low-sulfur) crudes and those of lower quality (low-gravity, high-sulfur). The amount of the differential in any period is associated with the supply of heavy crude available versus the demand, which is a function of the capacity of refineries that are able to process this lower quality feedstock into light products (motor gasoline, jet fuel, aviation gasoline and diesel fuel). The differential widened during 2011 primarily due to rising diesel prices and lower availability of light, sweet crude oil due to supply disruptions in Libya.

     Chevron produces or shares in the production of heavy crude oil in California, Chad, Indonesia, the Partitioned Zone between Saudi Arabia and Kuwait, Venezuela and in certain fields in Angola, China and the United Kingdom sector of the North Sea. (See page FS-10 for the company’s average U.S. and international crude oil realizations.)

     In contrast to price movements in the global market for crude oil, price changes for natural gas in many regional markets are more closely aligned with supply-and-demand conditions in those markets. In the United States, prices at Henry Hub averaged about $4.00 per thousand cubic feet (MCF) during 2011, compared with about $4.50 during 2010. As of mid-February 2012, the Henry Hub spot price was about $2.50 per MCF. Fluctuations in the price for natural gas in the United States are closely associated with customer demand relative to the volumes produced in North America.

     Outside the United States, price changes for natural gas depend on a wide range of supply, demand and regulatory circumstances. In some locations, Chevron is investing in long-term projects to install infrastructure to produce and liquefy natural gas for transport by tanker to other markets. International natural gas realizations averaged about $5.40 per MCF during 2011, compared with about $4.60 per MCF during 2010. (See page FS-10 for the company’s average natural gas realizations for the U.S. and international regions.)

     The company’s worldwide net oil-equivalent production in 2011 averaged 2.673 million barrels per day. About one-fifth of the company’s net oil-equivalent production in 2011 occurred in the OPEC-member countries of Angola, Nigeria, Venezuela and the Partitioned Zone between Saudi Arabia and Kuwait. OPEC quotas had no effect on the company’s net crude oil production in 2011 or 2010. At their December 2011 meeting, members of OPEC supported maintaining the current production level of 30 million barrels per day and made no change to the production quotas in effect since December 2008.

     The company estimates that oil-equivalent production in 2012 will average approximately 2.680 million barrels per day based on the average Brent price of $111 per barrel for the full-year 2011. This estimate is subject to many factors and uncertainties, including quotas that may be imposed by OPEC, price effects on entitlement volumes, changes in fiscal terms or restrictions on the scope of company operations, delays in project startups, fluctuations in demand for natural gas in various markets, weather conditions that may shut in production, civil unrest, changing geopolitics, delays in