Chevron chairman and CEO John Watson told the Energy Institute's International Petroleum Week dinner in London last month that fossil fuel is no dinosaur. Meg Chesshyre was there.
Far from having reached any peak, the world's estimated base of recoverable oil, gas and coal is continually rising,' proclaimed Chevron chairman and CEO John Watson. In fact, said Watson, over the past 30 years, while concern about resource scarcity was gaining some traction, the world's proved reserves of oil and natural gas increased 130%, to 2.5 trillion barrels. ‘The last several years alone have yielded deepwater and shale discoveries that couldn't have been imagined 10 years ago and in any case couldn't have been extracted. As vast as the world's energy needs are and will be, it is within our power to meet them.
‘We're in a business where success and failure have very large consequences. A lot can be lost if we don't observe the highest of standards and keep our entrepreneurial edge. And the public good is served when we do big things and do them right. With that public good in mind, and with a view to the opportunities we have in this industry, it seems to me that four key strategies will see us through.
‘The first is to rebuild the conditions that maximize investment. Even the best of energy companies can perform only as well as the legal and regulatory environment allows. The issue is, what will it take to draw out investment capital on the massive scale that is needed? The answer is access to resources, rational regulatory and tax regimes, and a stable business climate.
‘Reasonable access, along with rational taxation and rule-making, are essential. So, too, is a predictable business climate founded on the rule of law, contract sanctity, and open and free trade. This has never been more important given the recent instability we have seen this month in key energy producing regions.'
According to Watson, the second key strategy is to be relentlessly focused on safe and reliable operations. ‘Certainly, going forward we will operate under new and stricter standards – in the Gulf of Mexico and other places. Far from resisting those rules, our industry is helping to strengthen them. This proactive, uncompromising approach to safety is the test we should all apply to any company, starting with our own. In an industry that's always edging up against the frontiers of geology and engineering, the best practices should be the only practices.'
Technology is at the heart of the third strategy, which is to enhance ways that we produce energy, use energy, and develop new sources of energy, explained Watson. Arguably the biggest challenge for technology is how it can be applied to the economic development of renewables and other alternatives to fossil fuels at industrial scale. Right now, alternatives make up less than 15% of the global energy portfolio. Even under the most promising scenarios, it will take decades for alternatives to reach the affordability, reliability and scale of fossil fuels. ‘In the long-run, renewables are going to play an important role in meeting global demand,' declared Watson, adding that he had charged his company with developing a renewables business that is profitable and can operate at scale without subsidies.
Lastly, Watson said new partnerships needed to be built to ‘match the size of the challenges before us. It is the very nature of our business to involve multiple stakeholders – from national governments, to local communities, to private-sector partners in capital or technology'. Pointing out that his company was heavily engaged in worldscale projects in countries such as Kazakhstan, China and Australia, he said: ‘Look at each of these and you'll find a diverse range of partners, all putting technology, capital resources, management skills and local development goals to a common purpose. And even the biggest companies in an indispensable industry know they'll do better work in collaboration.
‘Our success will not be measured by ours alone, but by the progress we share with others.' OE