Sustainable Development of Natural Gas from Shale

1. Sustainable Development of Natural Gas from Shale Gregory Hild Chevron U.S. Marcellus Operations APEC Workshop on Unconventional Natural Gas Washington, D.C. 6 November 2012

2. Bringing Global Knowledge and ExperienceDriving sustainable development • Focusingon prevention is key to safe & responsible development • Applyinglessons learned and best practices globally Enablingeconomic growth while protecting the environment 1

3. World-Class Natural Gas Field in our Backyard Recoverable Reserves (Tcf) South Pars/ 1,235 North Dome Iran & Qatar Marcellus489 United States Urengov 222 Russia Yamburg 138 Russia HassiR’Mel 123 Algeria Marcellus Shale: The 2011 Playbook, July 2011 edition, www.hartenergy.com.

4. Overview of Chevron’s Marcellus Operations Premier acreage – a future legacy asset >700,000 net acres of Marcellus Shale 60% operator of a Marcellus Shale JV 49% non-operating interest inLaurel Mountain Midstream Active exploration in Utica trend Growing development capability Marcellus Trend Utica Trend 161 KM 100 MI 0 50

5. Marcellus ShaleA Great Public Resource and Responsibility Tremendous positive impact in Pennsylvania. In 2010: • Supported nearly 140,000 jobs • Generated $11.2 billion in the regional equivalent of gross domestic product • Added $1.1 billion to state and local tax revenues Chevron is committed to: • Responsible development globally • Keeping people safe and protecting the environment • Working closely with local governments, respecting our neighbors and investing in the community

6. Combining Two TechnologiesHydraulic Fracturing and Horizontal Drilling • Over the past decade, we have used innovation to combine hydraulic fracturing with another technology - horizontal drilling, to unlock natural gas from shale rock. • Hydraulic fracturing occurs several thousand feet away from groundwater zones. Provided by Marcellus Shale Coalition

7. Hydraulic FracturingA Proven and Safe Technology • Used safely in the U.S. since 1949 on more than 1.2 million wells • 90 percent of oil and gas wells use hydraulic fracturing technology worldwide • Not a technique used exclusively on shale gas wells

8. Shale DevelopmentNew Application of Existing Technologies 7

9. Shale DevelopmentNew Application of Existing Technologies Multiple layers of steel casing and cement are used to protect the water table – both during drilling and for the life-of-well. 8

10. Shale DevelopmentNew Application of Existing Technologies The well is drilled horizontally into the shale formation and is cased and cemented. 9

11. Shale DevelopmentNew Application of Existing Technologies The production casing and cement in the horizontal section is perforated to establish communication with the shale rock. 10

12. Shale DevelopmentNew Application of Existing Technologies Water and sand – with a small amount of chemicals – are pumped into the shale to create a network of fractures to release the gas. 11

13. Shale DevelopmentNew Application of Existing Technologies The well is put on production - it will produce gas and small amounts of water for decades. 12

14. Responsible DevelopmentFocus on Prevention • Protecting groundwater • Protecting surface water and land • Reducing environmental impact

15. Well Design – SW PennsylvaniaProperly designed wells protect groundwater over life of well Steel Barriers Cement Barriers Max. groundwater 350' Fresh water protection 700' Coal seam isolation and protection Max. coal Mixture of water, sand and chemicals, under pressure, form fractures Natural gas flows from fractures into well Intermediate casing: hole stability and well control 2,700' (Well) >7,000' to groundwater Fracture (Shale) 7,500' – 8,500'TVD Lateral length Not shown to scale

16. Designing Wells to Protect GroundwaterMultiple barriers of protection A 16” Casing: Fresh Water Protection Extends + 350’ from the surface 11 ¾” Casing: Coal Seam Isolation & Protection Extends + 700’ from the surface 8 5/8”Intermediate Casing: Hole Stability & Well Control Extends + 2700’ from the surface 5 ½” Production Casing Extends 10,500’ – 14,500’ from the surface to end of horizontal section All strings cemented back to surface

17. Protecting Surface Water and LandMultiple Steps Taken to Prevent Fluid Release • Multiple barriers, such as containment liners and berms, used to prevent leaks and spills • Erosion and sedimentation controls protect surface water • Significant regulatory oversight at state level • Robust internal environmental compliance inspection process • Baseline water quality tests within 3,000 feet of each well

18. Reducing Environmental ImpactGood Practices Pad drilling Reduce footprint Accelerate reclamation process with hydro-seeding • Centralized impoundments • Minimize freshwater use: • Recycle water from wells • Use of non-potable water

19. Minimizing Our Environmental FootprintMultiple wells from a single pad

20. Reclamation of LandRestoring the land to its original contours • Work closely with landowners and regulators to develop reclamation plan • Reclamation process begins immediately after operations are complete • Indigenous grass using a process called hydro-seeding accelerates re-growth

21. Life of a WellActive Development vs. Production ~98% well life: minimal footprint • Shale gas wells are expected to produce for ~50 years • Long-term footprint of a well pad is typically less than 1 acre • Shale gas wells typically require minimal future well work ~2% well life: development activity

22. Safe and Responsible Resource DevelopmentDrive continuous improvement across the industry Ensure our own operations are safe and environmentally responsible Establish high standards and practices across industry • Engageregulators to share new technologies and practices Advancesustainable shale development across the globe 21

23. Discussion