Azerbaijan, Kazakhstan, Venezuela, Argentina, Brazil, Colombia, Trinidad and Tobago and South Korea. The company’s Caspian Pipeline Consortium (CPC) affiliate operates in Russia and Kazakhstan. The company’s Tengizchevroil affiliate operates in Kazakhstan. Through an affiliate, the company participates in the development of the Baku-Tbilisi-Ceyhan (BTC) pipeline through Azerbaijan, Georgia and Turkey. Also through an affiliate, the company has an interest in the Chad/Cameroon pipeline. The company’s Petrolera Ameriven affiliate operates the Hamaca project in Venezuela. The company’s Chevron Phillips Chemical Company LLC (CPChem) affiliate manufactures and markets a wide range of petrochemicals on a worldwide basis, with manufacturing facilities in the United States, Puerto Rico, Singapore, China, South Korea, Saudi Arabia, Qatar, Mexico and Belgium.

     The company’s operations, particularly exploration and production, can be affected by changing economic, regulatory and political environments in the various countries in which it operates, including the United States. As has occurred in the past, actions could be taken by host governments to increase public ownership of the company’s partially or wholly owned businesses or assets or to impose additional taxes or royalties on the company’s operations or both.

     In certain locations, host governments have imposed restrictions, controls and taxes, and in others, political conditions have existed that may threaten the safety of employees and the company’s continued presence in those countries. Internal unrest, acts of violence or strained relations between a host government and the company or other governments may affect the company’s operations. Those developments have, at times, significantly affected the company’s related operations and results, and are carefully considered by management when evaluating the level of current and future activity in such countries. Refer to page FS-6 for a discussion of the company’s transition agreement with Petróleos de Venezuela, S.A. (PDVSA), the Venezuelan state-owned petroleum company, to convert contracts for the Boscan and LL-652 operating service agreements into an Empresa Mixta.

     Suspended Wells The company suspends the costs of exploratory wells pending a final determination of the commercial potential of the related crude oil and natural gas

fields. The ultimate disposition of these well costs is dependent on the results of future drilling activity, or development decisions or both. If the company decides not to continue development, the costs of these wells are expensed. At December 31, 2005, the company had approximately $1.1 billion of suspended exploratory wells included in properties, plant and equipment, an increase of more than $400 million from 2004 and an increase of less than $600 million from 2003. Of the increase in 2005, about $300 million was the year-end suspended well balance for the former-Unocal operations. The year-end 2005 balance primarily reflects drilling activities in the United States, Nigeria and Indonesia.

     The future trend of the company’s exploration expenses can be affected by amounts associated with