ChevronTexaco Sees a Future in Partnering

Abstract: ChevronTexaco has elevated partnering from a business strategy to a core value of its corporate vision. Is this the wave of the future?

Analysis: Last September in Rio de Janeiro, Brazil, ChevronTexaco chairman and CEO David J. O'Reilly suggested the energy industry face the "challenge of change" through strong partnerships.

Speaking to more than 3,000 delegates at the 17th World Petroleum Congress, O'Reilly said, "The next 10 years will bring changes to the energy industry as dramatic as any decade in our history."

"Success is no longer determined solely by traditional financial or operational metrics," O'Reilly said. "Today we are held to new standards for corporate citizenship, human rights, and the environment, that are no less rigorous than the financial requirements of the investment community."

A Core Value
"Developing the resources and supplying the energy that the world needs to grow will take capital, expertise, sound management, creativity, and technology--but, increasingly, it will take partnership," continued O'Reilly.

O'Reilly detailed a broad definition of partnership, which includes industry, governments, host communities, and nongovernmental organizations. "When done right, partnership is a pragmatic way to confront challenges that are too big, and risks that are too complex," O'Reilly asserted.

Partnering is of course nothing new as a strategy in the oilfield. Field and well developments, pipelines, and countless joint projects have resulted in partnering when they made business sense to the parties. ChevronTexaco has gone beyond that to make partnering structural rather than situational.

Shortly after taking the helm of the new company, O'Reilly outlined "three pillars of ChevronTexaco's Vision": people, partnership, and performance, elevating partnership to a core value.

"It is our ambition to be the partner of choice wherever we work," he said. "The people of ChevronTexaco have an unrivaled reputation for building and sustaining lasting partnerships around the world--partnerships that offer mutual benefit and reach deep into the communities where we work."

The business case for partnership is increasingly clear and so are the benefits for developing countries, O'Reilly said. The payoff of effective partnership, he concluded, is significant.

ChevronTexaco supplied an example itself when it received the U.S. Secretary of State's 2003 Award for Corporate Excellence for corporate citizenship in Nigeria. The award, presented October 15, recognized several actions of Chevron Nigeria Ltd. (CNL):

  • Airlifting to safety 2000 villagers fleeing civil strife.

  • Establishing a riverboat clinic that delivers medical treatment to residents.

  • Creating the Chevron Workplace AIDS program, which focuses on peer education, community-based prevention, and training.

  • Providing furnishings and equipment for 54 schools that show improved attendance and performance.

  • Starting and continuing electrification programs that are bringing power and its economic benefits to 100,000 residents in the remote Niger Delta.

  • In accepting the award, O'Reilly cited several partners and contractors instrumental in the achievements, including The Nigerian National Petroleum Company, CNL's joint venture partner in Nigeria.

    Jay Pryor, CNL managing director said, "Working with governments, nongovernmental organizations, multilateral organizations, and international initiatives, we continue to address challenges in the Niger Delta. Developing and sustaining lasting partnerships is a critical component of our business strategy."

    Technologies, Too
    Partnerships are beneficial not just for ChevronTexaco's relationships with companies, governments, and NGOs; they appear equally useful for developing technology.

    In December 2001, the company and the University of Tulsa formed the Center of Research Excellence in production fluid flow. The center was set up to focus on flow assurance: the study of emulsions and multiphase flow, dispersions, and heavy-oil chemistry. Flow assurance is a critical aspect of oil production, particularly subsea where production problems are hugely expensive. Flow assurance is a priority focus of all major oil companies and engineering and service companies.

    Then in September of 2002, ChevronTexaco and Schlumberger launched a multi-year technology development project to increase efficiencies in oil and gas production. The aim is to enhance the use of oilfield sensor data from wells and facilities to improve realtime oilfield management.

    The companies plan to bring together advances in information technology and production system modeling, and enable simultaneous access to crucial field information from realtime sensors. Field and office personnel may then collaborate on faster and better decision-making to improve reservoir performance.

    "We aim to jointly develop technology…to assimilate large amounts of streaming production data, to improve oil and gas production rates and…recovery," said Satish Pai, vice president, Schlumberger Oilfield Technologies.

    Two more Centers of Excellence followed in August and October this year.

    In August, the University of Southern California (USC) and ChevronTexaco announced the Center of Interactive Smart Oilfield Technologies, which it calls CiSoft, to improve oil and gas exploration and production efficiency.

    ChevronTexaco will fund the center, which will draw upon faculty and resources within the USC School of Engineering's Information Sciences Institute, the Integrated Media System Center, and the Petroleum Engineering Program. Lloyd Armstrong, provost of the University of Southern California, C.L. Max Nikias, dean of the USC School of Engineering, and Don Paul, vice president and chief technology officer at ChevronTexaco, said the center will focus on integrated technologies targeted to the operations of instrumented, intelligent oil and gas fields.

    Benefits of the program to both parties stem from partnering. ChevronTexaco employees will participate in the center's research and development program, and the company will provide real-world drilling and production data from oil and gas fields from around the world.

    CiSoft will support a strong educational component and should draw top graduates from across the world, Nikias said. The engineering school will create a new Master of Science degree program which integrates information technology and petroleum engineering. CiSoft will also form an integral component of ChevronTexaco's "i-field" program, which is focused on the integration of field automation, reservoir simulation technologies, new and emerging well technologies, and realtime reservoir management. Advances in i-field technologies and enhanced workflows will help reduce field development costs, speed up the analysis of information, and enhance operational reliability.

    In mid-October this year, the Colorado School of Mines (CSM) and ChevronTexaco announced a similar Center of Research Excellence--this one to improve interpretation of subsurface geology.

    Dr. John Trefny, president of CSM, Nigel Middleton, vice president of academic affairs for CSM, and again Don Paul at ChevronTexaco, said the center will develop advanced technologies to improve interpretation through computer modeling.

    ChevronTexaco will provide funding to establish the center which, like the CiSoft program, will draw upon faculty and resources within the CSM Department of Geology and Geological Engineering. The center will focus on the research and development of integrated technologies targeted to the exploration for oil and gas particularly in deepwater geological environments. ChevronTexaco employees will directly participate in the program.

    The company will provide real-world geological data from oil and gas fields from around the world. ChevronTexaco also plans to provide additional research investments as expanded programs develop with CSM.

    In addition to research and development, the new Center of Research Excellence will support a strong educational component, drawing top graduate students from around the world. The program at CSM will also train existing ChevronTexaco employees in innovative petroleum exploration techniques and strategies.

    "This partnership will allow both organizations to leverage from each others' expertise," said Paul. "The Colorado School of Mines is known throughout the petroleum industry for its focus on industry challenges and for the quality of its students. The Geology and Geological Engineering Department will bring world-class experts to our joint research effort."

    ChevronTexaco's example makes an impressive case for partnering. They are making it work. Especially in light of what O'Reilly foresees for the next decade: "globalization and the countervailing forces of nationalism, the changing role of national oil companies, growing world population, and the increasing influence of a variety of stakeholders." Even for the U.S.'s second largest energy company (fifth largest in the world), dealing with such problems seems almost too large to face without further brainpower. And partnering can help trigger benefits for developing countries such as revenues and ripple effects from oil and gas production, which fuel social and economic development and progress even long after the closure of an oil well. It's hard to see much standing in the way of partnering as the wave of the future--or to disagree with O'Reilly's evaluation of the potential payoffs of effective partnership: "If we get this right, if we apply our expertise and experience toward shared goals--the net benefits will be enormous."