams said. “The Administration has strangled offshore drilling, and until that changes, we can’t look for better times in the marine industry.”
Adams said Washington has choked the Gulf shallow sector though it never had any significant spills. “There’s no reason that shallow water permits shouldn’t be 100% of what they were in the spring of last year, but we’re not even close,” he said. “The Administration isn’t interested in shallow-water or deepwater exploration.”
OMSA sent a letter to President Obama in February complaining about suspended offshore drilling and its impact on marine industry jobs. “We never heard back from the Administration and that’s because they know we’re right,” Adams said. According to OMSA, more than 50,000 wells have been safely drilled in the Gulf of Mexico over the past fifty years.
- Problems with Rig Permit Numbers
Adams said “BOEMRE numbers on Gulf drilling permits are completely misleading. We need to know how many wells are brand new that will lead to exploration and how many wells are being re-permitted from last year.” Someone looking at BOEMRE’s website might think that new wells are keeping pace with pre-moratorium levels, but they aren’t, he said. He added that oil and marine industries need to be able to compare how many exploratory wells are permitted. “It takes an average seven permits for a well to start producing,” he noted. In March, Senator David Vitter (R-La.) also sent a letter to U.S/ Interior Dept. Secretary Ken Salazar and BOEMRE director Michael Bromwich, complaining about inaccurate, federal information on Gulf drilling permits.
In their July study, IHS CERA and IHS Global Insight said an analysis of BOEMRE data provided several findings. “The current pace of plan and permit approvals is significantly below historical norms and indicates that the process is not working smoothly,” researchers said. And “the growing backlog of plans awaiting approval indicates that the industry remains ready to invest as quickly as it is permitted to do so.”
- Rigs and Vessels Adopt Oil Containment Systems
One way to get your vessel hired in the Gulf is to outfit it with spill-response equipment. After BP’s accident, BOEMRE issued new regulations requiring that rig operators be able to respond to subsea leaks and surface spills. In late July of this year, two Hornbeck Offshore Services vessels were added to the fleet of ships that can respond to a Gulf accident, the Marine Spill Response Corp. said. MSRC is a non-profit company that was established in 1990. Hornbeck’s HOS Centerline and HOS Strongline are vessels with oil-skimming systems, ocean boom, support boats and navigational systems that can support skimming at night and in stormy weather.
Hornbeck, based in Covington, La., in late May posted its first quarterly loss in over six years, but said it was diversifying by moving vessels into foreign markets. This summer, BOEMRE director Bromwich said his agency will issue more safety measures for Gulf rigs soon. At the fifth, annual World National Oil Companies Congress in the U.K. in late June, he said “offshore drilling in the U.S. and around the world will never be the same as it was a year ago. Changes that we have put in place will endure because they were urgent, necessary and appropriate.” More regulations will be issued, but not at the frantic pace of the past year, he said.
- Report Delayed On Who’s To Blame for Spill
In late July, a U.S. team examining the causes of the BP spill delayed the release of a final report as it continued weighing evidence. BOEMRE and the U.S. Coast Guard were expected to issue results of a joint investigation on July 27 but said they needed more time. The Gulf marine industry wants additional rigs to start drilling soon. Laborde said “the oil companies, the rig operators and the energy-service companies are all anxious and ready to get back to work. This would create jobs, improve the economy, increase government revenues through royalty income and taxes, and enhance our national security by lessening dependence on foreign oil.” Where the Gulf oil and marine industries go from here is up to decision makers in Washington, he said.
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McMoRan Exploration Co. today announced results from interim logging operations at the Lafitte ultra-deep exploration well located on Eugene Island Block 223 in 140 feet of water. The Lafitte well commenced drilling on October 3, 2010 and has been drilled to 27,038 feet.
Wireline logs indicate several Lower Miocene sands below 24,300 feet that appear to be hydrocarbon bearing. The sands have various thicknesses that aggregate approximately 200 gross feet (95 feet net), some of which are contained within a thin-bedded, sand-shale formation (i.e. laminated section).
These Lower Miocene aged sands are correlative to Lower Miocene sands seen onshore and in the deepwater of the Gulf of Mexico and provide additional confirmation of McMoRan’s ultra-deep geologic model. Lafitte is McMoRan’s third ultra-deep prospect to encounter Miocene age sands below the salt weld on the Shelf of the Gulf of Mexico.
McMoRan is preparing to set casing in the Lafitte well to 27,000 feet and plans to deepen the well to a proposed total depth of 29,950 feet to evaluate deeper Miocene objectives and possibly the Oligocene section. McMoRan holds a 72.0 percent working interest and 58.3 percent net revenue interest in Lafitte. Other working interest owners in Lafitte include: EXXI (18.0%), and Moncrief Offshore LLC (10.0%).
McMoRan Exploration Co. is an independent public company engaged in the exploration, development and production of natural gas and oil in the shallow waters of the GOM Shelf and onshore in the Gulf Coast area.
Chevron Corporation announced a new oil discovery at the Moccasin prospect in the deepwater U.S. Gulf of Mexico. The Keathley Canyon Block 736 Well No. 1 encountered more than 380 feet of net pay in the Lower Tertiary Wilcox Sands. The well is located approximately 216 miles off the Louisiana coast in 6,759 feet of water and was drilled to a depth of 31,545 feet.
“The Moccasin discovery underscores the importance of the deepwater Gulf of Mexico as a source of domestic energy for the United States and as a focus area for Chevron’s worldwide exploration portfolio,” said George Kirkland, vice chairman, Chevron Corporation. “Moccasin is an important addition to our queue of high-quality opportunities around the globe.”
Chevron began drilling the Moccasin well in March 2010. That activity was stopped in June 2010 when the U.S. government imposed a moratorium on deepwater drilling in the Gulf of Mexico. Drilling resumed in March 2011 after the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement approved Chevron’s revised drilling permit application.
The well results are still being evaluated, and additional work will be needed to determine the extent of the resource. Chevron, with a 43.75 percent working interest in the prospect, was the operator of the Moccasin discovery well. Other Moccasin owners are BP, with 43.75 percent, and Samson Offshore Company, with 12.5 percent.
Chevron is one of the largest leaseholders in the Gulf of Mexico and is currently developing the $7.5 billion Jack/St. Malo and the $4.1 billion Big Foot projects.
Chevron is one of the world’s leading integrated energy companies, with subsidiaries that conduct business worldwide. The company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels. Chevron is based in San Ramon, Calif.