press release

Chevron Press Release - "Capital Efficiency" Tool Helps Chevron Hold Its Investment Course

MINNEAPOLIS, MINN., Aug. 7, 1998 -- A home-grown, project-management tool nicknamed Chip-dip is helping Chevron stay the course on its multi-billion capital spending plan despite the pinch of slower oil demand and depressed prices, Vice Chairman Jim Sullivan said here today.

The company will also seek new ways to use the tool -- the Chevron Project Development & Execution Process (CPDEP, or Chip-dip) -- as it embraces capital efficiency, which stresses thorough analysis of spending proposals and close tracking of projects from conception through construction to operation, said Sullivan.

The payoff were after, he said, is to accomplish our $6.3 billion plan, which includes many promising growth opportunities, at lower cost.

Low oil prices are effecting our short-term cash flow and earnings, Sullivan told the Construction Industry Institutes annual conference. But we intend to stick with our capital program, so we have to keep improving capital efficiency by investing only in projects that add significant value, and then making sure we build them as cheaply, quickly and safely as possible.

The more effectively we spend these multi-billion-dollar capital budgets, the more discretionary cash well have to fund other projects, reduce debt, increase dividends or whatever we might need to do, said Sullivan.

Chevron has successfully used its Chip-dip tool in West Africa, Texas, Mississippi, Papua New Guinea, Indonesia, the deepwater Gulf of Mexico and other locations, said Sullivan. The company started developing the tool in the early 1990s -- a time of major oil-industry restructuring -- after learning it was spending more than other companies on big projects. Today, an internal Project Resources Group advises Chevrons major subsidiaries and promotes capital efficiency.

Three of the five phases in the Chevron approach make sure an organization first fully evaluates a projects worthiness. Construction doesn't even start until the fourth phase. Without front-end loading focus on evaluation, Sullivan said, You might select the wrong project, and even if you build it well, it will still be the wrong project.

Updated: August 1998