Char­lie Rose talks to Chevron CEO John Wat­son

Chevron’s CEO dis­cusses oil’s wild ride, fos­sil fu­els’ fu­ture, and his com­pany’s $19 bil­lion le­gal bat­tle in Ecuador

Bloomberg Businessweek (Europe) - - CONTENTS -

How do you an­swer when some­one asks about the prospects for fos­sil fu­els?

If you think about the last 150 years, all the ad­vance­ments in liv­ing stan­dards, ev­ery­thing that we en­joy—light, heat, trans­porta­tion by land, sea, and air—ev­ery­thing we value is co­in­ci­dent with fos­sil fu­els. New York would be dark with­out them. Fos­sil fu­els are im­por­tant now and will be for many, many years to come. It’s going to take nu­clear. It’s going to take coal. It’s going to take re­new­ables. Re­mem­ber, the de­vel­op­ing world needs all this en­ergy to raise liv­ing stan­dards, be­cause they as­pire to the things that we have.

How would you as­sess Obama’s ad­min­is­tra­tion in terms of en­ergy, the en­vi­ron­ment, trade?

They’re rush­ing out reg­u­la­tions as we speak, in their fi­nal six months. Just in the last cou­ple of weeks, they’ve done some—a well con­trol rule in the Gulf of Mex­ico. Our in­dus­try has put in place a hun­dred new prac­tices in col­lab­o­ra­tion with the gov­ern­ment since the Ma­condo in­ci­dent to im­prove drilling safety. And yet, with very lit­tle en­gage­ment with in­dus­try, they rushed out new pro­vi­sions. Also, meth­ane reg­u­la­tions. The cost of these meth­ane reg­u­la­tions is dis­pro­por­tion­ate to the ben­e­fits, at any rea­son­able price on car­bon. Those are just two re­cent ex­am­ples. In gen­eral, I would say the power has shifted to­ward reg­u­la­tors in this coun­try. I don’t think it’s a coin­ci­dence that we’re see­ing sub­par eco­nomic growth. I think it’s a bur­den.

On the is­sue of oil’s price swings, is it just sup­ply and de­mand?

At its sim­plest, it is. What’s not told is that de­mand rises rel­a­tively pre­dictably over time, but sup­ply comes on­line in big chunks. The in­dus­try does many long-lead pro­jects. And if you get sup­ply and de­mand a lit­tle bit off as you’re build­ing that new ca­pac­ity, you can get big ex­cur­sions up and down in price. And that’s what we saw re­cently. Over the last five years, we had pro­duc­tion that went off­line in the Mid­dle East. So prices went up. Then we got it a lit­tle bit off as the econ­omy slowed down and Saudi Ara­bia and Iran re­turned sup­plies to pro­duc­tion.

And what’s the im­pact of shale oil?

Well, it sur­prised the oil mar­ket, would be the first thing I would say. But what it re­ally showed the mar­ket is there’s a fairly re­silient source of sup­ply that’s avail­able on short no­tice. What the shale busi­ness showed is that, with the com­bi­na­tion of hy­draulic frac­tur­ing and hor­i­zon­tal drilling, we can grow pro­duc­tion pretty rapidly if we have the right price en­vi­ron­ment. When oil was over $100, we were grow­ing pro­duc­tion in this coun­try by a mil­lion bar­rels a day per year.

What’s the sta­tus of your Latin Amer­i­can law­suit?

You’re re­fer­ring to a large case in Ecuador, where a New York trial lawyer at­tempted to de­fraud my com­pany out of $19 bil­lion. For­tu­nately, we were able to prove, in a New York court, in a civil case, that RICO statutes were vi­o­lated, along with nu­mer­ous other laws—For­eign Cor­rupt Prac­tices Act, ex­tor­tion, wire fraud. We con­tinue to fight that. Thus far, we’ve been very suc­cess­ful. There’s risk, but we’ve been able to man­age it.

What do you see hap­pen­ing in Venezuela?

Venezuela, tech­ni­cally, holds the largest re­serves in the world. But it’s fac­ing in­ter­nal dif­fi­cul­ties. We’re the only Amer­i­can com­pany there right now. We work very hard to main­tain our re­la­tion­ships. We deal in long cy­cle times, so we work with govern­ments across the po­lit­i­cal spec­trum, in­clud­ing the Chávez gov­ern­ment and the Maduro gov­ern­ment to­day. One of the things that dis­tin­guishes Amer­i­can com­pa­nies is we re­ally don’t adopt an ide­ol­ogy. If it’s le­gal for us to do busi­ness and we can do busi­ness ac­cord­ing to our stan­dards, we’ll do busi­ness in many dif­fer­ent coun­tries around the world, re­gard­less of ide­ol­ogy.

“I would say the power has shifted to­ward reg­u­la­tors in this coun­try. I don’t think it’s a coin­ci­dence that we’re see­ing sub­par eco­nomic growth”

Watch Char­lie Rose on Bloomberg TV Weeknights at 6 p.m. and 9 p.m. ET

Newspapers in English

Newspapers from Bahrain

© PressReader. All rights reserved.