Global energy CEOs, who joined their brethren at the 31st annual IHS CERAWeek 2012 in Houston last week, urged their colleagues to dust up their images and become more proactive in exceeding regulatory safety standards.
Statoil ASA CEO Helge Lund, who said North America is the “largest growth opportunity” outside of Norway, encouraged the energy industry to help create a better public persona.
“What we do matters. Our products matter. So people should care,” Lund said. “We need access, but we also need acceptance.”
Lund encouraged delegates to embrace legislation to increase transparency for finances and operations to build public confidence. “I believe there is a huge upside working to ensure we have the right regulations, rather than being perceived as the industry that fights regulations.”
The industry should “admit” that it didn’t move quickly enough to disclose hydraulic fracturing chemicals. “I take the view that the industry should continue to be proactive and transparent. That is the only way we can earn the trust we need to develop these valuable resources.”
The Statoil CEO also encouraged the audience to embrace social networks such as Facebook and Twitter, and use them to advance a positive agenda.
“We cannot ignore that parts of the public that don’t trust our industry and our ability to operate safely,” Lund said. “Trust must be earned.” Because of the energy industry’s technology-savvy abilities, it could become a “socially responsible and technically sophisticated” leader.
“We have a responsibility to show leadership and take action beyond what is formally required of us,” Lund said. “Rather than await new governing regulations and legislation on our operations, we can take our own initiatives and exceed the expectations we meet.”
Statoil plans to increase North American production fivefold by 2020 through unconventional plays and in the Gulf of Mexico, Lund said. He told reporters that the company in 2011 produced close to 100,000 boe/d in North America. Its goal is to increase output to 500,000 boe/d by 2020 in the United States and Canada.
Statoil in late 2008 paid $3.38 billion to Chesapeake Energy Corp. for a stake in the Marcellus Shale (see NGI, Nov. 17, 2008). Two years later it secured Eagle Ford acreage in a joint venture with Talisman Energy Corp. (see Daily GPI, Oct. 12, 2010). Last year it paid $4.4 billion to buy Brigham Exploration Co., giving it access to the Williston Basin’s Bakken and Three Forks formations (see NGI, Oct. 24, 2011).
To date, output from the Marcellus has been inconsequential compared with overall company output, Lund said. The company, like most of its peers, has reallocated resources to more liquids-heavy areas. However, “we expect to produce about 60,000 to 100,000 b/d in our first phase” of production from the Bakken field, he told reporters.
In his keynote address last week, Royal Dutch Shell plc CEO Peter Voser echoed many of Lund’s comments about how the industry has to makeover its image.
The natural gas revolution is changing the U.S. energy security outlook but its role in energy demand may depend on how policymakers address regulatory challenges and whether the industry is able to earn the public’s trust, Voser said.
“We all recognize the significance of this opportunity [but] our industry needs to do a better job of convincing the world that natural gas is a force for good,” Voser said. It’s not only by job creation, “but by reducing energy costs and boosting other critical industries, such as chemicals manufacturing.”
Skepticism has grown in areas where unconventional gas and oil is being produced, and the concerns have to be addressed, the Shell CEO said. “As an industry, we have not always done our best to engage in the public debates about these issues,” he said. “We need to do a better job of listening and responding.”
Voser said fracking had been performed more than 1.1 million times in the past 60 years in the United States; documented cases of freshwater contamination are rare. “When problems have occurred, they were simply due to poorly designed wells,” he said. However, Shell supports disclosing frack chemicals and regulations to promote transparency.
Like his CEO peers, Total SA exploration chief Yves-Louis Darricarrere said more transparency and environmental sustainability are issues that require attention. In a keynote address last week he cited a swift swing in public opinion in France against allowing producers to develop shale resources because of myths about hydraulic fracturing.
“Our business will not be sustainable if we are not responsible operators accepted by all stakeholders including civic society,” he said. “We must reduce the environmental footprint of our operations as much as possible.”
Oil’s share of the global energy supply will continue to fall, with the slack picked up mostly by natural gas, Darricarrere told delegates.
Total’s view is not unlike that of other Big Oil executives; BP plc and ExxonMobil Corp. have stated similar views in their annual energy forecasts. Total, which also is investing millions in renewables — with a big bet on solar — expects fossil fuels to continue to shape the world’s energy landscape for decades. Plenty of natural gas and oil is in the onshore and offshore, but there are expensive obstacles that have to be bridged, Darricarrere said.
“I don’t think in-the-ground resources are an issue,” he said. Enough oil resources exist to last at least 75 years and enough natural gas is available for at least 130 years, by several calculations. “We see structural support for oil and gas prices, excluding North America, in the medium and long term,” Darricarrere said.
In North America, he noted, the cup runneth over with natural gas — and oil resources are looking stronger in the near term because of rapid gains in technology.
However, “for various industrial and geopolitical reasons, it will be difficult to produce more than 95-97 million barrels a day of oil and natural gas in the foreseeable future,” the Paris-based executive said. Last year global production was around 87.4 million boe/d.
The obstacles for projects in the deepwater and in other conventional drilling areas are becoming more expensive, Total’s chief said. In addition, several countries maintain barriers to investment. Extracting oil won’t necessarily quench the thirst for energy in some developing areas of the world. And world events, such as Japan’s nuclear meltdown at Fukushima, also will keep oil and gas at a premium.
“In a post-Fukushima environment, the position of fossil fuels is even more difficult to challenge,” Darricarrere said. Huge investments have to be made, with technical expertise and sustainability key to meeting global demands in the coming decades. New resources likely will be found in ever deeper waters and in colder climes, he said. “The subsequent developments will be complex and costly,” but “fossil fuels will continue to be an essential ingredient in the energy mix.”
Juan Jose Suarez Coppel, director general of Mexico’s state-owned Petroleos Mexicanos (Pemex), who also spoke last week, said, “The story is, if you don’t put anything in, you won’t get anything out.” He noted the challenges Mexico faces as it attempts to reset the production switch and ramp up oil and gas rates.
“There’s still a clear perception of the need to change things in the oil industry,” he said. Decision makers’ opinions have become “much more acceptable in the short term.” Because Pemex is run by the government, bureaucracy causes some problems, he said. “It’s much easier to fix a company than fix government institutions.”
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