Decision-making in an uncertain world
A Chevron case study

Page 1: Introduction

Modern organisations operate within an environment of change. There are all sorts of factors that change within this environment - for example, the market price of products and raw materials, the level of competition, market opportunities, changing government legislation and, of course, technology.This case study focuses on the way in which the oil company, Chevron, developed flexible solutions to...
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Page 2: Vision

Chevron Europe is part of a global organisation, Chevron Corporation, which is the sixth largest oil and gas company in the world. The Corporation employs 40,000 people world-wide and produces over 1.4 million barrels of oil and liquids per day. (1 barrel of oil = 42 US gallons or 35 Imperial gallons). Chevron (jointly with Texaco) was the first company to drill in the North Sea, in 1964.As part...
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Page 3: Development

Ever since its discovery in 1984, it was clear that drilling for Alba’s oil was not going to be easy. The geology of the area was particularly difficult and the total 750 million barrels of crude oil in the field were held in loose, unconsolidated sands. To make matters worse, the reservoir was long, thin and shallow, with a large volume of water underlying the oil. However, nearly 400...
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Page 4: Building an inter-disciplinary team

It 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...
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Page 5: Chevron's project development and execution process

The process which Chevron has created for project development and execution is set out in the illustration below. Chevron was able to use this approach in the development of Phase II of the Alba field. In analysing this phase, the project team was able to narrow down a range of alternatives into an optimum solution: 21 options were identified for further study 4 failed on grounds of technical...
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Page 6: Conclusion

Assessing risk Risk assessment is a key to effective business decision-making for any large business organisation. In assessing risks associated with oil production, there are a number of variables that are controllable and therefore ranges of outcomes are easier to estimate.For example, the controllable risks of enhancing an oil production platform include:l Technical risks - such as the...
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