Though industry leaders knew from the outset that it held a vast shale deposit of energy resources, Michael Wirth, chairman of the board and CEO for Chevron, said the Permian Basin is proving to be much larger than previously imagined.
Chevron Chairman of the Board and CEO Michael Wirth.
"There was a point in time when you were producing from maybe two or three of those benches out there, and now there are certainly many more than that," Wirth said. "We've learned that you can draw much longer laterals than initially was believed."
Another thing the industry has recognized as the shale revolution has progressed is the impact of machine learning.
"Powerful machine learning that identifies things that can correlate to performance would not have been seen even by your best people, because these are multi-variable correlations," Wirth said in a session discussing leadership at CERAWeek by IHS Markit, held recently in Houston.
Wirth said he believes the industry is in the early days of applying machine learnings and other technology to improve performance.
"A lot of early innovation was done by small companies out there marrying up new technologies, particularly horizontal drilling and hydraulic fracturing," Wirth said, adding that many of these companies relied on "trial- and-error in their learning."
These smaller companies, he noted, "made great progress and really proved that this resource class would work."
Larger companies that were more hesitant to rely on trial-and-error then utilized and perfected this learning in their own ventures.
"We've operated what we call factory drilling operations in Indonesia, Thailand and the San Joachim Valley for decades, where we drill hundreds of wells every year. We perfected the process of doing that efficiently, safely and in a proven application of technology every time you do it," he said.
This "perfection of processes" reflects the intersection of scale experience and technology, Wirth explained.
"The ability to bring in some of the technologies that are emerging today is creating great opportunities to drive efficiency and performance," he said.
Efficiency and the future of oil
In terms of staying competitive despite the volatility of the industry, Wirth observed that costs have come down.
"Operating costs are 50 percent of what they were a few years ago, and our development costs are down by more than a third, so we can get great economic outcomes from a project now at a much lower oil price than it would have taken five years ago," he said.
Drilling performance has also improved, Wirth said.
"It's not just rig rates that have come down, but the number of days to drill one of these wells that are very deep has dramatically improved," he said. "These projects have to continually improve to keep expanding our portfolio -- and others."
The Gulf of Mexico continues to be "a very important part of our portfolio," Wirth said. "There's a tremendous amount of resource still in the Gulf of Mexico to be recovered." Despite the emergence of alternative energy sources, Wirth said global demand for oil and its related products will continue.
"Something about electric vehicles that gets lost in the conversation is that less than 25 percent of a barrel of oil ends up in light vehicles," he said, explaining that the majority of it ends up in heavy transportation, industrial applications and petrochemicals.
"The demand for these products is growing dramatically," Wirth concluded. "There will be 9 billion people on the planet by 2040. We have an emerging middle class, so the need for solutions that address fundamental energy supply and economic development has never been greater."
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