are also presented for the U.S. and international geographic areas of the Upstream and Downstream business segments. (Refer to Note 11, beginning on page FS-41, for a discussion of the company’s “reportable segments,” as defined in accounting standards for segment reporting (Accounting Standards Codification (ASC) 280)). This section should also be read in conjunction with the discussion in “Business Environment and Outlook” on pages FS-2 through FS-5.

U.S. Upstream

     U.S. upstream earnings of $4.1 billion in 2010 increased $1.9 billion from 2009. Higher prices for crude oil and natural gas increased earnings by $2.1 billion between periods. Partly offsetting these effects were higher operating expenses of $200 million, in part due to the Gulf of Mexico drilling moratorium. Lower exploration expenses were essentially offset by higher tax items and higher depreciation expenses.

     U.S. upstream earnings of $2.3 billion in 2009 decreased $4.9 billion from 2008. Lower prices for crude oil and natural gas reduced earnings by about $5.2 billion between periods, and gains on asset sales declined by approximately $900 million. Partially offsetting these effects was a benefit of about $1.3 billion resulting from an increase in net oil equivalent production. An approximate $600 million benefit to income from lower operating expenses was more than offset by higher depreciation expense. The benefit from lower operating expenses was largely associated with an absence of charges for damages related to the 2008 hurricanes in the Gulf of Mexico.

     The company’s average realization for U.S. crude oil and natural gas liquids in 2010 was $71.59 per barrel, compared with $54.36 in 2009 and $88.43 in 2008. The average natural gas realization was $4.26 per thousand cubic feet in 2010, compared with $3.73 and $7.90 in 2009 and 2008, respectively.

     Net oil-equivalent production in 2010 averaged 708,000 barrels per day, down 1 percent from 2009 and up 6 percent from 2008. Natural field declines between 2010 and 2009 were mostly offset by increased production from the Tahiti Field. The increase between 2009 and 2008 was mainly due to the start-up of the Blind Faith Field in late 2008 and the Tahiti Field in second quarter 2009. The net liquids component of oil-equivalent production for 2010 averaged 489,000 barrels per day, up 1 percent from 2009 and up 16 percent compared with 2008. Net natural gas production averaged 1.3 billion cubic feet per day in 2010, down approximately 6 percent from 2009 and down about 12 percent from 2008. Refer to the “Selected Operating Data” table on page FS-11 for the three-year comparative production volumes in the United States.

International Upstream

     Earnings of $13.6 billion in 2010 increased $4.9 billion from 2009. Higher prices for crude oil and natural gas increased earnings by $4.3 billion, and an increase in net oil-equivalent production in the 2010 period benefited income by about $1.2 billion. This net benefit was partly offset by higher operating expenses of $500 million. A favorable change in tax items of about $450 million was mostly offset by higher depreciation expenses. The 2009 period included