Chevron's CEO: Affordable energy is crucial

Published on NewsOK Modified: December 27, 2012 at 12:05 pm •  Published: December 27, 2012
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NEW YORK (AP) — Chevron CEO John Watson notices something important as he visits his company's operations around the globe: Governments everywhere find high energy prices much scarier than the threat of global warming.

And that means the world will need a lot more oil and gas in the years to come.

To meet that demand, Chevron is in the midst of an enormous cycle of investment aimed at extracting oil and gas from wherever it hides in the earth's crust.

Chevron Corp., based in San Ramon, Calif., is the second largest investor-owned oil and gas company in the world, and the third largest American company of any type as measured by revenue and profit. Over the last year, Chevron has earned $24 billion on revenue of $231 billion.

Every day, the company produces the equivalent of 2.7 million barrels of oil and gas, mostly outside the U.S.

Next year Chevron will invest $33 billion — more than it ever has — to drill wells, erect platforms, build refineries and scan for undiscovered deposits of oil and gas. Among its biggest projects: A natural gas operation in Australia that will ultimately cost Chevron and its partners $65 billion to build. Also planned are three deep-water drilling and production projects in the Gulf of Mexico that will cost $16 billion.

Watson, a 55-year-old California native and Chevron lifer, joined the company in 1980 as a financial analyst. Before becoming CEO in 2010 he was vice chairman in charge of strategic planning, business development and mergers and acquisitions. He also ran the company's international exploration and production business, led the company's integration with Texaco and was CFO.

Watson has helped shape Chevron into the best performing major oil company in the world by several financial benchmarks, including the profit it makes for each barrel of oil it sells.

In an interview at The Associated Press headquarters in New York, Watson discussed world energy dynamics, U.S. energy policy, hydraulic fracturing, and working abroad. Below are excerpts, edited for length and clarity.

AP: Why do people and politicians dislike big oil companies that deliver the energy they rely on and benefit from?

WATSON: They don't feel like they have the choices. Most products that you consume every day, you have a choice. In energy you have less choice. And as costs rise, it hits the family budget. It's a convenience that we like, but we'd rather pay less for it.

AP: Is there anything you can do about that?

WATSON: Invest in good projects around the world. Every drop of oil that we produce anywhere in the world hits world markets and, other things being equal, brings prices down.

AP: What do you think is the biggest misunderstanding about your company or your industry?

WATSON: Just how much we invest in the business and the risks that we take to deliver the oil and gas that we all expect every day. We literally go to the ends of the earth to bring this energy to consumers.

AP: Can the industry continue to produce oil and gas at a price that can keep the world economy growing?

WATSON: I think so. We want to produce at a price our customers can afford, and I think there's ample resource to do that for the foreseeable future.

AP: Energy companies complain that the U.S. is over-regulated, but at the same time they are expanding here and cite its many advantages. Which is it? Is the U.S. a terrible place to do business, or is it terrific?

WATSON: On balance it's a good place to do business. We always have to be aware of what other governments are doing, and we have to be sure that we stay competitive. When I met with the president with some of my colleagues a couple weeks ago, that was the first thing that people talked about. It wasn't about taxes per se, it was about staying competitive.

AP: People on all sides of the energy debate have long complained about the lack of a comprehensive energy policy in the U.S. Are we wishing for something that just can't happen in this country? And if not, what would it look like to you?

WATSON: Historically the United States has had a wonderful energy policy. We're blessed with a diversity of resources. We have oil. We have gas. We have coal. We have nuclear. And renewables. And as a result, one of our biggest competitive advantages has been affordable energy. You need a strong economy and you need affordable energy to fuel that economy.

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