Address to Engineers Ireland

David J. O'Reilly

By David J. O'Reilly, Chairman and CEO
Chevron Corporation

Engineers Ireland

Dublin, Ireland, Apr. 16, 2009

Thank you very much. I appreciate your warm welcome and the hospitality of all the good people of Engineers Ireland. Dublin has never lost the feeling of home for me, and it's a special pleasure to be in the company of fellow Irish engineers.

That was a generous introduction by John Power. Thank you, John, for the kind words.

I'd like to acknowledge some familiar faces in the audience here tonight, particularly some close friends and a classmate, Brendan Bracken and Brendan Sheehan. Also present is the distinguished then lecturer/now professor from many years ago John Kelly.

I think those of us in the chemical engineering field, particularly back from the 60s, owe him and the faculty at University College Dublin a great debt of gratitude. At that time, the chemical engineering department was on Marion Street. I understand it's quite a fancy place now, but there used to be a lot of great equipment there in those days. I worked on a project – helping with a Ph.D. piece – on the effect of transverse air flow on cascading particles in a rotary dryer.

It was a good time.

I love rugby and have ever since I picked up a rugby ball at Willow Park when I was 7. This is a great time for Irish rugby – Irish teams simultaneously hold the Grand Slam, Six Nations Championship, Triple Crown, Heineken Cup and Magner's League. And to top it off, Blackrock College just won its 66th Leinster Senior Schools Cup. It doesn't get much better than that.

I also love golf. But as John Carr and a number of you can attest, I'm not very good at it. It's been a great time for Irish golf as well with Harrington's back-to-back British Open wins and a PGA championship.

One of the benefits of my business is the chance to pass through Europe a lot, and any trip is better if I also can arrange a visit to Ireland. Although I've been gone more than four decades, I count myself very fortunate for the values I inherited from my experience growing up in Ireland.

My father spent his whole life selling menswear at Arnotts on Henry Street, and he was always good for advice. He told me, "Never get in the rag trade." I took his advice and chose another industry, although I'm tempted from time to time to advise my daughters, "Stay out of the oil trade." It's a tough career and a tough business.

I've been entrusted with leading a very fine company. But I've always thought of myself first as an engineer. The training I received isn't a stage in life that I've felt I've moved beyond. That training has left me better prepared for every job I've ever had.

Whatever your engineering discipline, the qualities of excellence are always the same. You learn to see a matter whole and to understand each part of it too. You put your ideas to the test because in our field a single unexamined assumption can lead to a very bad outcome.

Good engineers are never going to tell you they know something for sure if they don't. Engineers learn to think things over and to keep coming at a problem until they've solved it. And these are habits that serve us all well in any walk of life.

We engineers deal in provability, scientific certainty, structural integrity. For us, these are nonnegotiable. In every age, and in every society that aspires to improve, these qualities will always be at a premium. We are all lucky to belong to a learned profession, with skills that are vital and always will be.

That's good to remember in a tough time for the trade here in Ireland and most everywhere else. When our economies come back and optimism returns, that renewed growth will depend mightily on engineers – and all they've discovered, designed, created and put together.

In a slow economy there's not much comfort in recalling that Ireland has seen much worse. You don't have to be too far along in years to remember an Irish economy whose main exports were people. It's an economy that I think has changed a lot over the time that I've been gone. When I think back to my graduating class, many of us left the country because opportunities were so limited here.

But something momentous happened here in the last several decades. And as hard as things are at the moment, we can't lose sight of the fact that Ireland turned loose the economic potential that was always here. This country has become a business center in its own right.

At long last, Irish workers and entrepreneurs could find their fortune without buying a ticket to somewhere else. For the first time anyone could remember, people with ideas, inspiration and capital found a place of opportunity right here in Ireland.

These are not the best days for the free market economy of Ireland or for any of the great free market economies. It's going to take time for a turnaround to occur. But there are many reasons for confidence – above all the fact that economic growth is driven by some of the most basic forces in the world.

Populations are continuing to rise. Men and women around the world are striving for a better life. And there will always be moments of genius that start new industries and change societies forever.

Ireland has suffered in the adversity of a global downturn, but Ireland will also be a part of the recovery. The whole experience is a shared one because Ireland is in the thick of the global economy, and always will be.

What may change, and I hope some change will occur, is the level of scrutiny that regulators apply to the financial sector. It's a safe bet that we're not going to see the same sort of financial engineering that we've seen in the past, or hiring and expansion in areas such as the field of subprime lending.

After what we've witnessed in finance, it should make all of us appreciate more the trades and the professions that produce things of real value – things that people need and use. That will always be true of the engineering profession – and of any industry where we have made our careers.

Few industries can better prepare you to think clearly in a time of volatility and public anxiety than oil and gas. In the span of a few months, prices can go way up or way down. One day consumers will be alarmed at the cost of energy and focused on the issue. And not long afterward, consumers and politicians might pay less mind to long-term energy concerns. But those who bear responsibility for energy production – like the people in our company – have to think decades ahead and stay focused on the fundamentals.

Oil, in particular, is a finite resource, and even allowing for incredible advances in technology, it gets harder over time to access and extract. A good deal of it lies under the ground in unstable areas of the world. And even absent these concerns, there is still the challenge that using these fuels – such as oil, gas and coal – can carry a cost to the world, including the climate of Earth itself.

So for all the good these traditional fuels have done mankind, everyone agrees they are not forever. Over time, we will replace them with cleaner, more diverse and more secure forms of energy. And a smart policy can help speed the day when the world has moved past the reliance on carbon-based fuels.

That's the objective we all have in view, and it helps explain why my own company is investing in alternative fuel technology. We are the largest producer of geothermal energy anywhere. We have an entire subsidiary devoted to helping customers use energy more wisely. But in the great scheme of things, even with all that effort, these are still relatively small businesses today.

Where the debate on energy gets difficult is when we talk about the facts of scale. How much energy does the world need, and how much of that demand can we meet with alternatives right now? How long will it take for the world to make a great transition, and what size of investment are we talking about to make that transition?

On some issues, strong opinions are often easier to come by than basic knowledge, and this is the case with energy. I spoke recently with a reporter who started covering energy about 30 years ago. He put it this way: the "asymmetry between the number of people talking about this issue and the number of people who understand it … [is] at the one-in-a-million level. I've never seen a wider gap."

The man has a point, and I'm afraid it applies to many political leaders as well. Even they spend a good deal more time talking about energy than in putting their various claims and pledges to the test of facts.

A realistic strategy for meeting the world's demand for energy, with a diverse supply of sources, has to start with an understanding of scale.

Every day in the life of the world we use, from all energy sources, the equivalent of about 240 million barrels of oil. Demand on that order is a fact, and over time it moves in one direction only – upward. Worldwide, we're using 50 percent more energy today than we did only 20 years ago. We're using it more efficiently per unit of GDP, but we're using more. And 20 years from now, demand will rise by another 30 to 40 percent.

At least 85 percent of the global economy today is powered by oil, natural gas and coal. Renewable sources – from wind to hydropower to biomass to solar – come to less than 10 percent of the total energy supply. Most of that is hydropower, which has been around for quite some time. Here in Ireland, renewables are more than 30 percent of the domestic energy production – yet of the total energy used here, when you include imports and the transportation systems, over 90 percent is fossil fuels. As in America, this shows both the promise of renewables and the certainty of reliance on traditional fuels for some time to come.

Development of alternatives is moving at an impressive pace in our two countries and well beyond. Yet their expansion is still unable to match the rising demand for energy across the world. So even as our use of alternatives grows dramatically over the next decade as a percentage of the total energy mix, 20 years from now they will still stand at around 10 percent.

In the long sweep of time, alternatives will meet a far bigger share of global demand. But it's not realistic to suppose that they can replace conventional energy in the short term, as we are asked to believe by many who do not check the facts.

After all, the development and application of new technology has always taken time. Look at the computer industry. It took about 50 years from the development of the silicon chip before computers really became a widespread part of everyday life.

Will energy alternatives take that long? I hope not. But we need to be realistic. Conventional energy sources will remain indispensible to meeting demand for decades to come, even as we pursue contributions from other sources.

We need to get beyond simplistic solutions and focus on our primary objective – which is energy security. There are no quick, no easy answers. Massive scale, long lead times, tight spare capacity, growing demand – these are the realities we face.

There are solutions. And those solutions are not either/or. It's not a choice between more oil drilling or more efficiency, coal or wind, nuclear or solar. We need greater efficiency and more renewables. We need nuclear and coal. We need wind and oil and natural gas. To achieve energy security, we are going to need it all.

Now despite the difficulties of meeting global demand, and over time making the shift toward renewables, there is a hopeful way of looking at this challenge.

After all, the enormous numbers we're dealing with tell more than just a story of resources exploited – of things being taken and used. Really, it is the story of entire societies beginning to shake off ages of poverty.

These societies are getting their first big chance at the material comforts and possibilities for self-betterment that we in Europe and America often take for granted.

Developing countries require a certain amount of energy to live just as we do. Now a good part of the rest of the world is on its way to a similar standard of living – with better jobs, higher incomes, and the opportunities for health, education, and the other things that prosperity offers.

This is a good thing. And this great progress for billions of people hinges on a growing supply of affordable energy used efficiently – from sources that can be drawn upon right now. And my best advice to policymakers is never to take economic growth for granted – or to forget that right now, the economies of the world are powered largely by fossil fuels.

Many wish it were otherwise, but it's a fact. And the danger is to let energy promises get ahead of energy realities. To the extent that oil and gas fuel economic growth, they can actually serve the great goal of getting us beyond a carbon-based society.

It is no coincidence that the greatest advances in alternative fuels have come in this past quarter-century – a time of incredible economic expansion.

Global output has tripled since 1970, while total energy use has only doubled. The world now uses roughly 25 percent less energy per unit of GDP than it did in 1970. The market is working as investment capital moves in the direction of new sources and far greater efficiency.

This is a crucial point often neglected by advocates of new controls and mandates: Alternatives depend on innovation, and innovation depends on economic growth.

Growing economies are always better situated to make the big investments that yield the long-term payoffs. Go to any developed country and you'll find a petroleum-based economy. Try to change that fact overnight, with overly restrictive policies, and what you'll get is a weaker economy and all that comes with it – a falloff in investment capital, the loss of optimism and less willingness to take the long-term view.

In those conditions, making big investments in energy sources that have a distant time horizon will often be the last thing on people's minds.

Supplying the energy needs of the world requires time and money – lots of both. Indeed, the energy system we have right now is the product of one hundred years of investment. We have to think about the next energy system we're heading toward as a hundred years of investment.

Our responsibility now is to prepare the way – to set in motion the world's transition to new and cleaner sources. It's not a sudden turn, but a long arc. We will convert away from conventional fuels. But it is more than the work of years or even of decades – it is probably the work of generations.

In the end, we'll succeed through technologies not yet developed nor even imagined. You don't have to be an engineer to have confidence in the power of technology to reduce our dependence on carbon-based fuels – but it doesn't hurt either.

I'm part of a company with nearly 40,000 engineers and scientists, and I've spent a good part of my career watching and admiring what they do. We're accustomed to asking a lot of them. And they have a way of coming through, with the perseverance and discipline that shows the best of our business.

So many of the great challenges of energy production begin as challenges of engineering. And in the great advances made, the diligence and inspiration of a single engineer can reach far beyond his own time and place.

That's how a far-sighted young engineer named McLaughlin brought electricity to all of Ireland by capturing the power of the River Shannon. And that is how new problems, of even greater complexity, will be faced and overcome by women and men of our caliber.

This is the kind of work each of us is called to do. And anyone who says the challenges are too big or too hard to solve has not met an Irish engineer.

Thank you all very much.

Updated: April 2009