Citing statistics indicating that literally billions of people are entering the middle class, John Watson, chairman and CEO of Chevron, said he believes demand for oil and gas and the industry’s related products is likely to continue to grow for some time.
“We all look at the same forecasts; most of them still show that we’re going to see growing liquids consumption for some time,” he said in a leadership dialogue with CERAWeek by IHS Markit Chairman Dr. Daniel Yergin at the recent CERAWeek event. “Right now, we’re getting more energy efficient around the world, everywhere, and so it’s actually fairly predictable what’s going to happen with demand.”
Responding to Dr. Yergin’s observation it’s been more than two years since oil prices dropped, Watson said the drop has been tough for the whole industry.
“But we’re all working through it,” Watson said.
Chevron’s response, he added, has been to finish projects under construction while reducing spending, reorganizing the company and getting costs down.
“Meanwhile, we’re finishing up those projects and they’re starting to generate revenue, so we’re getting our cash system well balanced right now,” Watson said. “We’re very fortunate in that we’re able to recycle the capital dollars that we do spend into a lot of shorter-cycle type of activity. We’ve got 2 million acres in the Permian and a terrific position: A million and a half of those are shale and tight resources.”
Regarding those acres’ production potential in the Permian Basin, Watson said it will depend on some of the gains Chevron is making in productivity continuing to be realized and accelerated.
“But we see growth of 20-35 percent in our production out of the Permian through the end of the decade. We talked about, within a decade, 700,000-barrel-a-day cases out of our operations alone,” he said. “We’re ramping up. We’ve got 11 operator rigs today, and we’re ramping up to 20 by the end of 2018.
“It’s a good story for us. Not everybody has that position.”
Watson noted, however, the industry has not had very many large discoveries of oil in emerging basins.
“So it’s been challenging,” he said. “We’ve tended to focus our work on the basins we know something about, including places like Thailand, Nigeria and the Gulf of Mexico.”
Watson agreed with Dr. Yergin the contributions of the industry are underappreciated.
“Light, heat, mobility — every aspect of our standard of living is brought to you by our products,” he said. “If you look at the advancements in living standards, it is because of our industry.”
Watson pointed out the importance of remembering it’s wealthy nations that have the best environmental standards and are the most efficient in use.
“So let’s focus on creating wealth and teaching people how to create wealth,” he said. “Once people have some measure of wealth and have their basic needs taken care of, they’ll start focusing very hard on the environmental performance.”
Regarding the recent regulatory environment in the United States, Watson sees improvement.
“We all want clean air and water, but what we need is to have some cost/benefit analysis applied to it so that we’re not just piling regulation on top of regulation,” he said, adding that over the past decade or so, energy and other industries have experienced intrusion into business that’s stunted growth and the economy.
“We haven’t seen 3-percent growth in the economy for eight years,” he said. “Hopefully we’ll put a little keener eye on the real costs and the real benefits of regulations so we can get the economy moving again.”
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