* Protesters chant outside, inside Chevron annual meeting
* 5 activists arrested, including one who spoke at meeting
By Braden Reddall
HOUSTON, May 26 (Reuters) - Discussions of safety were prominent at Chevron Corp's (CVX.N) annual shareholder meeting in Houston on Wednesday, as a blown-out BP Plc (BP.L) well continued to spew oil into the Gulf of Mexico.
John Watson, who took over as chief executive and chairman of the second-largest U.S. oil company this year, highlighted Chevron's improving safety record in an industry that he said could never completely eliminate risk.
"But we can mitigate risk," Watson told the meeting as he discussed last month's explosion on a BP-operated rig that led to the spill. "There will be lessons to learn. Our industry will learn them, our industry will share them."
Apart from the new man at the helm, it was also a different venue this year for Chevron, which held last year's meeting at its San Ramon, California headquarters. But familiar criticism from shareholders and activist representatives surfaced, including a massive potential legal liability in Ecuador.
Just this week, Chevron asked Ecuador's courts to disregard an environmental expert who had said the company should pay $27 billion in damages for the pollution there.
The lawsuit contends that Texaco, which Chevron bought in 2001, polluted the jungle and damaged the health of local residents by dumping billions of gallons of contaminated water over two decades, before leaving in the early 1990s.
Watson expressed sympathy over the environmental damage that led to the lawsuit, but said Texaco had done its share of the remediation, and pinned the blame for any remaining problems on state-owned Petroecuador, which took over operations there.
Watson also answered criticism of Chevron's natural gas interests in Myanmar by saying such projects required long lead times, and many things could change before they were finished.
"Over that time period, we can see considerable change in host governments," he said. "In some cases, we may like the change, in some cases we may not."
Some of the environmentalists' concerns seemed to resonate with the rest of the shareholders. More than a quarter of them voted for a proposal to appoint a board director with environmental expertise, according to a preliminary count.
In the question and answer session, Antonia Juhasz, author of "The Tyranny of Oil," offered a heated critique of Chevron's environmental record and then joined a few other activists in several minutes of chanting "Chevron lies" before Watson brought the meeting to a close.
About three dozen protesters, including a few wearing turtle costumes, greeted shareholders with signs and more chants as they left Chevron's office in downtown Houston. The protesters were corralled by several city police officers, including five on horseback.
Five activists, including Juhasz, were arrested after the meeting, according to a spokeswoman for the protesters.
She said the other four had been refused entry to the meeting, including Reverend Ken Davis, who at last year's meeting lambasted former CEO David O'Reilly over pollution from Chevron's refinery in Richmond, California, where Davis lives.
One shareholder at Wednesday's meeting invited Watson to move Chevron's headquarters to Houston, where the company would be more welcome than it was in California. "They want gasoline, but no drilling," he said amid laughter. "Is that right?"
Watson, a California native who earned his undergraduate degree in the state, said he certainly enjoyed visiting Houston, but assured his shareholders that Chevron would remain based in California "for a long time." (Reporting by Braden Reddall; Editing by Tim Dobbyn)