Chevron in 2015: A few insights

As I sit down to consider 2015, Chevron’s upstream portfolio is poised for continued growth through projects around the world. Our resource base is large and diverse, providing us flexibility to react to market conditions. We have a strong balance sheet and the capacity to fund attractive growth opportunities—even in times of lower crude prices.

Major deepwater projects continue their progress. We have five rigs running in the Gulf of Mexico, steadily developing and expanding a string of Lower Wilcox discoveries. Between now and 2016, we expect Big Foot, Jack/St. Malo, and an expansion of Tahiti to come online. Gorgon, the giant LNG project off the northwestern coast of Australia, is about 87% complete, with first gas expected in 2015. Wheatstone is not far behind at nearly 49% complete, and an expected 2016 start-up. Both projects have long-term contracts for much of their expected gas production. The string of subsequent Chevron discoveries in the area since 2009 now numbers 21, so the deep waters off of northwestern Australia will be a major focus area for us, for several decades. Off the West African coast, Moho Nord, Mafumeira Sul, and Greater Longui should come online in a similar timeframe. Newer deepwater blocks off China, Suriname, Morocco and southern Australia will be evaluated in 2015.

Shale/unconventional formations remain huge opportunities. The boom in shale plays is highlighted by Texas having almost a quarter of all the world’s active drilling rigs. Texas has increased its production from 1.0 MMbopd in 2008 to over 3.3 MMbopd in 2014, due largely to shale activities in the Eagle Ford, Permian and Delaware basins.* Chevron is building a new 330,000-ft² office complex in Midland, to accommodate the personnel necessary to develop the Wolfcamp and other stacked plays in the Delaware basin.

Internationally, shale is progressing. Adequate amounts of equipment and trained personnel are ongoing challenges. Our first wells in Canada’s Duvernay shale look promising, as do wells in the Vaca Muerta shale in Argentina. The Karoo in South Africa may be the next area to be evaluated. The sheer volume of shale worldwide represents fascinating potential, but the industry is fairly low on the technology curve for these formations. How do we identify sweet spots? What is the optimal well spacing? How can we improve initial productivity? How can we improve ultimate recovery? Is it all about creating more surface area, or are there EOR techniques that will work in ultra-low permeability rock? The questions go on and on.

Technology continues to be a major focus for Chevron. Technology will help us answer some of the industry’s most challenging questions—how do we deal with water depths greater than 10,000 ft., bottomhole temperatures over 500°F, and reservoir pressures in excess of 23,000 psi? How do we bring down well costs, continually improve safety, improve refining margins, get better recovery from shales, etc? Keeping up with, and properly using, current technology is critical, but developing new approaches to deal with the remaining technology gaps is critical challenging.

Our technology alliances with Los Alamos National Laboratory and NASA’s Jet Propulsion Laboratory continue to deliver innovative, high-value solutions. Our real-time, wireless downhole pressure and temperature monitoring system, downhole liquid level monitoring system, and 2-phase flowmeters are all expanding their applications. Several new technologies are just beginning their commercialization. We’re making progress on a full 3-phase flowmeter, a long-life ESP motor for harsh conditions, and an enhanced, long-distance logging tool concept. Managing “big data” and drawing useful information from it continues to be an ongoing challenge for drilling, reservoir management, refining, etc. And the battle to keep all of that data secure is becoming more sophisticated.

A well-managed downstream continues to produce significant value for us as an integrated energy company. Our refinery network and complexity allows us to process challenged crudes, and our supply and trading teams have the expertise to get these crudes to markets and facilities that can capture the full value. We are always evaluating opportunities to improve crude delivery systems with the goal of maximizing enterprise value, from crude to the customer.

The integrated model allows our downstream function to create added value for the enterprise by supporting the upstream business with both people and technology. We have refining experts in Nigeria, Angola, Kazakhstan, Venezuela, Australia and other upstream units around the world, where they support commissioning, start-ups, turn-arounds and operations. Further, as many of our upstream upgrading and processing operations have become very similar to refineries, we leverage our downstream engineering, processing technology, and operational expertise to run these facilities.

We can’t control prices. We can’t control demand. What we can control is the way we operate. Top-tier reliability remains essential to our operations and the key to profitability. Our strategy calls for continual focus on competitiveness through base business operational excellence, and targeted investment for profitable growth. We’re prepared for key challenges, from shifting fundamentals in North America crude markets, to increased process safety management expectations, and the impacts of policy and regulation, to ensure that we further strengthen our position and deliver sustained performance in safety, reliability and profitability.

* Source: www.eia.gov