If you have ever wondered what Robert Southey, who wrote “Goldilocks,” Lewis Carroll, who wrote “Alice in Wonderland,” and W.H. Adams, widely credited with discovering the Permian Basin, have in common – and you would be forgiven if you haven’t – then January’s AAPG Global Super Basins Leadership Conference will be the occasion to find out.
Because someone from Chevron has been thinking about that very comparison – both from the perspective of how the company is working to use the Permian as a template for future exploration and also because it sums up the state of affairs in 2020 about as well as anything.
“The Permian Basin, ‘Goldilocks’ and ‘Alice in Wonderland,’” said Scott Neal, Chevron’s director of shale and tight asset class for Chevron’s Upstream Division, “is the search for the optimum, a chaotic present day, and what it means for the future.”
The Permian Prototype
With the Permian providing global scale, Neal said, technology developed across North America’s shale plays have gained traction and become foundational around the world as other basins look to replicate the success. Technologies once considered novel have found a home in a data-rich and manufacturing-oriented setting positioned to impact global plays in a similar fashion.Further, over the past six years, the Permian Basin has become synonymous with the shale business itself. And while shale development was not invented in the Permian, it most certainly has been perfected in the vast acreage of west Texas and eastern New Mexico. What has been gleaned from the Permian – the double entendre notwithstanding – are lessons and trends that can be utilized in the pursuit of other basins.
This approach is nothing new for Chevron.
“In addition to the Permian, we also have other shale and tight assets in Argentina, Canada, and now in the DJ Basin and Eagle Ford,” said Neal.
Neal recently led Chevron’s re-organization efforts of the subsurface function and from 2017-2019, he was the manager of exploration and applied reservoir management in the company’s Mid-Continent Business Unit, where he led a large cross-functional team that carried out a broad range of geoscience and engineering studies across the Permian Basin. He has also worked in Myanmar and Indonesia, spanning both business and technical leadership.
First Principles
As mentioned, Chevron is making it a point to share and is actively working to bring an asset class approach to technology in an effort to continually improve performance in all those basins.
“This is an approach Chevron has found successful in other asset classes,” Neal said, pointing to the company’s successes with heavy oil. “It provides a great example where our teams in the San Joaquin Valley partner closely with international teams to deploy the latest technology, provide training and bring back insights from around the world.”
This is how the company nurtures and supports international connections, even during these difficult times.
“First, Chevron can leverage the digital revolution to our advantage and use our artificial intelligence, automation and digital products to institutionalize and scale workflows across the entire value chain,” said Neal.
More specifically, the company’s focus on what he calls “first principles,” allows it to map the best of its data insights to ensure “we use the right analogs to extract insights.”
“Our organizational focus on making asset class connections and building a culture reinforces the importance of data transparency, sharing and adoption of good ideas wherever they might come from,” he said.
The Future and North America
The interconnectedness of all this will be part of his presentation for this month’s super basins conference, generally, and the Permian Basin, specifically, when Neal discusses how Chevron is using the Permian to look at other basins. As to what Neal expects, he predicts because of the elephant in the room, COVID-19, most of those in attendance will be curious about how long, how deep and how permanent the effects of the pandemic will be on the industry.
He believes even the language to arrive at such understandings needs a reboot.
“What does a return to ‘normal’ look like?” he asks, specifically as it relates to what he calls the “destruction of demand” and ongoing excess OPEC supply, all of which will have many wondering, “Where does North America fit into the future?”
The question is easier to pose and consider overseas, Neal believes, because there’s much in the European press about the future energy transition. He wonders, though, if such matters are being discussed as thoroughly in the United States, specifically when it comes to questions and considerations of climate and where exactly future industry investments should go.
“How do the emerging basins compete with the larger and more established assets in the Permian?” he said.
At Chevron, he said, it is a primary consideration.
“We remain returns-focused and in such a dynamic business environment, the flexibility provided by our short-cycle Permian and other shale assets allows us to work our way through this environment in a thoughtful manner, reacting to current market conditions while focused on preserving long-term value. We don’t see the point of bringing on new production capacity when the world is so heavily oversupplied, and so the shale assets have really delivered in terms of providing the flexibility we need right now,” he said.
It is not a pretty picture.
“Like Alice in Wonderland, we have experienced a world turned upside down. The collapse in short-term demand creates an immediate need, while longer-term factors around the climate and energy transition are a constant reminder that significant challenges remain,” he explained.
Neal said the industry has the technical skills and the wherewithal to bring scale, but will need to continue to attract talent, develop the right technology and articulate the path toward a better future for the future to succeed.
And here he returns once again to the metaphor.
“Widespread application of the latest digital technology, rapid progress in understanding of unconventional reservoir characterization and – similar to Goldilocks’ quest for the best – an unrelenting focus on making the next well better than the last,” said Neal.