billion in 2012 compared with $18.3 billion in 2011. The increase was mainly due to a gain of approximate $1.4 billion on an asset exchange in Australia, higher natural gas realizations of about $610 million and a nearly $600 million gain on sale of an equity interest in the Wheatstone Project. Mostly offsetting these effects were lower crude oil volumes of about $1.3 billion and higher exploration expenses of about $430 million. Foreign currency effects decreased earnings by $275 million in 2012, compared with an increase of $211 million a year earlier.

     International upstream earnings of $18.3 billion in 2011 increased $4.7 billion from 2010. Higher prices for crude oil increased earnings by $7.1 billion. This benefit was partly offset by higher tax items of about $1.7 billion and higher operating expenses, including fuel, of about $1.0 billion. Foreign currency effects increased earnings by $211 million in 2011, compared with a decrease of $293 million in 2010.

     The company’s average realization for international crude oil and natural gas liquids in 2012 was $101.88 per barrel, compared with $101.53 in 2011 and $72.68 in 2010. The average natural gas realization was $5.99 per thousand cubic feet in 2012, compared with $5.39 and $4.64 in 2011 and 2010, respectively.

     International net oil-equivalent production of 1.96 million barrels per day in 2012 decreased 2 percent from 2011 and decreased about 5 percent from 2010. New production in Thailand and Nigeria in 2012 was more than offset by normal field declines, the shut-in of the Frade field in Brazil and a major planned turnaround at Tengizchevroil. The decline between 2011 and 2010 was primarily due to price effects on entitlement volumes.

     The net liquids component of international oil-equivalent production was about 1.3 million barrels per day in 2012, a decrease of approximately 5 percent from 2011 and a decrease of approximately 9 percent from 2010. International net natural gas production of 3.9 billion cubic feet per day in 2012 was up 6 percent from 2011 and up 4 percent from 2010.  

Refer to the “Selected Operating Data” table, on page FS-10, for a three-year comparative of international production volumes.

U.S. Downstream

     U.S. downstream operations earned $2.0 billion in 2012, compared with $1.5 billion in 2011. The increase was mainly due to higher margins on refined product sales of $520 million and higher earnings of $140 million from the 50 percent-owned Chevron Phillips Chemical Company LLC (CPChem). These benefits were partly offset by higher operating expenses of $130 million.

     Earnings of $1.5 billion in 2011 increased $167 million from 2010. Earnings benefited by $300 million from improved margins on refined products, $200 million from higher earnings from CPChem and $50 million from the absence of 2010 charges related to employee reductions. These benefits were partly offset by the absence of a $400 million gain on the sale of the company’s ownership interest in the Colonial Pipeline Company recognized in 2010.

     Refined product sales of 1.21 million barrels per day in 2012 declined 4 percent, mainly reflecting lower gasoline and