service agreement, averaged 2.67 million barrels per day, or 6 percent higher than production in 2005. The increase between periods was largely due to volumes associated with the acquisition of Unocal in August 2005. The company estimates that oil-equivalent production in 2007 will average approximately 2.6 million barrels per day. This estimate is subject to many uncertainties, including quotas that may be imposed by OPEC, the price effect on production volumes calculated under cost-recovery and variable-royalty provisions of certain contracts, changes in fiscal terms or restrictions on the scope of company operations, and production disruptions that could be caused by severe weather, local civil unrest and changing geopolitics. Future production levels also are affected by the size and number of economic investment opportunities and, for new large-scale projects, the time lag between initial exploration and the beginning of production. Most of Chevron’s upstream investment is currently being made outside the United States. Investments in upstream projects generally are made well in advance of the start of the associated crude oil and natural gas production.

     Approximately 24 percent of the company’s net oil-equivalent production in 2006 occurred in the OPEC-member countries of Indonesia, Nigeria and Venezuela and in the Partitioned Neutral Zone between Saudi Arabia and Kuwait. In December 2006, OPEC admitted Angola as a new member effective January 1, 2007. Oil-equivalent production for 2006 in Angola represented 6 percent of the company’s total. In October 2006, OPEC announced its decision to reduce OPEC-member production quotas by 1.2 million barrels of crude oil per day, or 4.4 percent, from a production level of 27.5 million barrels, effective November 1, 2006. In December 2006, OPEC announced an additional quota reduction of 500,000 barrels of crude oil per day, effective February 1, 2007. OPEC quotas did not significantly affect Chevron’s production level in 2006. The impact of quotas on the company’s production in 2007 is uncertain.

     In October 2006, Chevron’s Boscan and LL-652 operating service agreements in Venezuela were converted to Empresas Mixtas (i.e. joint stock contractual structures), with Petróleos de Venezuela S.A., as majority shareholder. Beginning in October, Chevron reported its equity share of the Boscan and LL-652 production, which was approximately 90,000 barrels per day less than what the company previously reported under the operating service agreements. The change to the Empresa Mixta structure did not have a material effect on the company’s results of operations, consolidated financial position or liquidity.

     At the end of 2005 in certain onshore areas of Nigeria, approximately 30,000 barrels per day of the company’s net production capacity remained shut-in following civil unrest and damage to production facilities that occurred in 2003. By the end of 2006, the company had resumed operations in portions of all the affected fields, and more than 20,000 barrels per day of production had been restored. In early 2007, additional production restoration activities continued in the area; however,