Decision-making in an uncertain world
A Chevron case study

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Page 4: Building an inter-disciplinary team

Chevron 4 Diagram 1It was at this time that Chevron decided to build a small interdisciplinary team with the brief to take a thorough look at the available options. This approach was consistent with the newly adopted Chevron Project Development and Execution Process (CPDEP). (See Fig 3 overleaf). The team would provide Chevron with a creative approach – it would not simply plough ahead with pre-determined ideas.

Chevron 4 Diagram 2The team of five was given an open brief - to examine all the available options. The approach adopted by the team was known as Decision Risk Analysis. This is a methodology that helps to make decisions in uncertain conditions by taking a view of the probabilistic outcomes. In simple terms, this involves setting out decision trees (see Fig 2) with all the risks for each alternative decision.

The importance of each decision is derived from the impact each variable has on the success measure (e.g. Net Present Value). This is shown in the ‘Tornado’ diagram below Chevron 4 Diagram 3(Fig 1). The forecasted price of oil typically comes out on top. These risks are set out as mathematical probabilities. This new way of organising is now being adopted by Chevron world-wide and involves bringing together all the disciplines involved in a particular project at the same time and empowering them to evaluate a wide range of development options. This contrasts with the traditional way of working which would have been on functional lines, beginning with the geologists, then moving through the reservoir engineers to facilities and process engineers and finally operations.

The changing nature of Phase II

Phase II of the Alba project could have involved building the Southern Platform. However, work carried out by the project team using Decision Risk Analysis techniques indicated that there was a range of other options that were worth considering. In an industry in which technology is constantly changing, it was also clear that new approaches would present themselves as viable alternatives in the course of time.

A spreadsheet-based computer model has been central to the process used for the Alba Phase II studies. This enabled the team to simulate the range of outcomes for each of the different development options - from installing a second platform to doing nothing. In between these two extremes lay a host of imponderables. Could the southern area be accessed via sub-sea wells, drilled by a semi-submersible rig and then tied back by pipeline to the Northern Platform etc?

The team evaluated many technical solutions in search of the solution which would add greatest value to Alba’s second phase development. This was achieved by grouping them into a small number of basic development scenarios representing a wide range of different investment and business strategies. All of these needed to be weighed up to find out the optimal solution. A further problem at this time was that the price of oil was at a low level which meant that certain options would have been uneconomic. However, developments in technology meant that it would be feasible for Chevron to consider drilling wells in the southern area of the field from the existing Northern Platform, using extended reach drilling (ERD) techniques.

ERD is the single, most significant advance in technology that has shaped the thinking of the Alba Phase II team (which had grown to fifteen people with complementary skills in petroleum engineering, geology, facilities design, production and economics). As ERD has developed, so has the distance over which it can operate, enabling more oil to be accessed from the same platform.

Chevron | Decision-making in an uncertain world