CompanyGraph
Chevron Corporation
CVX · NYSE Arca · United States
Extracts Permian and Kazakh crude through jurisdiction-locked infrastructure and processes it through heavy-crude-configured refineries supplying California and Gulf Coast products markets.
Richmond refinery's heavy crude processing configuration cannot absorb Permian light shale output alone, forcing Canadian oil sands imports to fill the crude quality gap — which means the integrated position between upstream production and downstream product sales depends on crude trading to bridge the two legs. That configuration is itself locked in place by California Air Resources Board gasoline specifications, because any reconfiguration to accept lighter crude would require rebuilding the CARB-compliant blending train, making the constraint self-reinforcing rather than optional. The Caspian Pipeline Consortium route through Russian territory is the only export pathway for Tengizchevroil's production, so the same exclusivity that secures Kazakhstan's output converts into a single-point exposure whenever that transit corridor faces disruption. These structural dependencies — refinery metallurgy, CARB blending infrastructure, and a jurisdictionally captive export route — each resist rapid change through a different mechanism, so no single operational adjustment resolves more than one constraint at a time.
How does this company make money?
Crude oil and natural gas are sold at commodity spot prices plus location differentials — adjustments that reflect where the barrel is physically located relative to a benchmark price. Refined products are sold at regional rack pricing, which is the wholesale price at which fuel leaves a refinery or terminal for distribution. Tengizchevroil generates distributions through a production sharing agreement with Kazakhstan, under which the company receives a defined share of output or proceeds according to the terms of that sovereign contract.
What makes this company hard to replace?
California Air Resources Board gasoline specification compliance requires Richmond refinery's specific blending infrastructure, and replicating that infrastructure takes years. The Tengizchevroil joint venture partnership agreements with the Kazakhstan government create contractual commitments spanning decades. Gulf of Mexico deepwater lease development requires multi-billion dollar platform investments with payback periods exceeding twenty years, making exit or replication by another party a long-horizon undertaking.
What limits this company?
Richmond refinery's heavy crude processing configuration is the throughput bottleneck: it cannot absorb incremental Permian light crude without crude quality mismatch, capping the volume of integrated barrels the company can run from its own upstream production through its own downstream slate. No amount of additional Permian drilling removes this constraint because the bottleneck is refinery metallurgy and unit configuration, not production volume.
What does this company depend on?
The company depends on Permian Basin drilling permits issued by the Texas Railroad Commission, Canadian heavy crude imports delivered via pipeline to fill the Richmond refinery's configuration requirements, Gulf of Mexico deepwater lease blocks granted by the Bureau of Ocean Energy Management, Phillips 66 joint venture refinery operations, and the Tengizchevroil partnership with KazMunayGas for Kazakh production access.
Who depends on this company?
Southwest Airlines holds jet fuel supply contracts drawing from the Pascagoula refinery; disruption to that refinery's output would affect Southwest's fuel sourcing directly. The Caltex Australia retail network is supplied by the Richmond refinery. Dow Chemical purchases petrochemical feedstocks from Gulf Coast operations. California Air Resources Board gasoline specifications require Richmond refinery's blending output to meet compliance-grade standards, making the refinery a necessary supplier to the California fuels market as currently configured.
How does this company scale?
Permian Basin horizontal drilling — a technique that bores sideways through shale rock layers to access hydrocarbons — replicates cheaply across adjacent acreage where the geology is already proven. Deepwater Gulf of Mexico exploration resists scaling because each new prospect requires its own geological assessment, specialized drilling rigs, and multi-year development timelines that cannot be compressed simply by deploying more capital.
What external forces can significantly affect this company?
California's Low Carbon Fuel Standard imposes product specification and compliance requirements on the Richmond refinery that originate from state energy and climate policy rather than from industry dynamics. OPEC+ production decisions alter global crude price differentials and refinery input costs from outside the company's operating control. The Jones Act — a federal shipping law requiring goods transported between U.S. ports to be carried on U.S.-built, U.S.-flagged vessels — restricts crude oil transport between Alaska and California refineries, affecting crude sourcing options for Richmond.
Where is this company structurally vulnerable?
Caspian Pipeline Consortium infrastructure crossing Russian territory is the only route of sufficient capacity to move Tengizchevroil's production to export markets, so any disruption to that transit corridor — whether through Russian regulatory action, physical infrastructure interdiction, or geopolitical closure — strands the full Tengizchevroil production volume with no substitute pathway, converting the sovereign partnership's exclusivity from a durable differentiator into a concentrated single-point exposure.