Unocal is one of the world's leading independent oil and gas exploration and production
companies, with principal operations in North America and Asia. Unocal is also
a leading producer of geothermal energy and a provider of electrical power in
Asia. Other activities include ownership in proprietary and common carrier pipelines,
natural gas storage facilities and the marketing and trading of hydrocarbon commodities.
Unocal's primary activities are oil and gas exploration, development and production,
and they are carried out by business units in North America and Internationally
in Asia and other locations around the world.
The U.S. Lower 48 business is primarily comprised of the Company's exploration
and production operations in the onshore area of the Gulf of Mexico region located
in Texas, Louisiana, and Alabama; operations in New Mexico and Colorado; and
the shelf and deepwater areas of the Gulf of Mexico.
The Company holds approximately 5.3 million net acres of prospective land in
the U.S. Lower 48. Nearly 21 percent of the prospective acreage is located in
federal leases, offshore in the Gulf of Mexico. Prospective lands include over
3.7 million net acres of fee mineral lands, which are primarily located in Alabama,
Arkansas, Texas, Mississippi, Florida and Louisiana.
During 2003, the Company refocused its efforts in the Gulf of Mexico shelf
and onshore areas to improve its cost structure by selling non-core properties
with low margins. However, the Company retained its deep mineral rights from
a substantial number of the properties sold.
Over the past five years, the Company has acquired acreage positions in the
deepwater Gulf of Mexico, with interests in 224 exploration leases. The Company's
acreage is primarily in the Subsalt/Foldbelt trend, which lies beyond the Primary
Basin deepwater trend.
ALASKA
The Company operates ten platforms in the Cook Inlet and five producing natural
gas fields. The Company also holds working interests in two North Slope fields.
The Company has a 10.52 percent working interest in the Endicott field and a
4.95 percent working interest in the Kuparuk and Kuparuk satellite fields.
CANADA
The Company's operations in Canada are primarily carried out by its wholly
owned subsidiary Northrock Resources Ltd. ('Northrock'), which focuses on three
core areas: West Central Alberta (O'Chiese, Garrington, Caroline and Pass Creek
areas), Northwest Alberta (Red Rock and Knopcik areas), and the Williston Basin
(Southeastern Saskatchewan).
INTERNATIONAL:
The Company's International operations encompass oil and gas exploration and
production activities outside of North America. The Company, through its International
subsidiaries, operates or participates in production operations in Thailand,
Indonesia, Myanmar, Bangladesh, the Netherlands, Azerbaijan, the Democratic
Republic of Congo and Brazil.
The primary function of the Trade segment is to externally market the Company's
hydrocarbon production. Marketing activities include transporting and selling
the Company's production. To that end, the Trade segment conducts the majority
of the Company's: (a) worldwide crude oil and condensate marketing activities,
and (b) North American natural gas marketing activities, excluding those of
the Alaska business unit. Commodities are sold to third parties at market prices,
terms and conditions. Most of the Company's U.S. production is sold on an intracompany
basis from the Exploration and Production segment to the Trade segment at market
prices and then resold by the Trade segment to third-party customers. These
intracompany sales and purchase transactions, including any intracompany profits
and losses, are eliminated upon consolidation. To market the Company's crude
oil production, the segment enters into various sale and purchase transactions
with unaffiliated oil and gas producing, refining, marketing and trading companies.
These transactions effectively transfer the commodities from production locations
to industry marketing centers with higher volumes of commercial activity and
greater market liquidity. These transactions allow the Company to better manage
its commodity-related risks and seek additional revenues beyond the market values
available at production locations. Currently, these sale and purchase transactions
represent a significant portion of the segment's U.S. crude oil sales and purchases.
The Midstream segment is comprised of the Company's pipelines business and
North America gas storage businesses.
The pipelines business principally includes the Company's equity interests
in certain petroleum pipeline companies and wholly-owned pipeline systems throughout
the U.S. Included in Unocal's pipeline investments is the Colonial Pipeline
Company, in which the Company holds a 23.44 percent equity interest. The Colonial
Pipeline system runs from Texas to New Jersey and transports a significant portion
of all petroleum products consumed in its 13-state market area. Also included
is the Unocal Pipeline Company, a wholly-owned subsidiary, which holds a 1.36
percent participation interest in the TransAlaska Pipeline System ('TAPS').
TAPS transports crude oil from the North Slope of Alaska to the port of Valdez.
The Company is a producer of geothermal energy, with more than 35 years experience
in geothermal resource exploration, reservoir delineation and management. The
Company also has proven experience in planning, designing, building and operating
private power projects and related project finance and economics. The Company,
through its subsidiaries, operates major geothermal fields producing steam for
power generation projects at Gunung Salak and Wayang Windu in Indonesia and
at Tiwi and Mak-Ban in the Philippines. Together, these projects have a combined
installed electrical generating capacity of 1,120 megawatts.
COMPETITION
The energy resource industry is highly competitive around the world. As an
independent oil and gas exploration and production company, Unocal competes
against integrated oil and gas companies, independent oil and gas companies,
government-owned oil and gas companies, individual producers, marketing companies
and operators for finding, developing, producing, transporting and marketing
oil and gas resources. The Company believes that it is in a position to compete
effectively. Competition occurs in bidding for U.S. prospective leases or international
exploration rights, acquisition of geological, geophysical and engineering knowledge,
and the cost-efficient exploration, development, production, transportation,
and marketing of oil and gas. The future availability of prospective leases/concessions
is subject to competing land uses and federal, state, foreign and local statutes
and policies. The principal factors affecting competition for the energy resource
industry are oil and gas sales prices, demand, worldwide production levels,
alternative fuels and government and environmental regulations. The Company's
geothermal and power operations are in competition with producers of other energy
resources.
