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Interview

with Rick Cohagan, President and Managing Director, Chevron Upstream Europe

13.09.2008 / Energyboardroom

What is the scope of European operations that Chevron’s Aberdeen office manages, and how important has this region been traditionally for the company?

Chevron Upstream Europe is based in Aberdeen, as our headquarters for E&P operations not only in the UK, but also in Norway, Denmark, the Netherlands, the Faeroe Islands and Greenland. Chevron has been active in upstream operations in Europe for many years, and it has always been a key region for the company in many regards. In particular, Europe has been an area where Chevron has recruited and developed a lot of talent, and it has also provided strong and stable earnings over time.
The importance of Chevron’s European base is illustrated by the company’s decision to establish a brand new Technology Centre in Aberdeen in 2006. The centre is currently employing around 60 people, and aiming to reach a staff of 100 in the near future. It carries out research and provides technology services for European operations of course, but also supports global operations, including those operations which are in a similar time zone.

Within this European context, what does the UK in particular represent in terms of production for Chevron and which are the main projects at the present time?

In terms of production, the UKCS itself is still an important part of Chevron. In total, Chevron Upstream Europe represents around 180 000 barrels of oil equivalent per day (boepd), with the UK production accounting for 120 000 of them. The profiles of the fields vary with some fairly large oil fields like Captain and Alba, which are in their mid-life phase, and gas developments like Britannia which we co-operate with ConocoPhillips.

Some of the most exciting work Chevron is doing in the UKCS is on the exploration side. We have recently contracted for a new drill ship with Stena, whose construction just finished in Korea, which should arrive soon in the UK and allow us to drill wells in the West of Shetland area starting in November. These are challenging deepwater prospects with the additional difficulty of getting precise imaging due to thick basalt subsurface. These prospects are going to be challenging because of the deep water and difficult met-ocean conditions, but Chevron has always excelled in finding ways of solving these types of challenges, so we are looking forward to doing many interesting things in the West of Shetland area.

As Malcolm Webb at Oil & Gas UK stated, West of Shetland holds great potential for the UKCS but there will have to be a common approach among all the interested parties in order to make it a reality. What part does Chevron play in this context, and what do you see as the main issues in this regard?

It is always difficult to start working in new areas and trying to figure out what technology is needed to develop them. In the case of West of Shetland, an additional challenge comes from the lack of infrastructure in the area, meaning no existing pipelines to flow new discoveries into. The government has already taken some specific initiatives in this regard, particularly the formation of a special ‘West of Shetland Task Force’ of which Chevron is a member, together with BP, Total, Dong and ExxonMobil. Basically this group brings together some of the big players with a considerable amount of leases in the area. The main objective is to try to find joint solutions to the infrastructure challenge that we all face, so that we would be able to get gas onshore safely and efficiently in the midst of these difficult ocean conditions. The main focus is on developing a pipeline for gas, since oil could possibly be transported utilizing an FPSO development.

Developing West of Shetland is a big challenge which Chevron and the other mentioned companies are trying to overcome, together with the government, and we are also inviting other industry players with a possible interest of participating in a project. It is, however, still in the early stages of the process and we are listening to a variety of opinions from the different stakeholders involved. Naturally, the government has its own ideas and priorities, and the different companies also have different perspectives depending on their existing assets and expectations for the area.

Many of the independent and new entrants in the UKCS are getting a lot of attention, often giving the general perception that they are the only dynamic oil companies in the area. What is your view on the roles that both the smaller companies and the majors are playing in the UKCS?

In a mature basin such as the UKCS, it is very healthy to have many new players of different sizes coming in to operate assets that no longer offer the same value for larger companies. I believe that all of these companies are doing a lot of good work, making new discoveries and progressing technology, which is helping the UKCS maximize recovery overall. It makes for a very interesting and dynamic time and ensures that the UKCS will still be a very exciting place for exploration and production for many more years.

On the other hand, there are certain new opportunities like the West of Shetland region which fit very well with the size and financial strength of majors such as Chevron. These companies are also key to applying enhanced oil recovery technologies in the UKCS, which will help optimize and prolong the life of older fields. So we are also very active, though we may tend to be less vocal about all the things we do.

Overall, the industry works very much like an ecosystem. Every company has its place and role to play, and each one makes an important contribution to the big picture. The majors are handling some of the big projects that may not interest the smaller companies but likewise the smaller players are investing in some of the things that the majors are not interested in. In the end it is about finding a way to make all of this work for everybody’s benefit and maximise production from the UKCS.

Do you believe that the major oil companies’ long-standing decision to maintain a relatively low profile has resulted in a situation where society at large has a poor understanding of what they are contributing? Has the establishment of Oil & Gas UK made any progress in this regard?

I consider the creation of Oil & Gas UK as something that was long overdue, and has brought the producers and the contracting community together, and enabled us to deliver a more unified story about this industry to the public. The value and success of this organization is probably underestimated, because it really has become a place where the government can go for a answer to its concerns, without having to separately ask all the oil companies and contractors. Oil & Gas UK represents a big step forward for the industry, not only in terms of dealing with the government, but also for getting the story out to the wider community.

Another thing which I have found particularly positive and distinctive about the UK’s oil and gas industry is the unified commitment to safety issues. The ‘Step Change’ initiative which has been running for many years has brought together contractors, operators, unions, regulators and trade bodies, all with the goal of working towards further improving safety in the oil and gas industry. We are working hard to make the UKCS the safest oil and gas province in the world – and critical to this is that there is a leadership team which will continue pushing the safety agenda forward as a top priority for the entire industry.

How successful is Chevron in attracting and retaining the best human resources at a time of heated competition in the industry?

Chevron in Aberdeen is doing many things in create an environment in which our staff can give their best and help us attract new talent into the company. One of the most visible elements is Chevron House, our new headquarters in Aberdeen, which was designed to make the working experience more pleasurable for everyone. We are also one of the world’s leading companies in applying the latest technologies, which also helps attract a lot of talent here.

Furthermore, Chevron is very active in terms of training our people. In particular, we developed a program called ‘Horizons’ for new technical recruits, which is a structured program involving training and development by moving people into different areas within the company to gain broad experience early in their careers. Sometimes they will even move from one European country to another within this training program, such as Denmark, Norway or the Netherlands. ‘Horizons’ has been such a success and people appreciate the opportunity of continuous development so much that we have recently extended it through another program called ‘Pathways’ for more experienced staff within the company.

Another thing about Chevron that is very appealing is that we are a truly global company. We offer people the opportunity to have a career which will take them around the world if that is what they want. At the same time, and since not everyone has the same type of expectations or mobility, Chevron can also offer its people a long-term and stable career in Aberdeen, if that is their preference. So we can do both and we try to be very flexible with our people, making sure that we provide a meaningful work experience for them, whatever their desires are. This applies not only to the technical positions but also to people from other disciplines within Chevron.

What was the rationale behind Chevron’s decision to set up an energy technology centre in Aberdeen?

The first obvious reason is related to the talent pool available in the UK, and Europe in general. The knowledge base that has come out of the universities in the UK, Norway, Netherlands and Denmark is second to none, and anybody we attract from European countries can compete anywhere in the company and in the world.. Having the technology centre here in Aberdeen has therefore been a plus, enabling us to create even closer bonds with universities. Moreover, Aberdeen is strategically located because it enables the people working in the technology centre to have access to the greatest laboratory in the world, the UKCS, right on their doorstep. There are many interesting new technology developments happening in this region, notably in the information area with our new i-Field technology, that enables our people onshore to share real time data and follow, minute by minute, what’s happening offshore.

Chevron drilled the first exploration well in the North Sea over 40 years ago, and remains a very active player today. Towards the future, what are Chevron’s main ambitions in the UK?

Chevron is excited about the new opportunities in the area West of Shetland because we have a very strong lease position. The early indicators we have for our prospects there are promising, so we are excited to begin drilling with the Stena Carron and hopefully have the kind of success that could take us to further development in the coming years, but we are still at an early stage and there are major economic and technical challenges to overcome. Regarding Chevron’s existing fields in the UKCS we are looking into opportunities to enhance our recovery rates. It can be very expensive and technically challenging in the North Sea’s particular environment, but we are looking to find a way to make it work.

Stepping beyond the UKCS, Chevron has leases in other interesting areas such as Norway, Greenland and the Faeroe Islands, which we hope to develop in the future, if we have the necessary exploration success.

On a personal note, and after having worked most of your life with Chevron in the United States, what is the most exciting thing about your current position in Aberdeen?

Throughout my career with Chevron in the United States, I was always been hearing about the challenges of the offshore work environment in the North Sea and about the cutting-edge technology that was being applied. It was a place I had always dreamt of working, so when I had the opportunity to come to Aberdeen, I did not hesitate. It is always hard to leave the people that you work with for many years, but luckily here in Aberdeen I have a great team plus many challenges and opportunities to work on. All the people here at Chevron are working towards a common goal, which makes it all really enjoyable. I am also motivated to be applying technology here in the North Sea today, which will eventually be exported later on to other parts of the world,.

What is your final message to the readers of Oil & Gas Financial Journal on behalf of Chevron Upstream Europe?

There are still a lot of opportunities and a lot of life left in the UKCS. The technology challenges are big, but we have a lot of talented people working on overcoming them. There are many interesting projects that offer good investment opportunities, so I see many more years of activity to come, provided the business environment remains competitive and stable.

The main issue for the UK is to ensure that there is a good long-term framework for continued investments in its oil and gas sector. The reservoirs are not as big as in other parts of the world and companies are being pulled in many different directions, so there has to be a clear and stable environment in order to keep the UKCS attractive.

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