Chevron’s Operational Excellence Management System

       Chevron is a transnational energy corporation with offices and projects all over the world.  The company takes great pride in conducting business according to its core values.  The company’s vision and mission statement, Business Conduct and Ethics code, and Operational Excellence Management System overview can be easily found on the company website and elsewhere on the Internet.

       The Chevron Way encompasses the company’s vision and mission statement.  Chevron’s vision is “to be the global energy company most admired for its people, partnerships, and performance” (Chevron, 2018; MBA Tutorials, 2020).  This vision reflects its core values “to conduct business in a socially responsible and ethical manner.  We respect the law, support universal human rights, protect the environment, and benefit the communities where we work” (Chevron, 2020; MBA Tutorials, 2020).

       In accordance with the Chevron Way, the company strives to safely and efficiently supply energy products to its customers all over the world; hire the best-qualified people; become the best-qualified and highest-performing organization for its partners; and earn the respect and admiration of all of its stakeholders (MBA Tutorials, 2020).

       Chevron’s Business Conduct and Ethics Code outlines for employees the values and high standards of the company.  As Chairman and Chief Executive Officer Mike Wirth writes, “The Chevron Way is our touchstone for getting results the right way and establishes high standards for how we operate around the world” (Chevron, 2020).  The code emphasizes the company’s commitment to comply with the laws, regulations, and customs of every country in which it operates.  Violations can range from human rights to health and safety matters to bribery and fraud.  Consequently, the company encourages all employees to speak up about alleged violations of the code.  Since the company has a non-retaliation policy, employees who speak up in good faith are protected from retaliation by supervisors and peers (Chevron, 2020).

       In the United States, Chevron and other energy companies are regulated by the U.S. Department of Transportation (DOT).  In 1994, DOT established the Pipeline and Hazardous Materials Safety Administration (PHMSA) to regulate the United States’ 2.6 million miles of oil and gas pipelines.  As of 2018, oil provided 40 percent of U.S. energy, and natural gas provided 25 percent (U.S. Department of Transportation, 2020).

       Pipelines are considered a transportation system because they transport oil and gas to residential, commercial, and industrial customers.  Transporting energy products through pipelines is considered the safest means of transport.  PHMSA regulates all types of pipelines: gathering lines, transmission pipelines, and distribution lines.  The agency is responsible for “regulating the safety of design, construction, testing, operation, maintenance, and emergency response of U.S. oil and natural gas pipeline facilities” (U.S. Department of Transportation, 2020).  Protecting human lives and the environment from pipeline safety hazards are the main focus of PHMSA (U.S. Department of Transportation, 2020).       

       Integrity Management is a program instituted by PHMSA that requires pipeline operators to analyze and understand the environment and population in the area where the pipeline exists. Operators must be able to foresee the consequences of a pipeline failure to the local environment and community.  This proactive approach to pipeline safety and emergency management helps operators to prioritize inspections and scheduled maintenance and keeps them well-prepared in the event of a pipeline failure (U.S. Department of Transportation, 2020).

       In addition to PHMSA, other federal agencies involved in pipeline safety and security are the Department of Homeland Security (DHS), Transportation Security Administration (TSA), Department of Energy (DOE), and the Federal Energy Regulatory Commission (FERC).  State and local governments as well as industry experts also contribute to regulatory controls and standards.  Individual states must meet minimum federal safety regulations but can create stricter rules (U.S. Department of Transportation, 2020). 

       PHMSA’s Office of Pipeline Safety performs “field inspections of pipeline facilities and construction projects; inspections of operator management systems, procedures, and processes; and incident investigation” (U.S. Department of transportation, 2020).  When violations or safety hazards are found, the agency can force an operator to take corrective action (U.S. Department of Transportation, 2020).

       Operators of gas distribution systems must participate in the Gas Distribution Integrity Management Program (DIMP) which requires them to develop and put into practice a comprehensive integrity management program tailored to their individual distribution systems.  The purpose is to enhance safety by identifying risks, ranking them by severity, and implementing safety precautions to manage and eliminate those risks (U.S. Department of transportation, 2018).

       Chevron has developed a comprehensive Operational Excellence Management System which reflects its core values as a company.  Mike Wirth, Chairman of the Board and CEO, takes personal responsibility for the company’s performance.  His primary concern, when it comes to safety, is “to eliminate high-consequence personal and process safety events.  This means no fatalities or serious injuries and no fires, spills or explosions that can affect people or communities” (Chevron, 2018).

       Wirth’s focus is on three important areas: 1) understanding the safety risks involved in managing oil and gas operations; 2) identifying the safety measures needed to mitigate the risks; 3) implementing, maintaining, and improving those necessary safety measures (Chevron, 2018).

       The goals of Chevron’s Operational Excellence Management System are to protect “people and the environment” (Chevron, 2018), fulfill its mission “to be the global energy company most admired for its people, partnerships, and performance” (Chevron, 2018), and successfully manage “workforce safety and health, process safety, reliability and integrity, environment, efficiency, security, and stakeholders” (Chevron, 2018).

       To implement and maintain such a system requires the cooperation of all members of management and the workforce.  Everyone in the company must be accountable for their actions and the actions of others.  Everyone must be responsible for fostering a culture of safety and performance excellence (Chevron, 2018).

       Company accountability begins with its compliance with all health, environmental, and safety laws and regulations. Next, the company must comply with its own internal policies and procedures.  At the same time, company personnel must continually assess the company’s risk management program and make improvements as needed.  Assurance measures must be taken to ensure that safety precautions are kept in place to mitigate all identified risks.  The competency of the workforce must be kept up-to-date to ensure that quality management requirements are met.  The company must provide educational opportunities to keep the workforce informed of new policies, practices, and procedures.  The company must incorporate advanced technology into its operations to reduce the risk of human error.  Communication systems must be effective and reliable in order to convey information about potential chemical and biological safety hazards.  Contractors hired by the company must be in compliance with Chevron’s Business Conduct and Ethics Code and Operational Excellence Management System to maintain consistency and high-performance standards across the company.  There must be a competent system in place to report and investigate accidents; evaluate causes; implement new safety procedures; and communicate findings with management and the workforce.  Finally, an emergency management team must be prepared to respond at any time to a serious crisis that could harm property and human lives (Chevron, 2018).

       The reliability and integrity of wells, pipelines, and other facilities must be managed effectively to prevent safety hazards and operational losses.  Equipment must be inspected and maintained on a routine basis (Chevron, 2018).

       Chevron maintains a goal “to do business in environmentally responsible ways” (Chevron, 2018).  The company seeks to prevent all spills and accidental releases of gas and oil; to reduce air, water, and ground pollution; to conserve national resources and reduce greenhouse gases; to manage waste, especially waste produced by contractors; to dismantle company assets that are no longer used and restore the natural environment to its original pristine state.  The company keeps the public informed of its environmental management policies on its website (Chevron, 2018).

       Efficient use of energy and resources in order to drive down costs is an important part of Chevron’s Operational Excellence Management System.  Maintaining a secure physical and cyber environment prevents unnecessary and unwanted intrusions and safety hazards.  Engaging all stakeholders, including outside contractors, in the safety and performance goals of the company ensures that everyone connected with the company is on board (Chevron, 2018).

       The Operational Excellence Management System at Chevron depends on strong leaders and committed workers who are willing to work together as a team to implement, maintain, and improve the safeguards which mitigate risk.  “Typical safeguards include facility designs, mechanical devices, engineered systems, protective equipment, and execution of procedures” (Chevron, 2018).  Once risks are identified, personnel work together to eliminate them; create new policies and procedures to manage them; and provide personal protective equipment to protect workers from them (Chevron, 2018).

       Personnel are also expected to follow a code of conduct that was designed to reinforce safety and mitigate risk.  The two key tenets of this code are: “Do it safely or not at all” and “There is always time to do it right” (Chevron, 2018).  If all employees operate on a daily basis within the fundamental safety provisions of the Operational Excellence Management System, safety hazards should be minimized or avoided altogether (Chevron, 2018).

       Chevron’s website provides an excellent overview for the general public of its history, operations, financial status, environmental and safety management, ongoing projects, and vision for the future.  What it does not address are the real situations that come up and threaten the financial standing of the company and the Operational Excellence Management System it has put in place.

       The jewel in Chevron’s crown is the Gorgon Project, located off the coast of Western Australia.  Gorgon is one of the largest liquefied natural gas (LNG) projects in the world, with the capacity to produce 15.6 million tonnes of LNG per year.  The processing facilities are located on a one percent section of Barrow Island, a Class A Nature Reserve.  Chevron has invested an enormous amount of time and resources into preserving the integrity of its pipelines, processing facilities, and the environmental standards of Barrow Island.  The company has set out to prove that an oil and gas company can successfully operate while respecting and preserving the local environment (Chevron Australia, 2020).  

       From its very beginning in 2009, the Gorgon Project has been plagued by failures, safety hazards, engineering challenges, and excessive costs.  Originally, the project was supposed to cost $US37 billion, and the first LNG was projected to be produced in 2014.  By the time the first load of LNG was produced and shipped off to Asia in 2016, the final cost came in at $US54 billion (Boiling Cold, 2020).

       In 2009, there was a strong worldwide demand for LNG.  In early 2016, the price of petroleum products had fallen, and there was an excessive supply of LNG on the market.  Chevron was under pressure to complete Gorgon and produce its first load of LNG.  In order to meet Chevron Chief Executive John Watson’s deadline, “untreated feed gas traveled from the Jansz-Io gas field wellheads, 1350 [meters] below sea level off the edge of the continental shelf, to Barrow island, 130 [kilometers] away” (Boiling Cold, 2020).  Once the gas was treated and ready for cooling, “the feed gas ran through [a propane cooler] on a separate circuit” (Boiling Cold, 2020).  The propane gas in the cooler circulated “back to the compressor through a knockout drum” (Boiling Cold, 2020).  Nearly three weeks later, the fourth knockout drum failed, damaging the compressor.  Production was halted for three months (Boiling Cold, 2020).

       Chevron released a statement more than a week later that the failure would only require routine repairs, and all equipment and materials were available at the facilities.  In reality, the propane compressor was flown to Perth for repairs.  Three months after the failure, Chevron had not reported it to the Department of Mines and Petroleum (DMP), the safety regulator for the Barrow Island LNG plant (Boiling Cold, 2020).

       In August 2016, Chevron finally met with DMP officials to discuss the incident.  Chevron provided an analysis of what led up to the incident.  The most serious violation was the failure of workers to follow the company’s safety code and stop the cooling process when the propane compressor began to vibrate excessively (Boiling Cold, 2020).

       Another significant issue was the failure by engineers and operating technicians to evaluate and identify possible safety hazards with the plant’s start-up operation and then take measures to make changes to the design or procedures to mitigate risks (Boiling Cold, 2020).

       Other violations included workers with inadequate knowledge to start up the plant, fuzzy management responsibilities, and insufficient technical resources to deal with a problem (Boiling Cold, 2020).

       Chevron took corrective measures to fix the problems and satisfy the requirements set forth by the DMP, then issued a public statement to assure the public that they had taken action to ensure the safety of all people working at the plant (Boiling Cold, 2020).

       Part of Chevron’s environmental agreement with Western Australia was “to capture and store underground 40 percent of the [Gorgon] plant’s emissions through a sophisticated process known as geosequestration or carbon capture and storage” (Australian Broadcasting Corporation, 2018).  Chevron proudly brags about its CO2 injection project on its website.  But the reality shows something different.

       Chevron promised that between 5.5 and 8 million tonnes of CO2 would be injected into its underwater carbon storage project in the first two years of production on Barrow Island.  But seal failures and problems with corrosion delayed the CO2 injection project, leaving the Federal Government of Australia $AU60 million dollars poorer. As a result, all the gains in lower CO2 emissions made by the widespread use of solar power were wiped out.  A spokesperson for Chevron stated, “Our focus is on the safe commissioning and start-up of the carbon dioxide injection project and achieving a high percentage of injection over the 40-year life of the Gorgon project” (Australian Broadcasting Corporation, 2018).

       Chevron’s CO2 injection project was approved by Premier Colin Barnett on September 14, 2009. “The Barrow Island Act was the first legislation regulating carbon dioxide storage (geosequestration) in the world” (Department of Mines, Industry Regulation and Safety, 2019).  The project started injecting CO2 into the Dupuy Formation, a geological layer located more than two kilometers beneath Barrow Island, in August 2019.  Since then, the Department of Mines, Industry Regulation and Safety has been monitoring the project, making sure that Chevron stays in compliance with the Barrow Island Act and its Pipeline License (Department of Mines, Industry Regulation and Safety, 2019).

       When Chevron’s carbon dioxide system successfully started up in August 2019, Chevron Australia issued a press release reassuring the Australian public that it would continue to monitor all safety issues and fulfill its promise to reduce the Gorgon plant’s greenhouse gas emissions by 40 percent over the 40-year life of the project (Chevron Australia, 2019).

       When the coronavirus spread around the world early in 2020, the slumping oil and gas industry was hit with more problems.  The economic lockdowns put in place to stop the spread of the virus kept people at home, causing a backlog in equipment and parts orders, and a slowdown in preventative maintenance and repairs on wells, transmission pipelines, refineries, and gas distribution systems (Reuters, 2020).

       In order to cut costs, companies like Chevron and ExxonMobil began laying off workers, putting off maintenance and repair projects, and delaying start-up projects.  This put established wells, pipelines, refineries, and gas distribution systems at risk for future failure and safety hazards (Reuters, 2020).

       In July 2020, it was reported by the Australian media that routine maintenance at Barrow Island had uncovered thousands of cracks in eight propane kettles that had been sitting in storage for several years.  These kettles had been scheduled to be installed on LNG Train 2.  It has been speculated that the cracks were caused by water penetrating the thermal insulation surrounding the vessels.  The insulation was installed by overseas construction firms and then shipped to Australia (Boiling Cold, 2020).

       While repairing the cracks in the eight propane kettles, workers at Chevron discovered defective welds in those same kettles.  Executive Vice-President Jay Johnson told investment analysts that the defects occurred during the manufacturing process and not because they were poorly designed.  He claimed that repairs would be sufficient to make the vessels safe (Boiling Cold, 2020).

       Safety measures were put in place to mitigate risks in LNG Trains 1 and 3, but Chevron refused to reveal what those safety measures were or how workers would be safe while repairing LNG Train 2 (Boiling Cold, 2020).

       The company suffered a $US8.3 billion loss in the second quarter of 2020 due to problems at the Gorgon Project.  And it refused to explain how the 16 propane-filled kettles still operating were safe without being inspected for cracks and weld defects (Boiling Cold, 2020).

       In September, Chevron reported that it had given incorrect instructions to welders repairing the eight propane kettles on LNG Train 2.  Authorized personnel had neglected to inform welders that a post-weld heat treatment needed to be done, subjecting the weld to more cracking and failure (Boiling Cold, 2020).

       More delays in repairs have cost Chevron and its partners more than $AU500 million.  The continued problems at Gorgon have worried union leaders and workers alike.  The Department of Mines, Industry Regulation and Safety “gave Chevron permission to continue operating [LNG] Trains 1 and 3 under a plan where Train 1 would close for inspection of its kettles in early October and Train 3 would shut down in early January [2021]” (Boiling Cold, 2020).

       The company error occurred simultaneously with the final phase of its plan to lay off 20 to 30 percent of its Australian workforce due to losses incurred from COVID-19 lockdowns, a slumping oil and gas industry, and the expensive problems at Gorgon Project.  If repairs need to be done on Trains 1 and 3, the company will incur even more losses.  In order to recover some of its losses, Chevron plans to sell between $US5 billion and $US10 billion worth of assets (Boiling Cold, 2020).

       Publicly, Chevron does what it needs to do to keep a shining reputation, but the reality is a much different story.  Chevron’s lofty goals for itself magnify every mistake that it makes, from environmental violations to engineering and operational errors to investment losses.  Although  basically a sound company and a worthy employer, Chevron is in a tough position due to stricter environmental standards, COVID-19 restrictions, a slumping industry, and forces lined up against the use of fossil fuels.

References

Chevron. (2020). Chevron business conduct and ethics code. Retrieved from

https://www.chevron.com/-/media/shared-media/documents/chevronbusinessconductethics

       code.pdf

Chevron. (2018). Chevron operational excellence management system. Retrieved from

Click to access OEMS_Overview.pdf

Chevron Australia. (2019). Safe start up and operation of the carbon dioxide injection system at

       the gorgon natural gas facility. Retrieved from https://australia.chevron.com/

       news/2019/carbon-dioxide-injection/

Department of Mines, Industry Regulation and Safety. (2019). Gorgon carbon dioxide injection

       project. Retrieved from https://www.dmp.wa.gov.au/Petroleum/Gorgon-CO2-injection-

       project-1600.aspx

Diss, K. (2018, June). How the gorgon gas plant could wipe out a year’s worth of australia’s

       solar emissions savings. Australian Broadcasting Corporation. Retrieved from

https://www.abc.net.au/news/2018-06-21/gorgon-gas-plant-wiping-out-a-year-of-solar-

       emission-savings/9890386.     

MBA Tutorials. (2020). Chevron mission and vision statement. Retrieved from

Chevron Mission & Vision Statement

Milne, P. (2020, July). Gorgon’s catastrophic start-up. Boiling Cold. Retrieved from

https://www.boilingcold.com.au/gorgons-catastrophic-startup/

Milne, P. (2020, July). Cracks at chevron’s gorgon threaten safety and lng production.

       Boiling Cold. Retrieved from https://www.boilingcold.com.au/cracks-at-chevrons-gorgon-

       threaten-lng-production/

Milne, P. (2020, August). Gorgon weld problems raise safety questions chevron will not answer.

       Boiling Cold. Retrieved from https://www.boilingcold.com.au/gorgon-weld-problems-raise-

       safety-questions-chevron-will-not-answer/

Milne, P. (2020, September). Chevron to redo its botched gorgon weld repairs. Boiling Cold.

       Retrieved from https://www.boilingcold.com.au/chevron-to-redo-its-botched-gorgon-weld-

       repairs/

Milne, P. (2020, November). Chevron to restart gorgon lng train after $500m production loss.

       Retrieved from https://www.boilingcold.com.au/chevron-to-restart-gorgon-lng-train-after-

       500m-production-loss/  

U.S. Department of Transportation. (2020). About phmsa. Retrieved from

https://www.phmsa.dot.gov/about-phmsa/phmsa-mission/

U.S. Department of Transportation. (2018). Gas distribution integrity management. Retrieved

       from https://www.phmsa.dot.gov/technical-resources/pipeline/gas-distribution-integrity-   

       management-program/

Yagova, O., George, L., Bozorgmehr, S. (2020, May). Coronavirus creates repair headache for

       Oil and gas industry. Reuters. Retrieved from

https://www.reuters.com/article/us-health-coronavirus-oil-maintenance-an/coronavirus-

       creates-repair-headache-for-oil-and-gas-industry-idUSKBN22V0LT.

Dawn Pisturino

Thomas Edison State University

December 16, 2020; April 20, 2022

Copyright 2020-2022 Dawn Pisturino. All Rights Reserved.

Why does Australia have so much Natural Gas?

Gorgon Project, Chevron.com

Chevron is a multinational corporation with offices, plants, pipelines, partnerships, and subsidiaries located all over the world. One of the company’s largest and most important overseas projects is the Gorgon Project – and associated smaller projects – situated off the coast of Western Australia.

Australia does not produce a lot of oil, but it produces an abundance of natural gas. This phenomenon is due to the geology of the Australian continent (Blewett, 2012, p. 221).

The Northern Carnarvon Basin, created during the Paleozoic period, is located off the northwestern coast of Australia, on the northwest shelf. “The basin is Australia’s premier hydrocarbon province where the majority of deep water wells have been drilled (greater than 500 meters water depth) . . . Almost all the hydrocarbon resources are reservoired within the Upper Triassic, Jurassic, and Lower Cretaceous sandstones beneath the regional early Cretaceous seal” (Geoscience Australia, 2020). The faults on this area run north or northeast, among “structural highs and sub-basins” (Geoscience Australia, 2020) which occurred over four geological phases involving glacial and tectonic activity (Geoscience Australia, 2020).

The basin covers 535,000 square kilometers, with water depths up to 4,500 meters. Paleozoic, Mesozoic, and Cenozoic sediment covers the area, up to 15,000 meters thick. The area comprises two Mesozoic petroleum supersystems (Geoscience Australia, 2020).

Total petroleum systems of the northwest shelf include the Dingo-Mungaroo/Barrow system and the Locker/Mungaroo/Barrow system. In the Dingo-Mungaroo/Barrow system, the hydrocarbon source rock is composed of Jurassic Dingo Claystone. The reservoir rocks comprise the Triassic Mungaroo Formation, Jurassic rocks, and the Cretaceous Barrow Group. In the Locker/Mungaroo/Barrow system, the source rock is composed of Triassic Locker Shale. The reservoir rocks comprise the Triassic Mungaroo Formation and the Cretaceous Barrow Group. Muderong Shale makes up the vast seal over much of the area (Bishop, 1999, p.6-7).

A total petroleum system is composed of several elements: the depocenter, which is the basin; the source, which is made of rocks containing organic materials; the reservoir, which is made of porous, permeable rock, such as sandstone; the seal, which is made of impermeable rock, such as shale; the trap, which holds the accumulation of source rocks; the overburden, which is composed of sediments subjected to heat; and the migration pathways, which allow the source rocks to form a link with the trap (Blewett, 2012, p. 176).

Additionally, there must be geochemical processes which cause “trap formation, hydrocarbon generation, expulsion, migration, accumulation, and preservation” in a precise order with exact timing (Blewett, 2012, p. 176). Millions of years of geological events, such as the shifting of tectonic plates and glacier movement, as well as extreme changes in weather, such as the change from the Ice Age to a more temperate climate, formed the particular geology which makes up the Australian continent and its surrounding oceans (Blewett, 2012, p. 217).

“The main trap styles in the [Carnarvon] basin are anticlines, horsts, fault roll-over structures, and stratigraphic pinch-outs beneath the regional seal” (Blewett, 2012, p. 220). Australia has an abundance of natural gas due to the type of vegetation which decayed and became trapped in “non-marine coaly source rocks” (Blewett, 2012, p. 221) and the fact that some basins did not evolve long enough to create the conditions to produce oil.

Chevron entered the Western Australia oil and gas market when it purchased Caltex in 1952. In 1980, the Gorgon natural gas field was discovered west of Barrow Island; and in 2003, Chevron received permission from the Western Australia government to build a natural gas plant on Barrow Island (Chevron Australia, 2020).

Barrow Island is located 60 kilometers off the northwest coast of Western Australia. Chevron’s Gorgon Project includes three liquefied natural gas (LNG) processing plants capable of producing 15.6 million tonnes per annum (MTPA), and a domestic natural gas plant capable of producing 300 terajoules of natural gas per day (Chevron Australia, 2020). According to the operators of the Dampier-Bunbury Pipeline, which transmits this natural gas to distributors, one terajoule of natural gas can provide energy to the average household in Western Australia for 50 years, so Chevron’s Gorgon Project is a significant contribution to Western Australia’s regional economy (Dampier Bunbury Pipeline, 2020). The project is expected to be productive for 40 or more years (Chevron Australia, 2020).

The onshore Gorgon Project also includes three acid gas removal units, two LNG tanks, four condensate tanks, three CO2 compression plants, two monoethylene glycol (MEG) processing plants, 2 inlet processing units, and ground flare capabilities. Marine facilities, an airport, employee housing, a fire station, laboratory, warehouse, workshop, and a permanent operations facility complete the physical structure of the Barrows Island onshore project (Chevron Australia, 2020).

“A subsea gas gathering system is located on the ocean floor at the Gorgon and Jansz-Io fields, located about 65 and 130 kilometers respectively off the west coast of Barrow Island” (Chevron Australia, 2020). From there, natural gas from both fields is transmitted to the Barrow Island facility by undersea pipelines. After processing, gas for domestic use is transmitted through a 90 kilometer domestic gas pipeline that ties in to the Dampier-Bunbury Natural Gas Pipeline. Once the LNG is processed, it is stored and shipped by large LNG tankers to Japan and other Asian countries (Chevron Australia, 2020).

The Dampier-Bunbury Pipeline (DBP), at 1600 kilometers long, is the longest pipeline in Australia. Built in 1984, it is expected to last for another 50 years. Every year, it receives 112,000 hours of planned maintenance to ensure its safety and optimal condition. Twenty-seven turbine compressor units, located at ten sites along the pipeline, exert enough pressure to push the natural gas along the pipeline. It has functioned at 99% efficiency for the last ten years. Owned by the Australian Gas Infrastructure Group, more than 2 million homes and businesses benefit from the pipeline. The company also supplies natural gas to power generators, mines, and manufacturers — and other companies can tie in to the pipeline (Dampier Bunbury Pipeline, 2020).

DBP owns 34,000 kilometers of distribution networks, 5,500 kilometers of transmission pipelines, 52 petrajoules of storage capacity, employs 315 workers, and contracts with 1,600 contractors. The company’s goal is to provide natural gas at the lowest possible cost. The company provides 21% natural gas for power generation; 39% for mineral processing; 9% for other industrial purposes; 9% for retail outlets; 22% for mining.  Alcoa and BHP Billiton are two of its large industrial customers. The company provides natural gas to Synergy and Alinta for power generation (Dampier Bunbury Pipeline, 2020).

DBP operates the Dampier-Bunbury Pipeline for the Australian Gas Infrastructure Group (AGIG). It also plans and constructs metering stations, executes the tie-ins for other companies, and provides an odorization service. In 2013, “DBP completed the metering station for the connection of the Chevron-operated Gorgon Project” (Dampier Bunbury Pipeline, 2020).

Transmission pipelines are usually 6-48 inches in diameter and can handle pressures of 200-1500 psi. The high pressures move the natural gas through the line. Distribution pipelines are separated into main lines and service lines and carry natural gas to homes and businesses. They operate at lower pressures for safety reasons (Pipeline Safety Trust, 2019).

Compressors fueled by electric or natural gas use high pressure to push the gas through the pipeline. Compressor stations are located about every 50 to 100 miles along the line, and pressures can be adjusted as needed (Pipeline Safety Trust, 2019).

Gas pipeline operators, such as DBP in Western Australia, monitor the pipeline for problems using “a Supervisory Control and Data Acquisition system (SCADA). A SCADA is a pipeline computer system designed to gather information such as flow rate through the pipeline, operational status, pressure, and temperature readings” (Pipeline Safety Trust, 2019). These readings help operators to address problems quickly and easily. Operators, for example, can isolate a section of pipe that is malfunctioning or adjust flow rates via the compressors and valves (Pipeline Safety Trust, 2019).

When a transmission line reaches the utility company’s “city gate,” it begins to transmit gas into the lower pressure distribution system that ultimately delivers the gas to homes and businesses. This is where the odorant is added to the gas. Gas mains, which are usually 2-24 inches in diameter, utilize pressures up to 200 psi. The service lines, on the other hand, only use pressures up to 10 psi (Pipeline Safety Trust, 2019).

The gas utility company is responsible for monitoring flow rates and pressures along the distribution line. When regulators sense a change in pressure, they will open or close in order to adjust the amount of pressure in the line. Relief valves release excess gas if the pressures build too high (Pipeline Safety Trust, 2019).

Pipeline operators, such as DBP in Western Australia, must monitor pipes for corrosion, leaks, breakages, and construction workers digging too close to the lines. They must follow pressure specifications determined by government regulatory bodies, otherwise, pipelines can become a safety and environmental hazard to the local community (Pipeline Safety Trust, 2019).

Barrow Island is a Class-A nature reserve, and Chevron has worked hard with the Western Australia government to maintain the local habitat for the native flora and fauna. Their goal to reduce CO2 emissions has led them to construct a CO2 injection system which allows them to inject excess CO2 from natural gas into a deep underwater trap called the Dupuy Formation, located two kilometers underneath Barrow Island. This system is projected to reduce greenhouse gas emissions by 40% and is fully supported by the Australian government (Chevron Australia, 2020).

Chevron is a well-respected energy corporation in Western Australia. The Gorgon Project alone is projected to contribute $400 billion to Australia’s Gross Domestic Product and $69 billion in taxes to the federal government between 2009 and 2040. With its booming natural gas industry in place, Australia is now a leading producer of natural gas in the world market (Chevron Australia, 2020).

Dawn Pisturino

Thomas Edison State University

October 27, 2020

Copyright 2020-2021 Dawn Pisturino. All Rights Reserved.

 References

Bishop, M.G. (1999). Total Petroleum Systems of the Northwest Shelf, Australia: The Dingo-

       Mungaroo/Barrow and the Locker/Mungaroo/Barrow. Reston: U.S. Geological Survey.

Blewett, R. (Ed.). (2012). Shaping a Nation: A Geology of Australia. Canberra: Australia

       National University.

Chevron Australia. (2020). Gorgon project overview. Retrieved from

https://www.australia.chevron.com.

Dampier Bunbury Pipeline. (2020). About dbp. Retrieved from https://www.dbp.net.au.

Geoscience Australia. (2020). Energy. Retrieved from

https://www.ga.gov.au/scientific-topics/energy.

Pipeline Safety Trust. (2019). Pipeline basics & specifics about natural gas pipelines. Retrieved

       From http://www.pstrust.org/wp-content/uploads/2019/03/2019-PST-Briefing-Paper-02-Nat

       GasBasics.pdf.

Chevron – Still a Good Investment

Chevron has been successfully supplying “affordable, reliable, ever-cleaner energy that enables human progress” for more than 140 years. But the company is facing unprecedented challenges in the face of COVID-19, [a hostile political landscape], and a slumping oil and gas market.

Chairman Mike Wirth continues to reaffirm the company’s slogan: “The right way. The responsible way. The Chevron Way.” And he proudly emphasizes the basic solidness of Chevron and its future. Based on the company’s past performance, he is probably right. Chevron has the money, resources, and innovation to weather any storm.

In 2019, according to its annual report, Chevron beat its competitors in several important areas. The company “delivered 15.2% Total Stockholder Returns; increased [its] dividend payment 6.2%, making it the 32nd consecutive year of increased per-share dividend payouts; increased share repurchases to a run-rate of $5 billion per year; generated more than $27 billion in cash flow from operations and returned $13 billion to shareholders; lowered [its] net debt ratio to 12.8%, further strengthening the company’s balance sheet.”

Additionally, the company produced 3.06 million oil-equivalent barrels per day, an increase of 4 per cent over 2018. This was largely due to its projects located in the Permian Basin, and the roll-out of the Wheatstone LNG project off the coast of Western Australia. These projects helped to balance out losses and the sale of assets in Denmark and Great Britain.

Chevron also boasted 11.4 billion barrels of net-oil-equivalent reserves, $237.4 billion total assets, and $139.9 billion from sales and other revenues in 2019. The company exhibited a strong corporate balance sheet. But the 2020 annual report has not yet been released [as of the writing of this paper].

The company released a statement on December 3, 2020 that it is reducing its long-term spending on capital investments due to lower oil and gas prices because it does not expect conditions to change very soon. Its position reflects the attitude of the oil and gas industry as a whole. [Since then, Joe Biden has been inaugurated as President and put policies in place that have raised gas and oil prices significantly. His policies threaten the oil and gas industry as a whole].

Chevron only plans to spend $14 billion to $16 billion per year from 2022 to 2025. This represents a 27% reduction in investments from what it had originally forecast. The new forecast is necessary as the company, along with other energy companies, cut oil and gas production, laid off workers, and put projects on hold. Continued spikes in COVID-19 during the winter and a stay-at-home work force have contributed greatly to reduced demand and lower prices [pre-Biden].

While European companies are using these conditions to invest more heavily in renewable energy and low-carbon fuels, Chevron remains committed to oil and natural gas, with smaller investments in wind, solar, biomethane, and hydrogen energy. It plans to invest less money in high-cost projects such as the Tengiz oil project in Kazakhstan and invest more money in reliable projects such as the Permian Basin and the Gulf of Mexico.

Chevron has now surpassed Exxon Mobil in market value, making it the largest American oil and gas company. The company will invest $14 billion in capital projects in 2021, with $300 million set aside for investments in renewable energy. Chevron’s stable business model has allowed its stock to remain a solid investment.

As a multinational corporation with offices, plants, pipelines, partnerships, and subsidiaries all across the globe, Chevron’s success is based primarily on its relationships with its stakeholders — management, work force, investors, partners, contractors, and members of the local community. The company relies on “the inspiration, creativity, and ingenuity of [its] people” to keep the company fresh, innovative, a solid investment, and a positive place to work.

The company’s Business Conduct and Ethics Code, Operational Excellence Management System, and written safe-work practices ensure that all employees will be held accountable for supporting a company culture that gives priority to “process safety, the health and safety of [the] work force, and protection of communities and the environment.” The company’s commitment to lowering its carbon footprint, investing more in renewable energy and ground-breaking technologies (such as methods for reducing corrosion on pipelines and drilling deeper underground and underwater), makes it an exciting investment and even more exciting place to work.

Since the company has been around for a long time, it has the resilience and experience to face any challenge, from operating the world’s largest LNG facility on Barrow Island off the coast of Western Australia, to minimizing its human and industrial imprint on the island’s Class A Nature Reserve, to specializing in recovering natural gas from shale and tight rock formations in underwater fields, to building one of the largest CO2 Injection projects below Barrow Island.

Chevron strives to hire the best-qualified people and contract with the best-qualified companies to maintain the integrity of the company and its projects. In Western Australia, for example, it is a major supplier of natural gas for the Australian Gas Infrastructure Group, which owns the longest natural gas pipeline in Australia, the Dampier-Bunbury Pipeline.

The Dampier-Bunbury Pipeline receives 112,000 hours of scheduled maintenance every year, has operated at 99% efficiency for the last 10 years, and is expected to last for another 50 years. Since Chevron’s largest LNG project, Gorgon Project, is expected to be productive for the next 40 years, this is an ideal situation for both Chevron and the Australian Gas Infrastructure Group.

According to Chairman Mike Wirth, “an investment in Chevron is an investment that drives human progress, lifts millions out of poverty, and makes modern life possible. It is an investment that values operating with integrity, getting results the right way, and striving for humanity’s highest aspirations: to create a more prosperous, equitable, and sustainable world.”

A good example is Chevron’s Gorgon Project, which is located off the coast of Western Australia. The project is expected to pour $400 billion into Australia’s Gross Domestic Product and $69 billion worth of taxes into the federal government between 2009 and 2040. As a result, Australia is fast becoming a leading producer of natural gas in the global market.

Natural gas is safer, cleaner, and more reliable than some other forms of energy, including electricity. It is transported through gathering pipelines, transmission pipelines, and distribution pipelines. But natural gas is also a hazardous substance. Chevron uses risk management principles to identify and minimize risks to property and human lives. Risks are assessed throughout the system, rated according to severity, and safety measures are put in place to minimize and eliminate safety hazards.

The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) is the primary regulator of energy companies and pipelines in the United States. It is responsible for “regulating the safety of design, construction, testing, operation, maintenance, and emergency response of U.S. oil and natural gas pipeline facilities.” The safety of the public and the environment is the primary concern of PHMSA.

PHMSA sponsors an Integrity Management Program which requires all pipeline operators to evaluate the environment and population surrounding a pipeline. It is critical that operators understand the consequences of a pipeline failure to the local community and take measures to prevent an incident from happening. When operators develop this kind of awareness, they are more likely to make certain that inspections and scheduled maintenance get done. They will be better prepared to handle the situation if a pipeline safety hazard occurs.

The Office of Pipeline Safety, which is part of PHMSA, performs “field inspections of pipeline facilities and construction projects; inspections of operator management systems, procedures, and processes; and incident investigations.” The agency can enforce safety regulations when violations are found.

Chevron’s Operational Excellence Management System addresses safety, health, and wellness issues throughout the company and its facilities around the world. Chairman Mike Wirth’s personal mission is “to eliminate high-consequence personal and process safety events. This means no fatalities or serious injuries and no fires, spills or explosions that can affect people or communities.”

According to Wirth, the company must focus on three important areas: 1) understanding the risks and benefits of managing oil and gas operations; 2) identifying the safety measures needed to minimize and eliminate the risks; 3) implementing, maintaining, and improving those safety measures.

All members of the company are expected to take a proprietary interest in promoting a culture of safety. This means every employee takes responsibility for his own and his peers’ actions. Every member must act as part of a team to achieve safety and performance goals.

The two key elements of the Chevron safety code are: “Do it safely or not at all” and “There is always time to do it right.” Failure to follow this code resulted in a major safety hazard during routine maintenance at the Gorgon Project in Western Australia, costing the company millions of dollars.

Driving down costs is also an important part of Chevron’s Operational Management System. Using energy and resources wisely, and maintaining a safe and secure environment, ensures that all stakeholders will benefit from the company’s efficient management of its operations.

Chevron invests a lot of resources in developing its current and future work force. The company is a strong proponent of teaching high school children science, technology, engineering, and mathematics skills (STEM). It needs qualified geologists, chemists, IT specialists, healthcare workers, engineers, and other specialists to keep the company performing at a high standard. It supports special programs which help low-income men and women get the job skills they need to land a high-paying job with Chevron or another energy company. And it strongly encourages girls to gain STEM skills. The company promotes diversity and a global perspective that defines it as a “global energy company most admired for its people, partnerships, and performance.”

In spite of setbacks, a global pandemic, [a hostile political landscape], and suffering oil and gas prices [which are now too high], Chevron will be strong as long as it conducts business according to its core values.

Dawn Pisturino

December 22, 2020

Thomas Edison State University

Trenton, New Jersey

Copyright 2020-2021 Dawn Pisturino. All Rights Reserved.

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