IRAN - SAUDI ARABIA: Iran oil minister due in Riyadh May 1



Iran’s Minister of Petroleum Seyyed Kazem Vaziri-Hamaneh will leave here for the Saudi Arabian capital Riyadh on May 1 to attend an Asian ministerial meeting.

Vaziri-Hamaneh is to deliver speech in Wednesday’s meeting on Iran’s stances on the Asian energy market.


The International Energy Forum’s headquarters is in Riyadh and the IEF meeting is held every two years.

Japan is helping Saudi Arabia host the upcoming biennial.


IRAN - INDIA: India keen to invest in SE Iran
India announced its readiness to invest in high-pressure power sector and steel mill in Sistan-Baluchestan Province in southeastern Iran, the provincial Trade Organization reported on Sunday.

An Indian delegation visiting Zahedan, the provincial capital city, voiced its eagerness to invest in production of high-pressure transformers and pylons and construction of steel mill.



Baja

RUSSIA: Gazprom steps on the gas

PricewaterhouseCoopers (PWC) analysts forecast that one-third of natural gas traded in the world will be liquefied in 2010.

Meanwhile, Gazprom, a Russian monopoly with ambitions to be a global energy producer, is suffering from a bad shortage of liquefied natural gas (LNG) production and export facilities.

The feeling at the company is that this shortage is increasingly damaging its prospects, and its management has lately made some major efforts to develop its own production and export infrastructure for LNG. Gazprom is making preparations to win a sizeable part of the market in order to dominate it by 2030.

LNG projects are being undertaken in response to changes in the gas market, as shown by a debate at the recent Gas Exporting Countries Forum in Doha, the capital of Qatar. Gas producers' growing desire to join forces is foundering on the absence of a gas market as a platform for joint moves, for example, in price coordination.

Actually, there is no global gas market at present; it is divided into regional segments, including North America, Europe, Asia, and South America. Most deliveries are through pipelines, and prices are fixed by long-term contracts, rather than in daily trading. Even in the case of LNG exports, liquefaction and deliquefaction terminals are so costly to build that export flows cannot be rerouted on short notice, again prompting the use of long-term contracts.

On the other hand, gas exporting countries have called for some thorough structural changes in the markets, above all raising the proportion of liquefied gas in the world to at least 10-15%.

Increasing the share of LNG in the gas trade would in effect establish a world market. And that share is increasing quickly. World LNG sales in 2005 totaled 188.8 billion cubic meters, accounting for 26.2% of world gas sales (the figure was 3% in 1970).

A report released by PWC at the beginning of this year and dealing with prospects for a worldwide natural gas market says that stepped-up LNG operations will bring about far-reaching changes in the next three years. In 2010, as a result, liquefied gas will make up one-third of all supplies. By 2020, the amount of gas exported by pipeline will decrease to 38% of all trade.

The United States and Southeast Asia, especially China and South Korea, are expected to consume most of LNG. Already, the latter's share of total gas consumption in the United States is more than 25%. Up to 85% (45 billion cubic meters) of Japan's gas consumption is in the form of LNG imports.

According to forecasts by the International Energy Agency (IEA), LNG imports to Europe in 2030 will rise sixfold, and total gas consumption in Europe will increase by 80%. LNG's share of the gas sold in Europe will grow from the present 8.6% to 27%.

The stakes are high in this game. According to the IEA, the gas industry, both investor-owned energy companies and their partners that control resources, will invest more than $135 billion in LNG terminals and tankers.

These global processes are making Gazprom step up its LNG efforts. With no production of its own yet, Gazprom has begun LNG deliveries through swap deals to the United States, Britain, South Korea, and Japan.

Russia will produce its own LNG early in 2008, as part of the Sakhalin-II project. The plant will consist of two production lines with a capacity of 4.8 million tons each of LNG a year, two storage tanks of 100,000 cubic meters each, and one LNG shipping terminal. A spokesman for Shell (one of the project's participants) said that the capacity might be doubled. Considering that Japanese firms have signed contracts for 92% of the future volume, expansion is inevitable. According to experts, the Sakhalin-II project will allow Russia to become a leading gas exporter to the Asia-Pacific region and the U.S.

Russia is thus diversifying its gas routes, pushing into gas markets previously closed to it for geographical reasons: the U.S. Atlantic seaboard and Asia-Pacific countries. Experts believe that Sakhalin-II will make Russia a leading exporter of gas to those two markets.

Another LNG plant is planned in western Russia. Gazprom has short-listed four companies as possible partners for the Baltic LNG plant. In July, it plans to choose one or two, the plant's head, Alexander Krasnenkov, said.

Gazprom and Sovkomflot, a shipping company, set up the Baltic LNG company in 2005 (the former owns 80%, the latter 20%). It will build a liquefaction plant in Primorsk, with an annual output of about five million tons. Construction will cost $3.7 billion, and the plant is expected to go on stream in 2011-2012.

All these efforts are turning Russia into a global gas power. Moscow is continuing to play tug-of-war to gain a decisive say on the new world gas market that is rapidly taking shape.

Baja

eNergy Stocks: Oil stocks rise on Eni-Dominion deal

by Jim Jelter


Early action saw the Amex Oil Index ($XOI :1,290.34, +5.89, +0.5% ) rise as much as 0.5% after Eni (E :66.89, +0.12, +0.2% ) announced it would pay $4.76 billion to Dominion Resources Inc. (D :92.05, +0.50, +0.5% ) for a stake in Gulf of Mexico production properties expected to nearly triple Eni's output in the region to 110,000 barrels a day. See full story.

Eni made the purchase to replenish reserves while the deal for Dominion is part of an ongoing process to ease out of petroleum production and concentrate on its core power generation business. Dominion's shares rose up as much as 2.3% on the deal, hitting a 52-week high of $93.63, while U.S.-traded shares of Eni were little-changed at $66.81.

A big Gulf of Mexico oil field acquisition by Italy's Eni Group brought some excitement to the energy market Monday, bumping up oil stocks in the face of a slight pullback by crude prices.

The deal added some upward sentiment to a market otherwise getting little input from the underlying commodities. Crude-oil for June delivery, though still high, was off 55 cents at $65.91 a barrel on the New York Mercantile Exchange. Reformulated gasoline was up slightly, however, touching a new contract high of $2.415 a gallon. See Futures Movers.

Action in the other energy indexes was more muted, with the Amex Natural Gas Index
($XNG :496.90, +0.31, +0.1% ) and the Philadelphia Oil Service Index ($OSX :237.98, -0.17, -0.1% ) both up 0.1%.

Among the top movers early Monday, Valero Energy Corp. (VLO :72.39, +1.18, +1.7% ) and Occidental Petroleum Corp. (OXY :51.59, +0.42, +0.8% ) were leading gainers on the Amex Oil Index, up 1% each at $71.91 and $51.67 a share, respectively.

Chevron Corp.
(CVX :78.80, +0.72, +0.9% ) , after reporting on Friday an 18% higher first-quarter profit, was up 0.7% while Exxon Mobil Corp. (XOM : 80.61, +0.25, +0.3% ) was up 0.2%. Exxon posted a 10% higher quarterly profit Thursday.

National Oilwell Varco Inc.
(NOV : 87.00, +0.35, +0.4% ) , which reported Friday a doubling of its first-quarter earnings, was visited Monday by profit-takers. The stock was down 1.2%, among the biggest percentage decliners on the oil service index, after posting a 4.6% gain in the previous session.

RUSSIA: It is to Set Up Nuclear Industry Giant


Atomenergoprom is to be set up in July to manage Russia’s civilian nuclear energy facilities. Deputy Head of the Federal Atomic Energy Agency Vladimir Travin is strongly tipped to be appointed the holding’s director.


Russian President Vladimir Putin said in his state-of-the-nation address on Thursday that Russia would soon create a state corporation to unite civilian and military nuclear energy industries.




Russian President
Vladimir Putin on Friday signed a bill to set up a state-owned holding to control the nation’s civilian nuclear energy industry. Atomenergoprom is to become part of a corporation which would control both civilian and military nuclear energy in Russia. Kommersant sources report that the arms exporter Rosoboronexport may also be turned into a corporation.

The new corporation, Rosatom, is to own all nuclear military and research assets as well as the Atomenergoprom holding. The nuclear giant is to receive the assets for management in 2008. Unofficial sources reported that the corporation would be directly accountable to the Russian president who would appoint its board.

Well-informed sources of Kommersant said Friday that the military arms exporter Rosoboronexport may soon follow suit and be turned into a state-run corporation. The national corporation on nanotechnology is likely to be set up following the same pattern.

REPORT: Primary Energy Recycling Q1 2007 Earnings

Primary Energy Recycling Corporation (TSX: PRI.UN or the “Company”) is disclosing today that it has recently been informed by Mittal Steel of the results of its physical measurement of the inventories of coke and coal of Harbor Coal’s site host, and that the resulting inventory adjustment is expected to result in a material reduction of Harbor Coal LLC (“Harbor Coal”) revenues for the first quarter of 2007. The Company is in the process of reviewing the information provided by Mittal to make an appropriate reserve for this negative inventory adjustment, which is expected to be in the range of $2 million to $2.5 million.

The reserve will be included in the first quarter 2007 results which the Company expects to release prior to markets opening on Monday April 30, 2007.


Imagen 1

Primary Energy Recycling Corporation Discloses Subsequent Event Affecting First Quarter 2007 Results and Unplanned Turbine Outage Expected to Affect Second Quarter 2007 – Quarterly Results Conference Call Planned for April 30, 2007 Following Release of First Quarter Results

John Prunkl, President of Primary Energy Ventures LLC, the Manager of the Issuer said “Upon being advised by Mittal of the results of the survey, we felt that taking an appropriate reserve for the inventory adjustment would be prudent. A negative annual inventory adjustment was recorded in the fourth quarter of 2006 which led us to agree with Mittal to begin semi-annual inventory adjustments which we expected would produce more accurate and less volatile inventory assessments. Accordingly, we were not anticipating an adjustment of this size, especially for such a relatively short period of time, and are in the process of both reviewing the survey results that have been provided and initiating an independent audit of Mittal's accounting of fuel and coke usage, including inventory adjustments, as is allowed under the terms of the PCI Associates’ partnership agreement.”

Unrelated to the inventory adjustment at Harbor Coal, a steam turbine generator failure occurred at the Company’s North Lake Energy Project on April 19, 2007. The Company’s preliminary assessment of damage to the low pressure section of the steam turbine is that it could take up to 60 days to repair the turbine and return North Lake to normal operations. Several alternatives which might accelerate this schedule and require some repairs at a later date are under review.

No revenue will be earned during the outage. The facility is insured under a program that requires a $500,000 deductible for machinery repairs and a 45 day waiting period before lost net earnings begins to be reimbursed under the business interruption provisions of the policy. It has not been determined if the damage qualifies for insurance coverage. Revenues associated with the North Lake outage could be negatively impacted by between $1 million to $2 million, largely in the second quarter of 2007, if all repairs are made immediately. We are working with our customer to mitigate the impact of the outage for both parties.

Depending on the magnitude of the combined impacts of these two events, the Company may be required to obtain a waiver of certain indenture and senior loan covenants to continue the payment of distributions and interest payments. “While we do not have enough information at this time to determine whether a waiver will be necessary, the potential magnitude of the inventory adjustment combined with the loss of revenue associated with the North Lake outage have led us to initiate discussions with our lenders to determine whether a waiver would be forthcoming in the event that we need to request one,” said Mr. Prunkl.

Conference Call and Webcast
Management will host a conference call to discuss the first quarter results on Monday, April 30, 2007 at 11 a.m. (ET). To participate in the conference call, please dial (416) 644-3417 or 1-800-732-6179. A conference call replay will be available until 12 a.m. on May 8, 2007. The replay can be accessed by dialing (416) 640-1917 or 1-877-289-8525 and entering passcode 21227217#.

A webcast replay will also be available for 90 days by accessing a link through the Investor Information section at www.primaryenergyrecycling.com.

Forward-Looking Statements
When used in this news release, the words "anticipate", "expect", "project", "believe", "estimate", "forecast" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions pertaining, but not limited, to operating performance, regulatory parameters, weather and economic conditions and the factors discussed in the Company’s public filings available on SEDAR at www.sedar.com. These forward-looking statements are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect new events or circumstances.

About Primary Energy Recycling Corporation
The Issuer owns a majority interest in Primary Energy Recycling Holdings LLC (“Primary Energy”). Primary Energy, headquartered in Oak Brook, Illinois, indirectly owns and operates four recycled energy projects and a 50% interest in a pulverized coal facility (collectively, the ‘‘Projects’’). The Projects have a combined electrical generating capacity of 283 megawatts and a combined steam generating capacity of 1,851 Mlbs/hour.

Primary Energy creates value for its customers by capturing and recycling waste energy from industrial and electric generation processes and converting it into reliable and economical electricity and thermal energy for its customers’ use. For more information, please visit us at www.primaryenergyrecycling.com

BRASIL - BOLIVIA : Successful, the energy Talks

The Bolivian government and executives from the Brazilian company Petrobras described the talks on Bolivia's acquisition of two Brazilian refineries on its territory as successful, it was reported on Sunday.

A report from the Ministry of Hydrocarbons quoted Petrobras's executive manager for Investments, Raul Adalberto de Campos, who said that both parties will sign a financial agreement soon.

On April 20, Bolivian President Evo Morales said the problem is whether the refineries are bought at the international market price or the patrimonial price.

Morales expects the issue to be resolved during the bilateral talks to buy the Guillermo Elder (Santa Cruz) and Gualberto Villarroel (Cochabamba) refineries, which were acquired by Petrobras in 1999.

According to statistics, the Brazilian company bought the refineries, which have a refining capacity of 60,000 barrels a day, at a total price of 104 million dollars.

Morales hinted at the time that Petrobras was asking for the market price for the two refineries, which is 180 million dollars.

Petrobras's decision to sell has dispelled doubts raised recently by the firm's representative in Bolivia, Jose Fernando de Freitas, who said that the company might seek international arbitrage.

The main obstacle in the negotiations is related to the price of the refineries, he said.




Baja

USA: Halliburton to Have Almost $1 Billion Gain From KBR

By Jim Kennett

Halliburton Co., the world's second- largest oilfield-services company, said it will have a gain of almost $1 billion in the second-quarter from its split with former subsidiary KBR Inc.

The gain will be reflected among discontinued operations from KBR, the former government-services and engineering subsidiary that was split off to investors earlier this month, Chief Executive Officer David Lesar told analysts yesterday on a conference call to discuss first-quarter earnings.

Lesar separated Halliburton from KBR to create a company focused on oilfield contracting. Halliburton services oil and natural-gas producers, while KBR builds energy infrastructure such as refineries and liquefied natural-gas plants, and bids on military and non-military government-services contracts. KBR is the largest U.S. military contractor in Iraq.

Halliburton yesterday reported a 13 percent rise in first- quarter net income, to $552 million, or 54 cents a share. Shares of the company rose 12 cents to $31.75 in New York Stock Exchange composite trading. They rose 9 cents yesterday.



Baja

REPORT: Chevron Q1 2007 Earnings

Chevron Corporation (CVX)
Q1 2007 Earnings Call
April 27, 2007 11:00 am ET

Executives
Steve Crowe - VP and CFO
Irene Melitas - Manager, IR

Analysts
Dan Barcelo - Banc of America
Doug Leggate - Citigroup
Ron Oster - A.G. Edwards
Mark Flannery - Credit Suisse
Paul Cheng - Lehman Brothers
Mark Gilman - Benchmark
Bernie Picchi - Wall Street Access
Oswald Clint - Sanford Bernstein
John Herrlin - Merrill Lynch
Jason Gammel - Prudential
Paul Cheng - Lehman Brothers
Mark Gilman - Benchmark




Free Image Hosting at allyoucanupload.com

Presentation

Operator

Good morning. My name is Matt, and I will be your conference facilitator today. Welcome to Chevron's First Quarter 2007 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Vice President and Chief Financial Officer of Chevron Corporation, Mr. Steve Crowe. Please go ahead, sir.

Steve Crowe

Thank you, Matt. Welcome to Chevron's first quarter earnings conference call. Today, on the call, I am joined by Irene Melitas, Manager of Investor Relations.

Our focus today is on Chevron's financial and operating results for the first quarter of 2007. We'll refer to the slides that are available on the web.

I remind you that today's presentation contains estimates, projections and other forward-looking statements and ask that you review the Safe Harbor statement on slide two.

I'll begin with slide 3, which provides an overview of our financial performance. The company reported earnings of $4.7 billion for the quarter or $2.18 per diluted share. Earnings were up 18% from the first quarter a year ago, reflecting a $700 million after-tax gain on the sale of our interest in the Nerefco Refinery in the Netherlands and higher margins on refined products worldwide.

These benefits were partially offset by the effect of lower prices for crude oil and natural gas on upstream profits.

First quarter results were 25% higher than the fourth quarter of 2006, which Irene will discuss shortly. Return on capital employed for the trailing four quarters was 23%. And the debt ratio was about 12% at quarter end.

Earlier this week, we announced an 11.5% dividend increase raising our quarterly dividend to $0.58 per share. 2007 marks the 20th consecutive year that the company has increased its annual dividend payout. Share repurchases totaled $1.25 billion, the same quarterly pace as in 2006.

Slide 4 highlights some of the milestones we achieved in recent months, starting with upstream. Last month, we announced the start-up of our Bibiyana natural gas field in Bangladesh. The field is initially expected to produce 200 million cubic feet of natural gas per day rising to 500 million cubic feet per day by 2010.

This exploration success continues with the announcement of two deepwater oil accumulations in the northern part of the Republic of Congo Moho-Bilondo permit. Chevron's non-operated interest is 31.5%. Evaluation and development options studies are underway.

In the downstream, we announced the sale of our 31% interest in the Nerefco Refinery in the Netherlands. The transaction closed at the end of March, and was part of our portfolio rationalization efforts highlighted during the March analyst meeting.

Irene, will now take us through the quarterly comparisons. Irene?

Irene Melitas

Thanks, Steve. My remarks compare first quarter results to those of the fourth quarter 2006. As a reminder, our earnings release compared first quarter 2007 to the same quarter a year ago.

Turning to slide 5; first quarter net income was about $940 million higher than the fourth quarter results. First quarter earnings benefited by $700 million from the sale of our interest in the Nerefco Refinery in Europe, as indicated in our interim update for the quarter.

Volume effects reduced earnings by $175 million and were primarily attributable to lower liftings in Canada and production in the US. A decrease in exploration expense contributed favorably to the quarters results.

The other bar reflects a positive swing in tax related items, lower operating expenses, and the net of everything else.

Slide 6, summarizes the results of our US upstream earnings, which declined by $90 million between quarters. The benefit of higher natural gas realizations were partially offset by lower liquids realizations, and netted to a $20 million improvement in earnings.

The $1.38 per barrel decrease in crude realizations was generally smaller than the decrease in industry benchmark prices.

While the average price for WTI declined by $1.89 per barrel between quarters. The Gulf of Mexico benchmark trade month price, which is on a lagged basis, declined by about $0.95 per barrel

Higher natural gas realizations resulted in a $50 million profit improvement. Though Henry Hub bid-week prices improved by $0.24 per thousand cubic feet, our average realizations improved $0.50 per thousand cubic feet, reflecting our regional production mix and spot sales.

Volume effects associated with third-party pipeline disruptions in the Gulf of Mexico and San Joaquin Valley and two fewer producing days reduced earnings by $65 million.

Other primarily reflects an unfavorable variance in FAS 133 effects, which was partially offset by lower exploration expenses and other items.

Turning to slide 7; international upstream earnings were about $90 million higher than the fourth quarter. Lower oil prices reduced earnings by about $35 million, and were partially offset by higher gas realizations.

Unit liquids realizations declined by $0.62 per barrel, less than the drop in spot brand prices due to country mix effects.

Lower liftings in Canada resulted in a negative earnings variance of $100 million. A decrease in exploration expenses benefited earnings by $155 million. The variance in other includes lower operating expenses between quarters.

Slide 8, summarizes the change in worldwide oil equivalent production including volumes produced from oil sands in Canada.

Daily volumes were down by 12,000 barrels between the quarters. During the first quarter, US production declined 14,000 barrels per day due to third-party pipeline disruptions affecting the Gulf of Mexico and San Joaquin Valley and natural field declines.

Outside the US, oil and gas production was relatively flat between quarters. Production increases in the United Kingdom reflect the absence of downtime at Britannia during the fourth quarter. This increase was offset by lower production in Canada due to unplanned downtime at Hibernia.

Turning to slide 9, US downstream results in the first quarter were slightly higher than the prior quarters. Lower realized margin effects of about $85 million adversely impacted earnings relative to the fourth quarter. This was primarily due to the affects of the Richmond refinery crude unit turnaround, which was extended by repairs associated with the fire.

The unit was down for most of the quarter, which prevented the company from capturing the improved West Coast refining margins. Refining margins were also dampened by supply effects during the quarter.

Marketing margins were lower on the West Coast. Weaker asphalt and lubricants margins also affected the quarter's results. Somewhat offsetting these lower margin affects were improved refining and marketing margins in the East. The other variance includes lower expenses at the Pascagoula refinery following the fourth quarter's FCC shutdown and expansion project and other miscellaneous items.

Turning to slide 10, international downstream earnings of about $1.3 billion were substantially higher than the fourth quarter. The sale of our interest in the Nerefco refinery, and associated assets in the Netherlands resulted in an after-tax gain of $700 million. Absence the sale, results were about $40 million lower between quarters.

Realized downstream margins improved earnings by about $50 million led by higher refining margins in most regions, in line with the rise in indicator margins. An unfavorable swing in foreign exchange effects reduced earnings by $90 million and drove the variance in other.

Slide 11 shows earnings from chemicals were $120 million in the first quarter compared with $124 million in the fourth quarter. Results for olefins declined during the quarter, primarily due to lower ethylene margins and higher manufacturing costs related to plant turnarounds. The improvement in additives earnings reflects the combination of higher margins, and lower non-manufacturing expenses.

Slide 12 covers all other. First quarter results show a positive variance from the prior quarter due to higher earnings associated with the company's investment in Dynegy, included in the P&L business' bar and as mentioned in our interim update guidance, favorable corporate tax items included in other.

Largely as a result of the variance in tax items, net charges for segment Other were lower than our standard quarterly guidance for this segment at a range of $160 million to $200 million excluding Dynegy.

That completes our brief analysis for the quarter. Back over to you, Steve.

Steve Crowe

Thanks, Irene. That concludes our prepared remarks. We'll now take your questions, one question per caller, please. We'll wrap up at or before the top of the hour.

Matt, please open the lines for questions. Thanks.


Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question is from Dan Barcelo of Banc of America. Your question please.

Dan Barcelo - Banc of America

Yes. Good morning.

Steve Crowe

Hey, Dan.

Dan Barcelo - Banc of America

Regarding to me, you had an impact obviously in the first quarter from Richmond. I didn't know, if you could just further quantify for us a bit some of the non-recurring operational impacts for first quarter for the downstream relative to just the refining margin impacts or other environment impacts?

Steve Crowe

Sure. Thanks, Dan. Just for a little bit of background, as Irene mentioned, we had a fire that occurred at the Richmond refinery in mid January at the crude unit. Just as that was being brought down for schedule maintenance. We had a failure of a swing out [wash oil pipe spool]. But as I mentioned, there was a plant turnaround being readied and so our supply position already anticipated the unit being out of service.

The fire itself extended the shutdown by about a month and the refinery was back by the end of the first quarter. From an analytical perspective, if you try to get an estimate of the cost of the incident including the lost profit opportunity as well as the additional repair costs, then it's probably on the order of about $150 million or so.

Thank you. Next question please.

Operator

Our next question is from Doug Leggate of Citigroup. Your question, please.

Doug Leggate - Citigroup

Thanks. Good morning, Steve and Irene.

Steve Crowe

Good morning, Doug.

Irene Melitas

Good morning.

Doug Leggate - Citigroup

The tax in the quarters, Steve, I think Irene alluded a little bit there in the comments. But it was obviously a bit lower than your guidance, I guess. Can you just walk us through some of the major items there and just reiterate perhaps what you expect the run rate to be for the balance of the year?

Steve Crowe

Sure. Thank you, Doug. The first quarter effective tax rate was 37.6% and if you look at the average effective tax rate for full year 2006, it was more on the order of 46%. So Doug as you pointed out, it was considerably lower than last year.

And looking at the components as to why our average effective tax rate is lower in the first quarter for a 90-day period, I'd point to three things.

Number one, we had a lower tax rate associated with the Nerefco sale, certainly a non-recurring item from a run rate perspective.

Number two, we have some favorable adjustments for prior periods resulting from the completion of tax audits.

And number three, in the first quarter, proportionately more income was earned in lower tax rate jurisdictions. Clearly, we operate in many taxing jurisdictions. So, as they shift from location to location, you can get some noise on that score.

With respect to the favorable adjustments for prior periods as Irene mentioned, we try to at least reference this in the April 10th interim update. In that interim update, we spoke about all other segment. We said, for the first quarter, favorable tax-related effects at the corporate level are expected to substantially offset corporate charges for the period. So, given the earlier guidance that should have given some indication that we were going to be getting a favorable tax benefit. But those three components explain roughly the 10% decline or 9% decline from sort of an average run rate.

As to your question, what might be an average rate? I think, the rate that we saw in 2006, is pretty representative. Again, there will be noise that occurs when we have adjustments as a result of completion of tax audits. And there will be noise to the extent that you have transactions that result in tax rates different than that average.

Thanks very much for you question, Doug. I hope that helps.

Operator

Our next question is from Ron Oster of A.G. Edwards. Your question please.

Ron Oster - A.G. Edwards

Good morning Steve. Had a quick question on Gorgon, I was wondering if you could give us an update in terms of any progress that's been made there regarding the development type or any contract sales? If you could just kind go over some of the major hurdles that need to be overcome before it to be sanctioned? And any timeframe on sanction would be helpful?

Steve Crowe

Thank Ron. We covered this at last months New York, Analyst Meeting. But for the benefit of those who may not have heard that, let me give a little bit of background.

Gorgon is a project of great scale and complexity. And certainly, we're dealing with increasing market-related costs. Gorgon is presently in the engineering and design phase. You may recall, last December, we received concurrence on the environmental framework for two-train LNG facility on Barrow Island, which was given by the Western Australian government. We are now awaiting the final environmental permits from the Western Australia government and the Common Wealth. Which we expect will occur around mid-year.

During the last several months, we've undertaken additional studies to reduce costs, consider appropriate production capacities, and try to mitigate any uncertainty with respect to the execution before we make a final investment decision. But the project is moving forward, and the first hurdle that we need to get past is the environmental permit, which I mentioned we hope to see in the not too distant future.

As was indicated in the slides, that we showed at the Analysts Meeting last month, start-up is expected after 2010. It's difficult for me to give anything more precise at this stage of the game until some of these milestones are completed.

But I thank you for your question, Ron.

Operator

Our next question is from Mark Flannery of Credit Suisse, your question please.

Mark Flannery - Credit Suisse

Yes, thanks. My question is on Kazakhstan and Tengiz, in particular. Can you just update us what we expect to see from that project as we go through the year? Any maintenance or ramp ups, ramp downs that kind of things?

Steve Crowe

Thank you, Mark. Again, this was a project that George Kirkland discussed at last months Analysts Meeting. But, let me give just a little bit of a backdrop here on this phased expansion at TCO. The sweet gas injection came on in the latter part of 2006. This year, we've tested it and established the sustained injection rates and pressures, and the mechanical operation of the facilities.

Later in 2007, we expect the Sour Gas Injection to commence and staged oil will increase.

Once fully online in 2008 as the project ramps up, we see Tengiz gross production capacity increasing from levels in the neighborhood of 285,000 barrels a day to a range of 460,000 to 550,000 barrels a day, once it is fully online. So, it’s moving ahead, and we will continue to update you with respect to the project as information becomes available. Thanks very much, Mark.

Operator

Our next question is from Paul Cheng of Lehman Brothers, your question please.

Paul Cheng - Lehman Brothers

Hi Steve and Irene. Good morning.

Steve Crowe

Hi, Paul.

Irene Melitas

Good morning, Paul.

Paul Cheng - Lehman Brothers

Just a quick one, it seems that you update Gorgon. Can you give us an update on Nigeria and Angola on the LNG project to see where we are in terms of sanctioning those projects? Thank you.

Steve Crowe

Thank you, Paul. Those projects are earlier in their development. The Angola LNG project in which we own about 36% equity is still in feed that is the engineering and the front-end engineering and design phase. It is progressing with the collaboration of our partners, and we expect FID, later this year.

As to the Nigeria LNG project, the Olokola I, it too was in feed with engineering and design work underway. It’s a little bit further back than the Angola I. But we will keep you apprise as it progresses. That's the current status Paul. Thank you very much.

Operator

Our next question is from Mark Gilman of Benchmark, your question please.

Mark Gilman - Benchmark

Guys, good morning.

Steve Crowe

Good morning, Mark.

Irene Melitas

Good morning, Mark.

Mark Gilman - Benchmark

Wondering to see if I could get a little bit more clarification on the international downstream earnings, knowing that, that segment contains a number of what I would consider to be non-refining and marketing activities including shipping, including CPC, including the petrochemical interest in Korea with LG.

I also noticed in that variance analysis, there was no mention one way or the other of the potential absence of the fourth quarter LIFO benefit that favorably impacted those results. So, if you could clarify that first quarter result in that segment, drill down a little bit, I would appreciate it?

Irene Melitas

Thanks Mark. You asked about some of the other contributing factors to our international downstream earnings, for example, shipping and so forth. Shipping was actually down between quarters on account of fewer liftings and lower freight rates.

The earnings contributed from the Sasol JV were positive between quarters. Trading margins were higher between quarters, and clearly the biggest driver as far as other items relates to foreign exchange, which was a negative variance between the two quarters.

Inventory related effects, I do not have that specifically isolated at this time. We can certainly get back to you after the call.

Steve Crowe

Thanks Mark, you are quite right to say, it’s a very large business with lots of components in it. And making it simplified for these bar charts, we do take a lot of things that get netted together.

Thank you very much. May we have the next call please?

Operator

Your next question is from Bernie Picchi of Wall Street Access. Your question please.

Bernie Picchi - Wall Street Access

Yes. Good morning, Steve and Irene. It was interesting and pleasing to see that you had a 5% increase in branded gasoline sales in the US in the quarter. I was a little surprised by that given kind of what's happened to gasoline prices. Can you give us any color on what may or how it should be happening region by region and also within the quarter and if you can go out into the beginning of the second quarter? Are you seeing a continuation of that trend? Is it going to falling-off on acceleration or what's going on?

Steve Crowe

Thank you, Bernie. The main driver that we've seen in our increase in volumes associated with branded gasoline here in the United States has been the expansion associated with the Texaco brand. As we got a full use of that, we've expanded the brand both in the Southeast and now more recently on the West Coast.

So, that's been a key contributor for the increasing sales of branded gasoline that we've seen here in the United States. And as you can imagine, that's a very favorable development from our perspective. As far as I know, Bernie, we don't see any thing that suggests that will not continue.

Thanks very much. May we have the next call?

Operator

The next question is from Oswald Clint of Sanford Bernstein. Your question please.

Oswald Clint - Sanford Bernstein

Hi. Good morning, guys. Just one question on exploration please. Given, there are very successful exploration discoveries quarter today than actually over the last couple of years, is there any potential for the rest of the year for a step up in drilling activity or some extra exploration wells to be drilled over the course of 2007?

Steve Crowe

Well, as we had talked about at our January call, we see the exploration activity essentially on par with that of last year. We've just had tremendous success with exploration, as you know. And over the last five years, our success rate has been industry leading at 45%. I don't have any specific new information with regards to the exploration program, but it is something that we are very proud of and it had a tremendous track record on. Perhaps, we can get you some more detail if you follow up with Irene a little later.

Irene Melitas

I would actually also recommend that you refer to the presentation by Bobby Ryan back in March and in one of the slides, it actually provides in great detail what our program is for 2007.

Steve Crowe

Thank you, Irene. May we have the next call?

Operator

Our next question is from of John Herrlin of Merrill Lynch. Your question please.

John Herrlin - Merrill Lynch

Yeah. Hi. Looking upstream at your CapEx, you are up 26% versus first quarter of last year, but down 21% versus fourth quarter. I am just trying to get a sense of what you are spending on there? Are these lumpy changes because of all the development stuff you are doing with things like at (inaudible) and Tahiti or is it because of exploration activity?

Steve Crowe

Thank you, John. Certainly, our C&E pattern is influenced by the timing of these large projects that you've heard so much about. We monitor the capital program very, very closely. Sort of on a naive basis, if you look back for several years for Chevron, our spending tends to be backend loaded to the second half of the year.

The $4.1 billion spend through the first quarter in the aggregate that includes R&M and other as well, is right in line with our historical pattern of spending about 20% to 21% of the full C&E amount in the first quarter. So, I think your perception is correct. It's driven largely by the timing of these projects.

John Herrlin - Merrill Lynch

Thanks.

Steve Crowe

Thanks very much, John.

Operator

Our next is from Jason Gammel of Prudential. Your question please.

Jason Gammel - Prudential

Good morning, Steve and Irene.

Steve Crowe

Good morning, Jason.

Irene Melitas

Good morning, Jason.

Jason Gammel - Prudential

With the Richmond incident now largely behind you, can you provide us with any guidance about the progress on capturing the reliability refinery within the system, maybe in terms of utilization ranges that we could expect to see for the remainder of the year based on what you know about scheduled maintenance?

Steve Crowe

Well, as we would have mentioned at last month's analyst meeting, we are spending a lot of time on process and equipment and people in trying to create that reliability refinery. Running the refineries with excellence is a very cost effective way of increasing earnings for our shareholders.

As Mike would have mentioned last month, 2007 has a particularly heavy turnaround. As I mentioned, there was a turnaround at the first plant turnaround in the first quarter at Richmond, and we have other plant turnarounds that occur here in the United States and overseas.

For competitive reasons and commercial reasons, we don't describe the timing of those things until they are completed. But they will influence the metrics when you look at crude utilization. However, they are well planned for and the downstream units are up and running. And so, we will continue to progress our efforts towards improving reliability. It is a key focus for our downstream business and we expect to see continued progress just as we had done in 2006. But thanks for the question very much, Jason.

Irene Melitas

And Jason, if I may add one more thing, just a data point here. The number of outages for the last six months was about 40% lower than the prior six months. So, I think that speaks to our ongoing progress and the reliability arena.

Steve Crowe

Thank you. May we have the next question please?

Operator

Our next question comes from Paul Cheng of Lehman Brothers, your question please.

Paul Cheng - Lehman Brothers

Hi, Steve and Irene. I just had a follow-up. When I was looking at your share buyback, it's about $1.25 billion a quarter and if you are looking at your cash flow generating capability and your cash on hand. Is there any reason that company do not want to increase the run rate to a more substantial?

Steve Crowe

Thanks Paul. The cash on hand at the end of the first quarter included the proceeds from the Nerefco sale which were received as the clock struck midnight on March 31st. Absent of that, the cash balances at the end of March relative to the end of the year were nearly the same.

As I pointed out, we spent $1.25 billion for share repurchases in the first quarter. Given the cash balances that we have now and our cash generation capacity, along with the strengthening of commodity prices, it's highly likely that we'll increase the pace of our repurchase program here in the second quarter.

But we look at the repurchase program as an appropriate use of our cash in excess of operating needs and our capital program. But first and foremost, we have such a wonderful queue of projects we want to make sure we fund the growth for our shareholders by making sure that those projects are well funded.

Over the last three years or so, we've used the share repurchase program as a way of balanced capital realignment as we've reduced debt and reacquired equity. It is however, even from an investment point of view quite apart from capital structure, an attractive investment for excess cash for our shareholders, as we're purchasing reserves at rates that are under $10 a barrel. So, I think you can expect a step up in the repurchase rate in the second quarter. Thanks very much, Paul

Paul Cheng - Lehman Brothers

Steve. Can I stay in with additional question?

Steve Crowe

Sure.

Paul Cheng - Lehman Brothers

You talked about the branded sales gasoline sale up because of Texaco. Can you share with us some market intelligence, in your network, what is the same store sales you offered here for those stores that have open more than 12 months?

Steve Crowe

Thanks Paul. I don't have the information for the change in volumes for same store sales year-to-year. If you give us some time we may be able to get that information for you. Thanks so much.

Paul Cheng - Lehman Brothers

Thank you.

Operator

Our next question is from Mark Gilman of Benchmark, your question please.

Mark Gilman - Benchmark

Steve and Irene, I wonder if we could talk in a little bit greater detail about the West African production numbers. Which in this particular quarter and frankly in some quarters previously, seem to be running below that, which I would expect given the development inventory and progress on projects? Could you alert us to any specific entitlement and production sharing contract effects regarding Angola and Block 14 in particular or ultimately if the first quarter is associated either or would decline from 4Q is associated either with Chad, Nigeria or elsewhere. If you could highlight that as well please?

Irene Melitas

Yes, Mark thanks for your question. The variance in West Africa is largely driven by Nigeria. Last quarter, we had most of the variance in our Africa production, primarily in liquids, reflected an incremental production that was allocable to us under terms of one of our agreements that were completed in the quarter. These types of allocations occur periodically and are somewhat similar to cost recovery barrels.

So what you are seeing 4Q, 1Q is the absence of that allocation, if you will. In Angola, actually the story is quite positive for the quarter. We did show a positive variance and it reflects primarily strong performance of our fields out there, and the addition of one more producing well at BBLT during the first quarter.

Steve Crowe

Thanks very much, Mark.

I think at this juncture, we'll wrap it up. In closing, let me say that we appreciate everybody's participation on today's call. And I especially want to thank each of the analysts on behalf of all the participants for their questions during this morning session.

So, Matt back to you.

Operator

Ladies and gentlemen, this concludes today's first quarter 2007 earnings conference call. You may now disconnect. Good day.



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CANADA: Statoil Expands Into Alberta

by William Trent

Large Cap Watch List member Statoil (STO) has been making some moves recently. It bought some capacity in the Gulf of Mexico last year, as well as the oil and gas operations of conglomerate Norsk Hydro (NHY). According to some rumors, it is also planning to swap some European assets for Chinese ones. Now it has expanded into Alberta, Canada.

Statoil to buy North American Oil Sands for $2 bln
Norwegian energy group Statoil said it had agreed to buy a privately-held Canadian oil sands venture for nearly $2 billion on Friday, aiming to broaden its production base away from maturing North Sea oil fields.Analysts said the deal to buy North American Oil Sands Corporation [NAOSC] for 2.2 billion Canadian dollars ($1.97 billion) in cash appeared pricy.

The offer of C$20 per share is significantly higher than a private placement NAOSC arranged in December at C$13.50, but Statoil brings its experience and capital base to the project, which may make it more viable. At any rate, the deal does seem to validate the recent enthusiasm over oil sands as a potential energy source. As to the price, the article continues:

“We are developing our global heavy oil portfolio and strengthening our marketing position in North America,” Lund said, adding that his company has gained experience in heavy oil projects in Venezuela.

With Venezuela on a nationalizing kick, the stability of Canadian investments may appear to be a bargain at any price.


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eNergy Stocks: Amex Oil Index lags despite Chevron profit

by Jim Jelter
Energy stocks closed mixed Friday, with a valiant rally in oil service stocks failing to pull integrated oil and natural gas stocks back into the green, despite support from higher crude oil and natural gas prices.

Crude for June delivery staged a late comeback, rising $1.40 to close at $66.46 a barrel on the New York Mercantile Exchange after spending most of the morning unchanged to slightly lower. Natural gas prices had an even bigger rebound, up 3%. See Futures Movers.

At the close, the Philadelphia Oil Service Index ($OSX :0.00, 0.00, 0.0% ) was up 1.3% at 238.2 points. For the week, the index rose 6.3%, by far the best performer in the sector.

Rally in oil service stocks fails to lift sector
National Oilwell Varco (NOV : 86.65, +3.84, +4.6% ) topped percentage gainers in the services group, advancing 4.6% Friday to $86.65. Before the opening bell, National Oilwell reported it more than doubled its first-quarter profit, citing a deep backlog of orders from the offshore rig industry and forecasts of continued strong growth internationally. See full story.

Meanwhile, the Amex Natural Gas Index ($XNG :496.59, -1.30, -0.3% ) slipped 0.3% to 496.6 points, leaving it with a 0.8% gain for the week. The index was pressured by a 1.8% drop in Nicor Inc.'s (GAS :52.04, -0.96, -1.8% ) share price to $52.04 triggered by disappointing earnings.

Nicor said its first-quarter net income rose to $47.2 million, or $1.04 a share, from $43.9 million, or 99 cents, a year ago. Excluding one-time items, however, the company earned 93 cents a share. Analysts had been looking for a profit of $1.01 a share. See full story.

The Amex Oil Index ($XOI : 1,284.45, -4.71, -0.4% ) fell 0.4% Friday to finish at 1,284.5 points. The index was up 1% for the week, however, buoyed by earnings reports from the of the world's biggest oil companies - many of them beating analysts' expectations.

Chevron Corp. (CVX : 78.08, -0.10, -0.1% ) was the latest to join that list, posting an 18% rise in first-quarter earnings, much of the gain built on the sale of Dutch refinery. Like Exxon on Thursday, Chevron said upstream earnings were hurt by lower oil and gas prices while refining margins soared in the downstream end of the business.

The company topped Wall Street estimates, posting a profit of $1.86 a share from ongoing operations. Analysts had been looking for $1.67. See full story.

Chevron's earnings report did not translate into a higher share price, however. The stock dropped 10 cents to close at $78.08.

Exxon Mobil Corp. (XOM : 80.36, -0.19, -0.2% ) , which reported a 10% higher profit Thursday, fell 19 cents to $80.36, while U.S.-traded shares of Spain's Repsol S.A. (REP : 33.38, -0.62, -1.8% ) led decliners in the group with a 1.8% drop to $33.38.

Valero Energy Corp. (VLO : 71.21, -0.53, -0.7% ) got a nod of approval from Credit Suisse a day after the refiner reported a 30% higher first-quarter profit and tripled the size of its share buyback program. Credit Suisse raised its target price on the company to $81 a share from $70 and predicted it would earn $8.21 a share in 2007, up 6% from its previous estimate.

Valero shares fell 53 cents, or 0.7%, to $71.21.

Baker Hughes Inc. (BHI :81.01, +0.19, +0.2% ) , in its weekly rig update, reported the number of drilling units searching for oil or gas in North America fell by 39 this past week to 1,828. The total count for U.S. rigs in operation decreased by 22 from last week to 1,747. The number of U.S. offshore rigs fell by three to 73. The weekly Canadian rig count fell by 17 to 81. Overall, the U.S. rig count was 139 units higher than a year ago, with the Canadian tally falling by 69 from last year.

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