Presentation on theme: "Prospective Technology Developments Up to 2050"— Presentation transcript:
1 Prospective Technology Developments Up to 2050 Image:Tahiti platform.Prospective Technology Developments Up to 2050Bharat SrinivasanManaging Director, Technology MarketingIt is my honor and pleasure to be here among such distinguished and visionary company at the Ninth Arab Energy Conference. The theme I have been asked to present today as a background paper is to speculate on prospective technology developments and their impacts on the Oil and Natural Gas Sector. This is a difficult topic and especially so, during these difficult times. Recognizing that, I have chosen to explore this theme in the context of my parent company, Chevron Corporation. In other words, how would Chevron view prospective technology developments and would the Arab World have a similar perspective?9th Arab Energy ConferenceDoha, QatarMay 9 – 12, 20101
2 Exploration &Production AgendaImage:Sucker rod pumps for small-scale test for steamflood at Joint Operations at Wafra, Kuwaiti sector of the Partitioned Neutral Zone (PNZ).Exploration &ProductionExploration & Exploration Well SuccessEOR & Impacts on Recoverable ReservesNon-conventional Oil ProductionRenewables StrategyRefining and Clean FuelsDevelopments Driven by Innovation, Leveraged Strengths and Collaborative PartnershipsIn doing so, I will look at Chevron’s Upstream business with exploration and production of oil and gas, then jump to some drivers in technology development in the growing and unpredictable area of Renewables and finally, where my heart lies, in the Downstream section and Refining for Clean Fuels. For your information, the graphic here is of a sucker-rod for a small-scale test for steam-flood at the Joint Operations in Wafra, the Kuwaiti sector of the Partitioned Neutral Zone. The theme I will explore is how Technology developments are driven by innovation which is leveraged by inherent strengths and collaborative partnerships.Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
3 11.6 billion BOE net proved oil and gas reserves Chevron Profile60,000 employees11.6 billion BOE net proved oil and gas reserves2.7 million BOE daily net production2.2 million BPD refining capacity15 fuels/lubes refineries upgraders3 retail brands25,800 retail outletsSo, how is Chevron like a microcosm of an Arab sector or state? Well, for one, we have about 60,000 citizens, or employees (except none of them can vote!). You can see we have massive Upstream proven reserves of almost 12 Billion, and almost 3MM B/d production. This is then somewhat loosely flanged with over 2MM B/D of Refining Capacity - most of this is in the U.S, most is 100% Chevron-owned and operated, with the balance operated in Joint-ventures around the world. This, however, is an area where, unlike the Arab world and due to the recent downturn, Chevron is likely to contract rather than expand. This is because the recent downturn has caused a significant gap between supply and demand some of the markets Chevron serves with its 3 retail brands (Chevron, Texaco and Caltex ) and thousands of retail outlets. Conversely, the refining supply situation will continue to grow in parts of the world, including the Arab world.33
4 Exploration and Production Image:Tengiz field.Exploration and ProductionExploration & Exploration Well SuccessEOR & Impacts on Recoverable ReservesNon-conventional Oil ProductionLooking specifically now at the Upstream section, I will focus on our Exploration and Production activities, then on to technology’s impacts on EOR and recoverable reserves and finally to non-conventional oils.
5 Chevron in the Arab World Chevron, with its roots in Standard Oil, has a long history in the Arab World of pioneering oil and gas production.Photographed in the Winter of 1937, Dammam No. 1 (right) and Dammam No. 7 (background) appeared as the only foreign bodies in an isolated desert landscape. By the following year, the discovery at Dammam No. 7 would establish Saudi Arabia’s potential as an oil-producing giant.Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
6 A Strong Worldwide Portfolio Europe, Eurasia & Middle East650 MBOEDNorth America750 MBOEDAsia-Pacific700 MBOEDAfrica & Latin America600 MBOEDFrom that past, On the Exploration and Production side, Chevron has oil and gas operations in nearly all of the world’s key hydrocarbon basins, including in the Arab World. We operate in over 25 countries through four regional operating companies and more than a dozen business units. Chevron has a portfolio of depth and diversity – both important to its long-term success.11.6 BBOEProved Reserves2.7 MMBOEDNet Production CapacityAreas of OperationForward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.6
7 Consistent Exploration Success 2002 - 2008 8.5BBOE Resource Adds45% Average Exploration Success RateCumulative Resources Added From Exploration2002Exploration is the foundation to our future success – for example, 2008 was a great year for example when we added more than 1.7 MM bbls of oil-equivalent. That represented a success rate of 49% , even better than our seven-year average at 45%. Our finding cost is the lowest in our industry peer group – all these metrics demonstrate the successful deployment of technology.20032004200520062007122008 Key Resource AdditionsYear-End Mean Resource Estimates
8 Technology: Key to Exploration Success Image:Two drilling engineers looking at a computer screen in the visualization room at the Well Design and Execution Collaboration Center (Well DECC), Houston, TX.3D seismic/4DHorizontal, multi-lateral wellsCompletionsSubsalt wellsSupercomputersVisualizationGeostatistics in reservoir modelsRecord depth - drillingRecord depth - productionWe have literally hundreds of different technology initiatives and prospects but some specific areas are responsible for our success; a) technology to see; advances in seismic imaging and sophisticated velocity modeling to interpret now enable us to see deeper and more clearly underground, especially through salt basins. We deliver high-resolution, visual images faster and cheaper than others – and continued developments in this area will be a necessity when project costs are in the billions and a single well can cost over 100 million dollars; b) technology to explore, that is, to get us where we need to be to find resources. Here, we are pushing technology to new depths, geologic challenges and temperature and pressure extremes – especially with deepwater wells and; c) technology to efficiently and economically produce includes such innovations as dual-gradient drilling, intelligent completions, titanium tubular, multiphase pumps and artificial lifts.Let me give you some specific examples – Chevron’s Jack/St Malo fields in the Gulf of Mexico are located below 7,000 ft of water, more than 21,000 feet below the sea-floor where water pressure is 1000 times sea-level pressure, yet using these technologies to see, then explore and finally produce, Chevron set records for deepest, highest pressure and longest duration. Recent events highlight the risks inherent in such technology applications.Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
9 Exploration and Production Image:Tengiz field.Exploration and ProductionExploration and ProductionExploration & Exploration Well SuccessEOR & Impacts on Recoverable ReservesNon-conventional Oil ProductionAs powerful as technology can be in exploring new fields, Chevron could not reach its production levels without simultaneously maximizing the potential of mature reservoirs.
10 Future Technologies Will Focus on Recovering More from Existing Fields Improved reservoir management practicesReliability and uptimeDe-bottlenecking operationsOptimization and automationCapital efficiency and drilling costsEnergy efficiencyChevron manages decline rates in existing fields with well-workovers, artificial lift techniques, facilities and equipment improvements and part of enhanced-oil recovery techniques such as water and CO2 injection and drilling. Even in EOR activities, tools such as Intersect (which is a Chevron-Schlumberger developed tool) enhance efficiency and cost by producing hundreds of detailed development scenarios for a field in a short amount of time.
11 Typical oil saturated core in Duri Field, Indonesia Technology Drives EOR Performance Thermal Recovery – Most Successfully Applied EOR MethodMechanismHeavy Oil RecoveryPrimary5 - 15%Steam Flood%WorldwideThermal67%Pre-SteamPost-SteamCO212%HC Misc19%OilSaturationAverages55%OilSaturationAverages8%Chemical1%N21%In our California fields, where heavy oil makes up approximately 84% of crude oil production, steamflooding is the key to continued recovery. So this is an example of where technology is effectively applied through usage of a core strength. And Steamflood is certainly part of Chevron’s history with California crudes. We utilize our decades old knowledge database on thermal recovery using steam injection, and have built integrated models for steam reservoir, field and heat management, using 3-D and 4-D models to guide well planning and drilling to improve recovery. With such proven success, these technologies are being deployed in mature, large scale thermal operations in Brazil, Angola, Canada, Indonesia, Venezuela and of course, here in the PNZ. In fact, at the PNZ, in June 2009, we had the first commercial application of a conventional steamflood injection in a carbonate reservoir.Steamflood – Increases reserves by a factor of 2-10 times compared to primary heavy oil recoveryTypical oil saturated core in Duri Field, Indonesia
12 Collaboration & Innovation Drive Performance Applying Steamflood Experience to New Opportunities Industry/Institution CollaborationINTERSECT simulation capabilities for HO reservoirsi-field – collaborative, visual environment to optimize and transform production performanceUniversity of Texas –advancing the science of EORIOC CollaborationPNZ Carbonate Steamflood Development – Kingdom of Saudi ArabiaPetropiar (Hamaca) – Petroleos de VenezuelaDuri – IndonesiaReservoir and heat management are criticalEfficient operating practices lead to high recoveriesDevelop and transfer critical Organizational CapabilitiesAdvanced technology, processes and best practicesAs we look at the Exploration and Production and EOR activities, I would like to point out a couple of other key features of successful technology deployment that have been alluded to earlier. 1) the importance of finding and building on your own technology strength, in Chevron’s case, steamflood was part of our legacy and strength, 2) the importance of collaborations, large and small. Much innovation comes from Chevron’s partnerships with Universities, small companies that are nimble and cutting-edge and also large scale partnerships with our host countries and partners. Chevron has been fortunate to work collaboratively with the Kingdom of Saudi Arabia on PNZ development among – similar collaborations with other host Govts have been key to succeeding in deploying technology to their best potential.
13 Exploration & Production Image:Tengiz field.Exploration and ProductionExploration & Exploration Well SuccessEOR & Impacts on Recoverable ReservesNon-conventional Oil ProductionLooking now beyond conventional oils…Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
14 Long-Term Outlook Shows Growth in Unconventional Resources Overall Oil Supply (MMBD)Unconventional Liquids (MMBPD)17 -150 -Shale OilGap - Unconventionals100 -NGLs, Condensate, etc.Bio-FuelsCoal to LiquidsGas to LiquidsMiddle East, West Africa, and FSU50 -Heavy OilNorth America, Latin America, Asia-Pacific, and Europe0 -0 -2005There are many predictions of peak oil, for the sake of argument, I will subscribe to theory that world oil and gas production will peak in about At any rate, after about 100 MMBL BBL/D, we expect un-conventional oils to make up an increasing portion of the gap between supply and demand. By Unconventional oils we mean heavy oil, Coal and Gas to Liquids, biofuels, shale oil….2030200520102015202020252030Hydrocarbon Demand – Grows from 85 MM BOED to 125 MM BOED over the next 25 yearsTotal Oil Production Plateau – At approximately 100 MM BOED the demand gap is filled by Unconventional SourcesUnconventional ResourcesXHO, GTL, CTL and “other” resources such as Biomass, Hydrates, etc. alternate hydrocarbon resources will become increasingly important
16 Chevron’s Development of Heavy Oil Reserves ~ 500,000 BOPD (net) = largest amongst International Oil Companies account for almost half of the world’s thermal heavy oil productionSaudi ArabiaPNZWafraSouthUmm GudairSouth FuwarisHummaNorth SeaAlbertaCanadaSan Joaquin ValleyCaliforniaPartitioned Neutral ZoneChinaArabian GulfVenezuelaChadBoscanHamacaChevron’s activities related to heavy/extra-heavy oil production are significant in the Arab region. Chevron is by far the largest heavy oil producer among international oil companies. We are also the larges thermal heavy oil producer, accounting for about half of all world production. 20% of our total, or 550,000 bpod production is in heavy oil, with two of our projects over 200,000 bpod each. Again, this reflects our history, our core competence, our expertise and so when it comes to technology for heavy oil development we expect Chevron to continue as a dominant player. Our pilot project in the PNZ involved drilling 16 injection wells, 25 producing wells, 16 observation wells , water treatment, steam generation and distribution facilities and is expected to lead to full-field steamflooding of the First Eocene reservoir.AngolaDuriIndonesiaBrazilMiningOffshorePrimaryThermal
18 Demand is Growing, All Sources will be Needed 201012,842 Million Tons of Oil Equivalent240 Mmboe/d203017,095 Million Tons of Oil Equivalent320 Mmboe/d10%1%2%26%6%21%I want to go on now to the Renewables area. When we think about Chevron’s approach to Renewables, it is important to note that Biomass and Waste continue to comprise a relatively small portion of the overall energy demand, which is despite the downturn, still growing. Thus, all forms of energy, including conventional and unconventional oil and gas continue to be very important to supplying the future demand, even with unpredictable politics and environmental policies possibly driving more renewables supply.34%Refs: IEA World Energy Outlook 2006
19 Leveraging Our AssetsChevron pursues renewable energy technologies thatAre similar to our core businessCan be integrated into our existing asset baseEnable our core businessCan give us a competitive advantageHaving established that the scale of the renewables effort is bound to be small, Chevron’s approach to the deployment of technology is similar to its more conventional side. That is, leverage off our key strengths and legacies, find collaborations and partnerships to innovate and apply the technology efficiently and economically. Because of its small scale and diffuse nature, in order to apply it efficiently and economically, we feel it must somehow be integrated into our existing asset base, be it in refining or otherwise, it must at a minimum, not detract from but enable our core business of E&P, Refining or Marketing and to the extent possible, it must give us a competitive advantage.
20 Areas of Focus Geothermal Energy Efficiency Emerging Energy Advanced BiofuelsHaving laid down those principles, the biggest ‘bang’ for the buck in terms of renewables is to think of it differently and focus on improving efficiencies of our energy delivery systems in existing facilties using advanced technologies. We have even formed a company called Chevron Energy Solutions that sells energy efficient systems to 3rd parties and municipalities using as many renewable energy platforms as possible. Also, as a result of our history in steamflood operations, it is no coincidence that Chevron is the largest geothermal energy producer today already and we continue to grow in this area. In the area of Biofuels, we are exploring multiple pathways and again leveraging with universities, startup companies - it is said that the Silicon Valley in California will become the Green valley, so Chevron is in close proximity to a lot of innovation that is happening in the area.
21 Chevron Technology Ventures Biofuels Business Unit Chevron Technology Ventures manages Chevron’s advanced biofuels research portfolio and the company’s interest in Catchlight EnergyExternal Research CollaborationsUniversitiesGovernment laboratoriesIndustrial partnersNGOsInternal R&DFeedstock supply and optimizationConversion technologiesFuel and combustion technologyChevron’s Technology Ventures unit seeks innovation through collaboration and R&D.
22 Conversion technology Catchlight EnergyChevron’s 50/50 joint venture with Weyerhaeuser to research, develop and commercialize the conversion of forest-based biomass into biofuelsWeyerhaeuserCatchlight EnergyChevronIn a more formal partnership, we are involved with Weyerhauser, the largest private landholder in the U.S., exploring ways to convert their forest-based biomass to transportation fuels.The Catchlight Joint Venture is an example of approach we have taken to technology development – finding a symbiotic partner and applying our core strengths and assets – here our core strength is in our upgrading technology, which I’ll discuss later. Chevron has the refineries and marketing, supply and retail infrastructure to make this a forest to fuel integrated venture. We’ll see if it works!Feedstocks at scaleConversion technologyHigh-quality fuels
23 Going Forward Maintain leadership in energy efficiency Continue to narrow focus in advanced biofuels feedstocks and conversion technologiesContinue to partner business units to investigate, develop and integrate innovative solutionsMaintain emphasis on energy at scaleSo our approach on renewables is simple – be efficient, find the right pathway that uses all our strengths efficiently and economically.
24 Refining & Clean Fuel Production Next we come to the part of the Company that is under the most severe duress and yet, presents opportunities in the Arab world.
25 Unconventional Liquid Fuels Demand Before we can refine anything, let us revisit the fact that no matter what price scenario one picks over 80% of the input to refineries will be conventional crude oils with the balance being unconventionals, including bitumen and extra heavy oil.Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
26 Conversion Capacity Needed – Crude/Resid to Diesel At the same time, although the recent downturn as destroyed some demand for transportation fuels in the U.S. and OECD, overall, fuels demand does grow, especially fuels in what we’ll call the middle-distillate range, kerosene, jet and diesel.Courtesy : Purvin and Gertz Inc.
27 Deficit of Diesel/Gasoil in Middle East/North Africa (MENA) Market Outlets Europe and Asia Pacific (Deficit)/Surplus, MtThis chart shows the regional effect of the middle-distillates supply-demand scenario. Whereas N. America for example is generally surplus over a long period, trends in the Asia-Pacific especially dictate that there will be a shortage in the next decade. And increasingly, the Middle East can be the source of filling this shortage.Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
28 Diesel Fuel Sulfur Levels MENA August 2008 5000/ ~201050 / 2016=10 / 201310 / 201010 / 201350 / 201010 / 20125000 / ~2010The other unmistakable trend is that of product quality. This Shows that even in 2008, most of the Middle East and North Africa countries are evolving from diesel fuel sulfur levels in the thousands to levels approaching 10 PPM by 2010, to match the need in the OECD and U.S.Putting it all together now, over the next several decades, we continue to be dependent on conventional oil for the most part but with an increasing portion coming from heavy and extra-heavy oils, at the same time, middle-distillates demand is growing and the growth is in areas that demand very clean fuels. So, how does the Refining sector and particularly that in the Arab World, satisfy all these trends. Through refining technology and a major part of this technology is what we call hydroprocessing.Middle East diesel sulfur specifications are tightening (limit ppm S/year)Sources: (2008 specs) and Wood Mackenzie (future specs)Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
29 Hydroprocessing as the Bridging Technology Challenges similar to Chevron’s historyConvert heavy, contaminated feedstocks to clean products economically, efficiently – led to “hydroprocessing” technologyEven the non-conventionals need hydroprocessingNeed continuing application and innovation of hydroprocessing as bridging, transitional refining technology to address shifts in supply/demand, public policy, ramp up of non-conventional-derived fuelsModerated by capital, GHG ‘costs’So, what is Chevron’s perspective on this? Interestingly, the situation is very similar to one we faced in our history. As our Refineries on the West Coast of California and in Mississippi were built, we were faced with having to convert, contaminated feedstocks to clean products and that is precisely how the technology of hydroprocessing was invented. Today, not only is it a case of déjà vu, but even in the whole field of renewables there is the need for some form of hydroprocessing to convert to final products.Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
30 How Hydroprocessing Fits In: An Upgrading Refinery Refineries use hydroprocessing to:Meet product quality specifications on transportation fuelsUpgrade heavier oil into desired, clean fuels or feedstocksRemove contaminants to feed downstream units, e.g., for lubricants, PetrochemicalsTransition to process non-conventional feedstocks, e.g., Coal to liquids derived, bio-mass derived oilsNew technologies such as Chevron’s VRSH increase liquid yieldForward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
31 Hydroprocessing Technology for Downstream Performance Chevron has built broad capability in processing heavy, high- contaminant crudes and residuum to clean productsUS Refineries – Over 40 years of hydroprocessing with more than 40 units currently operatingUK Refinery – Innovative processing techniques for processing difficult crudesS. Korea Refinery – Upgrading to increase flexibility, reduce crude cost, and upgrade to diesel and lubricant base oils with advanced hydroprocessing, including ISOCRACKING, ISODEWAXING and LC-FINING technologiesThrough JVs, Chevron markets hydroprocessing technologies and catalystsForward-looking projections in this presentation are subject to risk factors noted on page 2.
32 Hydroprocessing Technologies marketed by Chevron’s Joint-Ventures Forward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
33 Mid-East hydroprocessing capability will grow to meet Global needs Announced Capacity Increases May Solve Most of the ME HCR Capacity ShortageCapacity IncreaseNew CapacitiesHCR, % CDUCountryCDUHCRPreviousNewBahrain-262,00060,00022.9%Iran150,0001,601,000136,5009.4%8.5%Iraq750,00096,5001,347,500165,74111.6%12.3%Israel65,000220,0000.0%29.5%Jordan90,4004,3504.8%Kuwait679,00070,0001,568,200185,65013.0%11.8%Oman330,000415,000Qatar250,00076,000450,00096,00010.0%21.3%Saudi Arabia800,000185,0002,880,000308,8206.0%10.7%Syria350,000589,86526,41011.0%4.5%UAE600,00037,0001,381,25068,0504.0%4.9%Yemen140,000Algeria300,00078,08010.4%Egypt44,000866,25077,5004.6%8.9%Eritrea14,564Libya240,00050,740618,0008.2%Morocco200,00038,000354,901Sudan121,700Tunisia120,000154,000FutureMid-East hydroprocessing capability will grow to meet Global needsForward-looking projections in this presentation are subject to risk factors noted on page 4 of the Introduction section.
34 Innovation Drives Performance VRSH – Refining’s Future Vacuum Resid Slurry Hydrocracking (VRSH) technology - a unique resid conversion process for turning Vacuum Resid into high valued productsConverts nearly 100% vacuum resid into clean burning fuelsYields high value products (>80% diesel and lighter & <20% VGO)Liquid yield %, no cokeR&D pilot continues to improve the process and reduce technology riskFocus on optimizing catalyst formulation & operating flexibilityThis again highlights how technology has developed through the use of Chevron’s expertise and strengths in hydroprocessing, coupled with collaborative Joint-ventures and made our refining system, competitive and equipped for the future.Forward-looking projections in this presentation are subject to risk factors noted on page 2.
35 SummaryOur comprehensive Environmental, Social and Health Assessment process applies leading technologies to reduce environmental, social and health impacts and risks from our activitiesUpstream, Renewables, Refining Technology Developments for the Mid-East and Chevron will depend on:InnovationLeveraged strengthsCollaboration/PartnershipsForward-looking projections in this presentation are subject to risk factors noted on page 2.