Chevron Official Urges Asian Governments to Boost Energy Security

By: Patrick Barta
Thursday, November 12, 2009

 

SINGAPORE -- Asian governments need to act more aggressively to boost energy security, including making it easier to develop untapped gas deposits and alternative energies to prevent future shortfalls of supply, a top Chevron Corp. official said Thursday.

Countries throughout Asia-Pacific "have discussed strategies, policy frameworks and best practices for 10 years," said George Kirkland, Chevron's executive vice president for upstream and gas, at a meeting at the annual Asia-Pacific Economic Cooperation conference in Singapore. "Now is the time to take action."

He singled out Australia as a model. He said that country offers a more stable political environment and more reliable fiscal terms than other countries in the region. It also worked with Chevron to support strategies to trap carbon dioxide generated in the production of natural gas there and bury it underground, assuming long-term liability for the emissions, he said.

Chevron recently green-lighted one of the world's largest liquefied natural gas projects there – the 43 billion Australian dollar (US$40 billion) Gorgon project offshore – and hopes to proceed with a planned Wheatstone development in Australia as well, he said.

"Australia got it right with natural gas," he said.

Mr. Kirkland's comments come at a time when many parts of the world are awash in excess natural gas, and some analysts, including forecasters at the International Energy Agency, have said future energy demand in some places could be weaker than expected as developed nations boost conservation programs.

Mr. Kirkland in an interview agreed that there is lots of energy available, especially natural gas and coal. But any potential surpluses could disappear quickly if more investments aren't made, especially in Asia. Unlike the U.S., where much of the domestic gas supply is transported through pipelines, Asia relies heavily on LNG shipments by ship that require enormous upfront expenditures of capital to develop.

"You have to spend a lot of money, and until you spend the money, you don't have the gas," Mr. Kirkland said. "With the amount of expenditures we put on these projects, you really have to have certainty" that the fiscal terms aren't going to change later, he said.

Indonesia, where Chevron has long operated, has become more difficult to work in than in the past, he said. Other parts of Asia with the potential for further oil and gas development remain unstable or off-limits to further exploration by Western companies, such as Myanmar, where U.S. sanctions prevent many major companies from expanding their presence.

Mr. Kirkland said Chevron is continuing to review whether to participate in an upcoming second round of bidding in December for oil assets in Iraq. Only one project out of a possible eight was awarded in the first auction in June, to a partnership of China National Petroleum Corp. and BP PLC.

He said Iraqi officials had taken steps to clarify contractual terms which could make the second round more attractive to foreign investors, and suggested Chevron was likely to play a part in the bidding.

"For a big company, it will be difficult not to be there," he said, though he added, "we've not reached a final decision on our bids." He said that if Chevron does participate, it most likely would be looking to gain access to one of the larger projects on offer, he said.

"You're always looking for big" fields to invest in, he said.

Mr. Kirkland said Chevron also remains interested in Myanmar, but won't expand there so long as U.S. sanctions -- put in place because of the country's long history of human rights abuses -- remain.

Mr. Kirkland said Chevron is "strongly supportive" of a recent initiative by the Obama administration to expand dialogue with Myanmar's ruling military regime. Mr. Obama is expected to meet with top Myanmar officials over the weekend in what is expected to be the first encounter between a U.S. president and a senior junta leader in decades.

"You can't make progress unless people are talking," he said, adding that Chevron would "love to see" diplomatic progress in the country, which could lead to improvements in living standards for Myanmar residents – as well as potential investment opportunities for Chevron, though any further opening of the country could be years if not decades away.

Chevron has come under criticism from international rights activists for its Myanmar investments, which it acquired when it bought U.S. oil and gas producer Unocal Corp. several years ago. But Mr. Kirkland said Chevron has no intention of pulling out.

Myanmar has "some good basins" and "there just isn't an unlimited number of basins" left in the world to explore and develop, he said. It's unlikely Chevron would decide to move out of the country, he said.

"You hate to exit," he said. "Once you exit, it's hard to return."

Mr. Kirkland stressed the role that alternative energies could play in meeting Asia's rising energy demand and easing concerns about global warming – but added that officials need to do more to promote such energies. He said Chevron would consider further investments in geothermal energy, for instance, if it became easier to access suitable land in Indonesia or elsewhere to develop new projects.

Although geothermal energy will likely remain a small part of the world's energy picture, "it's a good business" without a lot of competition, he said. "I don't know if it could be a huge part" of meeting Asia's energy demand "but it can be a part," he said, adding "we need all kinds of energy."

Write to Patrick Barta at patrick.barta@wsj.com


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