Energy Producers Face Challenges

HOUSTON -- A retired top Chevron executive told an energy conference here last week that the industry faces significant challenges, from volatile oil prices to shifts in the political environment, reported the Houston Chronicle.

Donald Paul, retired chief technology officer for the California-based oil giant, said under a Barack Obama presidency, oil companies will have to place more emphasis on managing carbon dioxide emissions and diversifying their energy sources, particularly alternatives and renewables.

"They have some very smart people on their team," he said after a panel discussion of energy’s post-election outlook. Paul is currently head of Energy and Technology Strategies, an advisory firm, and senior adviser to the University of Southern California’s Energy Institute, according to the Chronicle.

Another speaker, Michael McAdams, executive director of Hart Energy Consulting, a division of the conference sponsor, Hart Energy Solutions, said Washington has never been so "ready for change" since the election of Ronald Reagan to the presidency nearly 30 years ago.

"Nobody in Washington wants to put you out of business," said McAdams, who, according to the Chronicle, encouraged executives to reach out to the new administration. "The doors are open."
Paul said Obama’s energy advisers frequently referred favorably to recommendations in Hard Truths, a report by the National Petroleum Council compiled at the request of the Energy Department and finished in June 2007, when oil prices were in the $60 range. Crude rose north of $140 in July of this year and now has retreated to the 2007 level amid the global economic downturn and financial crisis.

Paul predicted oil demand will rebound and the Petroleum Council’s message remains as relevant as in mid-2007: By 2030, demand will have grown to the extent that the globe will need as much new production as it has in total today. That includes everything from hard-to-reach fossil fuels to alternatives and renewables, including those years away from showing success in a laboratory.

Paul said a key question is whether the industry delays projects in tandem with the current downturn, leading to a possible supply crunch as demand rebounds along with economies.

"One of the challenges with this level of swing, where you basically doubled and then you halved prices, is it introduces a level of uncertainty in the planning and investment cycle," Paul said.

"Because of the lag time of when companies invest and when projects come into production—depending on how people respond to this—if they dial back capital programs, that puts another delay into the system," he said.

Last week, Royal Dutch Shell announced it would indefinitely shelve a decision on expanding its operations in Canada’s oil sands because of increased costs. And Thursday, ConocoPhillips and Saudi Aramco agreed to halt bidding on a refinery project in Saudi Arabia because of uncertainties in financial and contracting markets, according to the Chronicle.
This ad will auto-close in 10 seconds