Accelerating the Deployment

fallenleafblackbeansOil and Offshore

Nov 8, 2013 (3 years and 5 months ago)

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© ChevronTexaco 2004

Accelerating the Deployment
of Technology to Business
Opportunities

Kevin Kimber


ChevronTexaco

David Matheson
-

SmartOrg

Value
-
Based Management Systems

2

Exploration & Production

Refining

Chemicals

Power

Technology

ChevronTexaco ranks among the world’s largest
global energy companies

ChevonTexaco
Headquarters


180 countries


53,000 employees


US $8.5 Billion capital


11.9 billion BOE oil and gas reserves


2.6 million BOE daily net production


RRR of 114% in 2002

4
th

largest publicly traded integrated oil in the world


based on reserves and production

Global Business


Global Technology

3

Technological advancement and integration are
key to future ChevronTexaco opportunities…


Heavy oil production and upgrading


Deepwater production systems


Global gas supply and markets


Zero
-
incident / zero
-
impact operations


Energy systems and fuels of the future

4

Heavy Oil


A Huge Resource but a Real
Challenge



Upgrading

Steamflooding

Technology plays a key role in
Commercialization of Heavy Oil
Reserves


Steamflooding has added $
billions in value through
increased recovery


Upgrading has added $ millions
in increased product value


CT spends about $30 million per
year on R&D in this area



Heavy oil is very thick and viscous making
it difficult to produce from underground
formations and requiring greater
processing to refined products


Costs more to produce

Sells for less
0
50
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350
400
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Steamflood
Primary
Production (MBOPD)
Field discovered 1941
1
st
Production
Steamflood
start up
1 Billion
bbls
300,000 BOPD
COGEN operational
Production History of Duri Steamflood

5

Role of Portfolio Optimization Process & Tools

for Heavy Oil Technology

Like many organizations, we faced
significant challenges…


Business needs for technology were not being met in a timely
fashion


Corporate growth objectives demanding more for less


Technologists keeping projects alive too long


Inconsistent project evaluations


Not enough project failures


Difficulty comparing projects of different types


Limitations of thumbs up / down approach to project prioritization


6

CT Heavy Oil responded by implementing
a value
-
based management process.

Project
Justifications



Business
cases

Portfolio
Decisions



Subjective
Factors

Before: a roll
-
up event

Project
Evaluations

Specify & quantify
uncertainty

Clear standards

Give teams real
direction
Peer & Expert
Review

Transparency

Credibility and
Comparability
Portfolio
Decisions

Value
-
based

Solid information

Strategic
Alignment
Uncertainty
Tracking

Baseline
assessments

Updates based
on evidence
After: a value
-
based management process
7

Templates provided a standard basis for
evaluation and comparison.

We found we could address 40 projects with just
three templates:


Improvements to oil production efficiency


Improvements to upgrading processes


Generic


Basis for consistent and comparable assessments
of technical risk and commercial contribution

Oil Production Profile
2000
2005
2010
2015
2020
2025
2030
2035
Year
0
50
100
150
200
250
300
BBL Oil/Day Per Pattern
Base Case
Technology Case
Project
Evaluations

Specify & quantify
uncertainty

Clear standards

Give teams real
direction
Peer & Expert
Review

Transparency

Credibility and
Comparability
Portfolio
Decisions

Value
-
based

Solid information

Strategic
Alignment
Uncertainty
Tracking

Baseline
assessments

Updates based
on evidence
After: a value
-
based management process
8

Explicitly managing project uncertainty
helps teams drive the upside.

Project Value Given Technical Success
NPV of Commercial Contribution - Project Cost ($million)
Combined uncertainty


Cost of Fuel
Base CAPEX
Base Non-fuel Cost
Base SOR
Base Initial Steam Injection Rate
Base Duration at Peak
Base Time to Peak
Base Peak Production
Period 1 Duration
Tech CAPEX
Period 2 Deploy Duration
Deployment Delay
Period 1 Annual Deployments
Product Value
Tech Incremental Non-Fuel Cost
Base Production Decay
Period 3 Deploy Duration
Tech Incremental Peak Production
Period 2 Annual Deployments
Period 3 Annual Deployments
40
60
80
100
120
140
160
180
200
220
240
1
2.2
0
0
0
0
0
0
760
760
0
0
0
0
138
138
2
1
0.007
0.0015
2
1
2
0.5
25
200
16
26
-0.18
-0.4
-0.1
-0.02
5
2
1
4
75
800
50
750
Base Case = 81.84
Helped team move away
from concerns about capital
cost of new technology and
focus on acceleration of
deployment and maximizing
peak production

Project
Evaluations

Specify & quantify
uncertainty

Clear standards

Give teams real
direction
Peer & Expert
Review

Transparency

Credibility and
Comparability
Portfolio
Decisions

Value
-
based

Solid information

Strategic
Alignment
Uncertainty
Tracking

Baseline
assessments

Updates based
on evidence
After: a value
-
based management process
9

A transparent process helped address the
“garbage
-
in, garbage
-
out” problem.

Commercial Value Given Technical Success
Range of Uncertainty ($million)
Improving Computational Capability
Shearing
LSTS
Perf ormance Prediction
Dow nhole Steam Prof ile Control
2D NMR
Thin Sand Thermal
Dow nhole Steam Prof ile - New Wells
Catalyst
Remote Sensing
Steam Inj Well BP
Steam Distribution
Bio-Upgrading
Heat Management
Improve Hydrocoking Process
Well Gauging
High Mobility Ratio Waterf lood
HOSGD
Reservoir Opportunity Identif ication
VAPEX
Cold Flow
Heavy Oil Chemistry
Sulf ur & Metals Removal
CASH
-100
0
100
200
300
400
500
600
Project 1
Project 2
Project 3
Project 4
Project 5
Project 6
Project 7
Project 8
Project 9
Project 10
Project 11
Project 12
Project 13
Project 14
Project 15
Project 16
Project 17
Project 18
Project 19
Project 20
Project 21
Project 22
Project 23
Probability of Technical Success
Shearing
Heavy Oil Chemistry
Improving Computational Capability
Bio-Upgrading
Thin Sand Thermal
Sulf ur & Metals Removal
VAPEX
Catalyst
High Mobility Ratio Waterf lood
LSTS
Improve Hydrocoking Process
Perf ormance Prediction
HOSGD
Steam Inj Well BP
Reservoir Opportunity Identification
Cold Flow
CASH
2D NMR
Downhole Steam Prof ile - New Wells
Heat Management
Remote Sensing
Steam Distribution
Well Gauging
Downhole Steam Prof ile Control
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Project 1
Project 2
Project 3
Project 4
Project 5
Project 6
Project 7
Project 8
Project 9
Project 10
Project 11
Project 12
Project 13
Project 14
Project 15
Project 16
Project 17
Project 18
Project 19
Project 20
Project 21
Project 22
Project 23
Project 24

Historically this was one of the most
challenging issues


Process and tools key to overcoming

Project
Evaluations

Specify & quantify
uncertainty

Clear standards

Give teams real
direction
Peer & Expert
Review

Transparency

Credibility and
Comparability
Portfolio
Decisions

Value
-
based

Solid information

Strategic
Alignment
Uncertainty
Tracking

Baseline
assessments

Updates based
on evidence
After: a value
-
based management process
Project Comparison Tools

10

Using value as the primary decision criteria helps
people make and accept decisions.

0
50
100
150
200
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300
350
400
Expected Commercial Contribution (NPV Given Technical Success $million)
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Probability of Technical Success
LSTS
Dow nhole S
Steam Dist
Dow nhole S
Heat Manag
Shearing
Heavy Oil
Sulf ur & M
Improving
High Mobil
Cold Flow
VAPEX
Catalyst
Remote Sen
Perf ormanc
HOSGD
Improve Hy
CASH
Reservoir
Well Gaugi
2D NMR
Thin Sand
Steam Inj
Bio-Upgrad
Bread & Butter
Pearls
White Elephants
Oysters
0
5
10
15
20
25
30
35
Cumulative Portfolio Cost (NPV $million)
0
100
200
300
400
500
600
700
800
900
1000
1100
Cumulative Portfolio Value (NPV $ million)
Dow nhole S
Steam Dist
Downhole S
Heat Manag
Well Gaugi
Remote Sen
Cold Flow
Reservoir
HOSGD
2D NMR
High Mobil
VAPEX
Heavy Oil
Improve Hy
Catalyst
Steam Inj
Perf ormanc
Sulf ur & M
CASH
LSTS
Thin Sand
Shearing
Bio-Upgrad
Improving
Project
Evaluations

Specify & quantify
uncertainty

Clear standards

Give teams real
direction
Peer & Expert
Review

Transparency

Credibility and
Comparability
Portfolio
Decisions

Value
-
based

Solid information

Strategic
Alignment
Uncertainty
Tracking

Baseline
assessments

Updates based
on evidence
After: a value
-
based management process
Portfolio Evaluation Tools

CFO Chart

Innovation Screen

11

Project
Evaluations

Specify & quantify
uncertainty

Clear standards

Give teams real
direction
Peer & Expert
Review

Transparency

Credibility and
Comparability
Portfolio
Decisions

Value
-
based

Solid information

Strategic
Alignment
Uncertainty
Tracking

Baseline
assessments

Updates based
on evidence
After: a value
-
based management process
Evidence
-
based uncertainty tracking gives
improved visibility to project changes.

0
50
100
150
200
250
300
Baseline Project Value (Expected NPV $million)
0
50
100
150
200
250
300
Current Project Value (Expected NPV $million)
CASH
Well Gaugi
Cold Flow
Reservoir
HOSGD
Steam Dist
Heat Manag
Remote Sen
Steam Inj
Downhole S
High Mobil
Improve Hy
VAPEX
Sulf ur & M
2D NMR
Dow nhole S
Perf ormanc
Catalyst
Bio-Upgrad
LSTS
Thin Sand
Heavy Oil
Improving
Shearing
Improved
Worsened
Capturing Basis of Assessment

Value Tracking

12

The result: acceleration of technology to
business opportunity.

2003

2004

Improvement

New ideas
screened

22

35

60%

Projects
initiated

6

9

50%

Projects
Deployed

1

2

100%

Projects
Terminated

3

6

100%

13

Acceleration is worth tens of millions.

Illustrative Scenario:


Stopping one project a year earlier than we
otherwise would, saves the avoided project cost,
but more importantly…



Allows funding & resources to accelerate
another project or initiate a new one


Annual value of this scenario:



$10 million or 30% of annual budget


Targeted improvement in business impact over next
3 years is 100%


14

Summary

Goal was to develop a process & tools to:


Ensure technology development is aligned with business
strategy & intersects opportunity


Accelerate development & deployment of technology


Optimize technology portfolio value


Benefits of a Portfolio Mgt Process for Heavy Oil Technology


Consistent & comparable project evaluations


Clear commercial benefits & deployment schedules


Earlier project “kills”


Accelerated initiation & deployment of projects


Transparent, value
-
based portfolio decisions


Greater portfolio value



15

For more information…

To contact the authors:


Kevin Kimber:
kevinkimber@chevrontexaco.com


David Matheson:
dmatheson@smartorg.com


Value
-
Based Management Systems