Chevron Corp. CEO Dave O'Reilly on Tuesday called on the federal government to conduct an updated inventory of key areas in the Outer Continental Shelf, as authorized in the Energy Policy Act of 2005. If the results indicate the potential is there, he said, leasing programs to evaluate the resources should begin.
O'Reilly spoke at Cambridge Energy Research Associates' (CERA) CERAWeek 2007 in Houston. An effective, targeted 2-D seismic survey of selected areas in the Pacific, Atlantic and Gulf of Mexico (GOM) regions could be completed for under $500 million, he said, "a rational investment given the $4 billion or more in new revenue that increased royalty rates will generate."
New technologies are locating and recovering resources once considered too difficult to develop, he noted. Chevron's test last year of the Jack No. 2 well, which is located in 7,000 feet of water in the Lower Tertiary trend of the deepwater GOM, is a prime example (see Daily GPI, Sept. 6, 2006).
"Not so long ago, the Gulf was referred to as the 'Dead Sea' regarding its potential for new oil and gas supplies. But to paraphrase Mark Twain, reports of its death have been greatly exaggerated," O'Reilly said. "The work at Jack was a great example of what can be accomplished when companies are given the opportunity to invest and innovate." And, he noted, "we can't lose sight of the primary role that hydrocarbons will play for decades to come."
Echoing comments by ExxonMobil Corp. CEO Rex Tillerson, who spoke at CERAWeek earlier Tuesday (see Daily GPI, Feb. 14), O'Reilly said the "issue of access" to oil and gas resources is now "paralyzed in a debate confined by fixed positions and fuzzy data." No one knew 25 years ago that the area of the GOM where the Jack well was drilled held the volume of resources it does, he said. "It took innovative new technology to do that."
Because energy is "clearly at the top of the political agenda, any discussion about the future of energy in this country needs the full engagement of the U.S. business community." Energy challenges and their inherent opportunities loom large across the world, said O'Reilly. However, he said that despite this growing awareness on energy, the United States still has not made the changes in energy strategy or policy required for the 21st century.
"Today's energy debate, to a great extent, continues to be informed by narrow and outdated perspectives, unrealistic expectations and short-term thinking," O'Reilly said. "As an industry, we bear some responsibility for this. We haven't done all that we should to put the energy debate in the proper framework. We haven't talked directly enough with the American public about our business and the value we provide. As a result, our industry has lost some credibility."
The Chevron chief said the country has to manage its "energy portfolio" by enhancing its "core investments in oil, natural gas, coal and nuclear. Or, in financial terms, protect our principal...Even if the use of renewables doubles or triples over the next 25 years, we will still use fossil fuels for more than 80% of global energy demand."
Any discussion of energy policy today "would not be complete without recognizing the issue of climate change," he noted. "There are few issues where the need for policy alignment is greater. This is a huge challenge for all of us. But as a starting point, the private sector, policymakers and the scientific community should work together to create a national framework for carbon management that is rational and cost-effective. Otherwise, we run the risk that state actions -- no matter how well intentioned -- create a patchwork of regulations that impose high societal costs with limited impacts."
The "national framework," he said, "should be guided by several principles. First, we should acknowledge the critical need for global engagement. Reduction of greenhouse gas emissions must involve all of the major emitting nations in the world. Second, there should be broad and equitable treatment of all sectors of the economy to ensure that no single sector is disproportionately burdened. And third, there should be open communication about the costs, risks and trade-offs associated with climate change policies.
"The world has reached a point where integrated carbon management is needed," said O'Reilly. "Now we need to exercise the leadership that is required to create policies that are balanced, practical and flexible."
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