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Abstract
Like other oil companies, Chevron Corp. (NYSE: CHV) faces crude oil prices around $14 per barrel that are $6 per barrel less than a year ago at this time. But the San Francisco multi-national oil company is determined to stick to its $6.3 billion 1998 capital spending program. "We have an overall objective to beat our competition and we want to remain No. 1 in stockholder return. We declared that back in 1989, and after nine years and seven months, we still hold that position. But the competition is right on our heels," observed Chevron Vice Chairman James N. Sullivan.
To accomplish this goal, Chevron uses a five-phase project management process that it calls "chip-dip" (for the Chevron Project Development and Execution Process). Sullivan explained that the phases involve (1) framing the business goal to be pursued and ensuring that it aligns with corporate business objectives, (2) searching for and identifying the alternative that meets these criteria, (3) developing the alternative, (4) developing the project's plans in a timely and precise manner and (5) operating the project and evaluating the results.
The process was developed after Independent Project Analysis, Chevron's alliance partner, showed the major that its project costs routinely were higher than those of its competitors, sometimes by as much as 25%. "Even though we'd already achieved No. 1 in total stockholder return by that time, we obviously needed to do something about our costs or we wouldn't stay there for long," said Sullivan. First attempts to use the "chip-dip" were disappointments, he continued. "People felt the process was too restrictive. They felt that it robbed them of the authority to make quick decisions. Obviously, some successes were needed to demonstrate the value of using it," Sullivan said.