Accelerating the deployment of technology to business opportunities-chevron Texaco
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ChevronTexaco implemented a value-based management process and tools to optimize its heavy oil technology portfolio and accelerate the deployment of technologies. The process provided standard templates and metrics to consistently evaluate and compare projects. It helped prioritize projects based on their expected value, technical risk, and alignment with business strategy. Tracking project uncertainties and outcomes provided transparency. The results included faster initiation and deployment of projects, earlier termination of less promising projects, and increased portfolio value through accelerated technology development.
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Accelerating the deployment of technology to business opportunities-chevron Texaco
- 1. Š ChevronTexaco 2004 Accelerating the Deployment of Technology to Business Opportunities Kevin Kimber â ChevronTexaco David Matheson - SmartOrg Value-Based Management Systems
- 2. 2 Exploration & Production Refining Chemicals Power Technology ChevronTexaco ranks among the worldâs 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 4th largest publicly traded integrated oil in the world based on reserves and production Global Business â Global Technology
- 3. 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. 4 Heavy Oil â A Huge Resource but a Real Challenge UpgradingSteamflooding 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 50 100 150 200 250 300 350 400 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 Steamflood Primary Production(MBOPD) Field discovered 1941 1st Production Steamflood start up 1 Billion bbls 300,000 BOPD COGEN operational Production History of Duri Steamflood
- 5. 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. 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. 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 BBLOil/DayPerPattern 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. 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 21 0.007 0.0015 21 20.5 25 200 16 26 -0.18 -0.4 -0.1 -0.02 52 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. 9 A transparent process helped address the âgarbage-in, garbage-outâ problem. Commercial Value Given Technical Success Range of Uncertainty ($million) Improving Computational Capability Shearing LSTS Performance Prediction Dow nhole Steam Profile Control 2D NMR Thin Sand Thermal Dow nhole Steam Profile - New Wells Catalyst Remote Sensing Steam Inj Well BP Steam Distribution Bio-Upgrading Heat Management Improve Hydrocoking Process Well Gauging High Mobility Ratio Waterflood HOSGD Reservoir Opportunity Identification VAPEX Cold Flow Heavy Oil Chemistry Sulfur & 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 Sulfur & Metals Removal VAPEX Catalyst High Mobility Ratio Waterflood LSTS Improve Hydrocoking Process Performance Prediction HOSGD Steam Inj Well BP Reservoir Opportunity Identification Cold Flow CASH 2D NMR Dow nhole Steam Profile - New Wells Heat Management Remote Sensing Steam Distribution Well Gauging Dow nhole Steam Profile 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. 10 Using value as the primary decision criteria helps people make and accept decisions. 0 50 100 150 200 250 300 350 400 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 ProbabilityofTechnicalSuccess LSTS Dow nhole S Steam Dist Dow nhole SHeat Manag Shearing Heavy Oil Sulfur & M Improving High Mobil Cold Flow VAPEXCatalyst Remote Sen Performanc 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 $million) 0 100 200 300 400 500 600 700 800 900 1000 1100 CumulativePortfolioValue(NPV$million) Dow nhole S Steam Dist Dow nhole S Heat Manag Well Gaugi Remote Sen Cold Flow Reservoir HOSGD 2D NMR High Mobil VAPEXHeavy Oil Improve HyCatalyst Steam Inj Performanc Sulfur & M CASHLSTSThin SandShearing Bio-UpgradImproving 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. 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 $million) 0 50 100 150 200 250 300 CurrentProjectValue(ExpectedNPV$million) CASH Well Gaugi Cold Flow Reservoir HOSGD Steam Dist Heat Manag Remote Sen Steam Inj Dow nhole SHigh Mobil Improve HyVAPEXSulfur & M 2D NMRDow nhole SPerformanc Catalyst Bio-UpgradLSTSThin SandHeavy OilImprovingShearing Improved Worsened Capturing Basis of Assessment Value Tracking
- 12. 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. 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⌠â Allows funding & resources to accelerate another project or initiate a new one ⢠Annual value of this scenario: â $10 million or 30% of annual budget Targeted improvement in business impact over next 3 years is 100%
- 14. 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 âkillsâ ⢠Accelerated initiation & deployment of projects ⢠Transparent, value-based portfolio decisions ⢠Greater portfolio value
- 15. 15 Value-Based Management Systems SmartOrgÂŽ provides software and services to help companies evaluate their opportunities and make the best decisions about where to invest, especially when the future is clouded with uncertainty. Customers use SmartOrgÂŽ to build their capability in driving innovation from idea to commercial results and in selecting projects, improving returns in their portfolio. SmartOrgÂŽ helps companies to attain the highest value from projects and portfolios. 855 Oak Grove, Suite 202 Menlo Park, CA 94025 USA T: +1.650.470.0120 info@smartorg.com www.linkedin.com/company/smartorg @smartorginc About SmartOrg