© 2012 Chevron U.S.A. Inc. All rights reserved. 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

© 2012 Chevron U.S.A. Inc. All rights reserved. Bringing Global Knowledge and Experience Driving sustainable development 1 Focusing on prevention is key to safe & responsible development Applying lessons learned and best practices globally Enabling economic growth while protecting the environment

© 2012 Chevron U.S.A. Inc. All rights reserved World-Class Natural Gas Field in our Backyard Recoverable Reserves (Tcf) 2 South Pars/1,235 North Dome Iran & Qatar Marcellus489 United States Urengov222 Russia Yamburg138 Russia Hassi R’Mel123 Algeria Marcellus Shale: The 2011 Playbook, July 2011 edition,

© 2012 Chevron U.S.A. Inc. All rights reserved. 3 >700,000 net acres of Marcellus Shale 60% operator of a Marcellus Shale JV 49% non-operating interest in Laurel Mountain Midstream Active exploration in Utica trend Growing development capability Overview of Chevron’s Marcellus Operations Premier acreage – a future legacy asset Marcellus Trend Utica Trend MI 161 KM

© 2012 Chevron U.S.A. Inc. All rights reserved. Marcellus Shale A Great Public Resource and Responsibility 4 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

© 2012 Chevron U.S.A. Inc. All rights reserved. Combining Two Technologies Hydraulic Fracturing and Horizontal Drilling 5 Provided by Marcellus Shale Coalition  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.

© 2012 Chevron U.S.A. Inc. All rights reserved. Hydraulic Fracturing A Proven and Safe Technology 6 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

© 2012 Chevron U.S.A. Inc. All rights reserved. Shale Development New Application of Existing Technologies 7

© 2012 Chevron U.S.A. Inc. All rights reserved. 8 Multiple layers of steel casing and cement are used to protect the water table – both during drilling and for the life-of-well. Multiple layers of steel casing and cement are used to protect the water table – both during drilling and for the life-of-well. Shale Development New Application of Existing Technologies

© 2012 Chevron U.S.A. Inc. All rights reserved. 9 The well is drilled horizontally into the shale formation and is cased and cemented. Shale Development New Application of Existing Technologies

© 2012 Chevron U.S.A. Inc. All rights reserved. 10 The production casing and cement in the horizontal section is perforated to establish communication with the shale rock. Shale Development New Application of Existing Technologies

© 2012 Chevron U.S.A. Inc. All rights reserved. 11 Water and sand – with a small amount of chemicals – are pumped into the shale to create a network of fractures to release the gas. Shale Development New Application of Existing Technologies

© 2012 Chevron U.S.A. Inc. All rights reserved. 12 The well is put on production - it will produce gas and small amounts of water for decades. Shale Development New Application of Existing Technologies

© 2012 Chevron U.S.A. Inc. All rights reserved. Responsible Development Focus on Prevention  Protecting groundwater  Protecting surface water and land  Reducing environmental impact 13

© 2012 Chevron U.S.A. Inc. All rights reserved. Well Design – SW Pennsylvania Properly designed wells protect groundwater over life of well 14 Steel BarriersCement Barriers Fresh water protection Coal seam isolation and protection Intermediate casing: hole stability and well control Max. groundwater Max. coal  350'  700'  2,700' >7,000' to groundwater 7,500' – 8,500' TVD Not shown to scale Lateral length (Shale)Fracture (Well) Mixture of water, sand and chemicals, under pressure, form fractures Natural gas flows from fractures into well

© 2012 Chevron U.S.A. Inc. All rights reserved. A Designing Wells to Protect Groundwater Multiple barriers of protection 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 ’ from the surface 5 ½” Production Casing Extends 10,500’ – 14,500’ from the surface to end of horizontal section 15 All strings cemented back to surface

© 2012 Chevron U.S.A. Inc. All rights reserved. Protecting Surface Water and Land Multiple 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 16

© 2012 Chevron U.S.A. Inc. All rights reserved. Reducing Environmental Impact Good Practices 17 Pad drilling Reduce footprint Accelerate reclamation process with hydro-seeding Centralized impoundments Minimize freshwater use: Recycle water from wells Use of non-potable water

© 2012 Chevron U.S.A. Inc. All rights reserved. Minimizing Our Environmental Footprint Multiple wells from a single pad 18

© 2012 Chevron U.S.A. Inc. All rights reserved. Reclamation of Land Restoring the land to its original contours 19  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

© 2012 Chevron U.S.A. Inc. All rights reserved. Life of a Well Active Development vs. Production 20 ~98% well life: minimal footprint ~2% well life: development activity 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 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

© 2012 Chevron U.S.A. Inc. All rights reserved. Safe and Responsible Resource Development Drive continuous improvement across the industry 21 Ensure our own operations are safe and environmentally responsible Engage regulators to share new technologies and practices Advance sustainable shale development across the globe Establish high standards and practices across industry

© 2012 Chevron U.S.A. Inc. All rights reserved. Discussion