From left are DCP Midstream President Don Baldridge, Marathon Petroleum Corp. Executive Vice President and CFO Don Templin, and Chevron North America President Steve Green.
DCP Midstream President Don Baldridge is not one to mince words about his enthusiasm for Texas and the success the oil and gas industry has achieved in the Gulf Coast region.
"It's a great time to be in Texas," Baldridge said. "What happens in Texas impacts the world, and that's pretty amazing. We are a supply cushion for the world. Countries come to Texas to get energy supply now. That is just a remarkable state of affairs."
Baldridge noted the recent visit of India's Prime Minister Narendra Modi to Houston.
"The next day, he signed an LNG deal. That's no coincidence," he said, participating on a panel of industry executives at the Texas Oil and Gas Association's (TXOGA's) Lone Star Energy Forum held recently in Austin, Texas.
Baldridge encouraged forum delegates to spread the message of the prosperity found in the industry.
"If you're in high school, that's why you want to come to oil and gas," he said. "It's that kind of benefit that we're able to provide not just in Texas, not just in the United States, but globally."
Big numbers in the Permian
TXOGA President and panel moderator Todd Staples affirmed Baldridge's positive sentiment, noting that the Permian Basin alone "had a little over a million barrels per day, and 2023 is projected to be 8 million barrels per day," according to an EIA forecast.
Chevron North America President Steve Green said those EIA forecasts are "very much aligned" with what Chevron analysts have found.
"Exiting 2018, we were about 400,000 barrels of oil equivalent per day in the Permian," Green said. "The exit rate for 2020 is expected to exceed 600,000 barrels -- and 900,000 or more by 2023 -- so we're on a very aggressive and sustainable growth trajectory. It's going to be a terrific asset for Chevron, our shareholders and energy consumers for decades to come."
Chevron is very proud of its "big stake in the Permian," Green said, noting the company's approach in the region has been a little different than the strategies of other industry leaders.
"We've set up our business to maximize recovery of resources and create long-term value for our shareholders over a sweep of time," he said.
The infrastructure and export factor
Green observed that, despite its overwhelming strength, the Permian "doesn't get to escape the laws of supply and demand in a global oil market."
Some of the factors that could impact energy production to meet global demand are related to construction, he said.
"And regulation and policy needs to continue to advance and grow with the industry and societal expectations about how we deliver energy at scale," he said.
Don Templin, executive vice president and CFO of Marathon Petroleum Corp., said he agrees Texas plays an extremely important role in terms of its ability to facilitate and continue to grow in export capabilities.
"But if you don't have export capabilities, all the product that is produced in the Permian gets bottlenecked somewhere," Templin said. "And at some point in time, that will dampen production."
In the next five years, Templin said he believes investment in infrastructure that allows for more exports "is probably one of the most important things to continue to propel the United States' oil and gas market."
Baldridge agreed with Templin about the importance of infrastructure.
"The way we see it, there's no question about the supply," he said. "It's really about access to market -- infrastructure, light pipeline -- and being able to ensure that we develop capacity at the right time for the producers all the way to the Gulf Coast to export."
Baldridge clarified he was referring to "not only exports of liquefied biogas, crude and gas, but also the developments we're seeing in the petrochemical industry, the demand that has been created there, and the export of those building block materials to the rest of the world."
"We see it as ensuring that we can develop the right infrastructure," Baldridge continued. "It's why we partnered with Kinder Morgan and a couple of others to put in service the Gulf Coast Express Pipeline, moving 2 billion cubic feet per day. And that's a significant chunk of capacity."
Another major challenge Texas must address, Green said, is flaring.
"While we talk about all the prosperity, flaring is an issue the industry needs to lead on," Green said. "We need to get in front of this because it is not sustainable, I believe. And we're going to wind up with regulations we may like even less if we don't address this as an industry.
"It's not about 'major versus independent' or 'big versus small.' It is a challenge for our industry. And I really believe we need to be a leader on this issue as an industry and work on a sustainable source."
Embracing energy transition
Pointing to the Gulf Coast region's abundant supply of oil and natural gas and the anticipated growth of fossil fuels, Staples asked panelists to share their thoughts about the pervasive term "energy transition."
"What energy transition means to some is what we're going to do to have a world without oil and natural gas," Staples said. "To others, what our energy transition means is we will diversify our energy portfolio."
It's particularly important to know what energy transition means to energy sector leaders, Staples said.
"The way we look at it, it's more about energy addition," Baldridge said. "We think oil and gas will continue to be a major part of the equation, but how do we continue to add in other alternative sources of energy?
"It's about changing that narrative as we talk ⦠with our community, our investors and with folks who have a totally different mindset."
Hydrocarbons will be a critical component of energy's future, Baldridge said. "But we do need to make sure we are producing it, transporting it and delivering it in a much more environmentally sustainable way that impacts the amount of emissions. We also still look for support from innovative, new technologies."
Templin said he considers the energy transition to be an opportunity for growth, especially as the global population rises.
"Hydrocarbon-based energy is here for the foreseeable future," he said. "We have an obligation to take care of people and make their lives better."
Templin said he rejects "making a choice to allow people to live in poverty so that we can pursue a form of energy that we think is maybe politically correct, but is much more expensive, not as reliable and not as transportable as the energy we produce."
While Templin said he believes it is incumbent upon the industry to "honestly produce energy" without damage to the environment, he also believes "we have an obligation to use technology."
"We play an incredibly important role in making people's lives better, and we should not forget about, shy away from or back down from that," he re-emphasized.
Green reminded forum attendees the oil and gas industry has always been in transition.
"Our industry got its roots replacing whale blubber as a fuel," he said.
Of the 7.7 billion people on the planet today, Green said that more than a billion have zero access to electricity.
"So, while the developing world looks through one lens at energy transition, the developed world and the OECD (Organization for Economic Cooperation and Development) world have a different point of view," Green said. "I think we have to be careful not to send a message to the developing world that, 'Gee, we're sorry you're late, but we've used up all the carbon allowances, so you're going to have to remain without the things that we take for granted.'"
A different world
Recalling the years he spent in Bangladesh earlier in his career, Green said living outside the U.S. changed his perspective.
"Bangladesh has about 240 million people in an area the size of Wisconsin, all crowded in," he said.
At the time he was there, less than 10 percent of Bangladesh's population had access to electricity.
"They're still cooking with animal dung and wood," he said. "If you go into one of those villages and go inside a residence, the ceiling is absolutely black. That's where they live, and that's where they sleep. None of us would sleep one night in that, let alone live our lives like that. So I think we do have the obligation to do what we do safer, cleaner and more reliably, but we can't forget about the developing world."
Growing up in Ethiopia, Baldridge had a similar experience to Green's that made him appreciate "the emotional connection" to improving people's lives.
"My parents were missionaries, and we saw the same things," Baldridge said. "I grew up in a house that had a grass roof, with no running water and no electricity.
"In engineering and processing, we say, 'Here's the data, and so we should come to this conclusion.' But there's an emotional impact as well and a way to connect. Sometimes facts don't really matter. It's a lot about the emotions and that reach for aspirations.
"If we're not trying to impart that emotional connection to the next generation, they're not going to see the benefit of what we do the way we see the benefit of what we do."