Asia, the World and Energy Security: A New Framework

By Peter J. Robertson, Vice Chairman
Chevron Corporation

Monthly Luncheon Address

Bangkok, Thailand, Mar. 22, 2006

Before I begin, let me also thank the Chamber for inviting me and all of you for attending.

My topic is one that finds its way into the headlines almost every day. It is the subject of a growing global debate - a debate I believe will only intensify in the months and years to come.

I speak of Energy Security - the reliable and affordable supplies of energy we all depend on for our future growth and well-being.

The question is - and this only fuels the debate - whose energy security? Because the term means very different things to different people. Energy consumers think of it as security of supply. Energy producers think of it as security of demand.

The answer, of course, is that energy security is both. And it requires many partnerships between energy consumers and producers.

One thing is certain. It is utterly futile to plan for energy independence when, clearly, we live in a world of energy interdependence. The Far East depends on the Middle East. The United States depends on West Africa, Latin America, the Middle East and more. Europe - as it was reminded earlier this year - depends on Russia among others.

We urgently need new ways for consuming and producing nations to work together, not to pursue energy isolationism - or as Russian President Putin calls it, "Energy Egotism."

Now more than ever, we also need new ways for government and industry - and national and international oil companies - to work together toward the common goal of energy security.

We need to promote a global marketplace for the production, sale, and transportation of affordable, reliable energy.

I believe our debate about energy security - and the answers we come up with - will determine the quality of life for millions of fellow human beings and whether our economies can continue to prosper.

Nowhere is this more true than in the area known as "ASEAN + 3" - that is Southeast Asia plus Japan, China and South Korea.

In a few short years this region, rising on its own talent and hard work, has become an economic power house. But, like North America and Europe, Asia's appetite for energy cannot be satisfied by domestic resources.

Japan and South Korea - two of the most advanced economies - remain wholly dependent on foreign oil sources. And China, Asia's fastest-growing economy, is second only to the United States in oil imports.

Indeed, Cambodian Prime Minister Hun Sen calls new energy sources and supplies "the most critical factor for sustainable development in ASEAN, and Asia at large, in the 21st Century."

I doubt any of us here would disagree.

Here in Asia - as in the rest of the world - how we respond to the challenge of Energy Security will determine not only the economic outlook of individual nations but of the entire globe.

For this reason, I believe the time has come for a new producer-consumer framework. Producing nations would effectively agree to increase capacity through shared investment with consuming nations, and consumers would commit to increase efficiency in their energy usage while providing reliable demand for producers.

Such a framework should be a top priority of our energy diplomacy, offering a realistic alternative to the dead end of producer-consumer confrontation and to the current volatility of prices and consumption. It ought to contain five fundamental elements.

First, open markets. Transparency and the free flow of energy trade and investment can only occur on a level playing field. Removing market barriers can significantly increase production and moderate the price volatility we face today.

Second, sound policies to promote stable, predictable fiscal and regulatory regimes, the sanctity of contracts, and the rule of law. The better established these are, the greater the investment, development and security of energy resources for all countries.

Third, robust technology to conserve and optimize the resources we have now and to develop a full range of new energy sources while protecting the environment. This can be achieved through joint ventures and partnerships that foster the sharing of technology and best practices.

Fourth, increased energy efficiency. This remains the most abundant, cheapest form of new energy we have. Energy conservation and efficiency deserves a commitment from each and every one of us.

Fifth, responsible development. The production and use of energy must serve as a platform for broader economic growth and social well-being. We must ensure that the economic benefits of energy flow to all stakeholders including the poor and the vulnerable. This can only be done through proactive national and international leadership fully supported by industry.

Open markets; sound fiscal and regulatory policies and the rule of law; robust technology; energy efficiency; and responsible development.

Taken together, these elements can effect a profound change in the relationship between energy producers and consumers. They can provide true energy security based on a clear understanding and acceptance of interdependence supported by strong, mutually beneficial partnerships.

I'd like to think my company knows something about partnerships. Partnership is a core value embedded in our company vision - and printed in many languages in The Chevron Way. Our vision is to be the energy company most admired for its people, partnership and performance.

Many of our business alliances stretch back for decades, including those in Asia. Our kerosene signs first appeared along Shanghai's "great white way" almost a century ago. Junks, camels and Mongolian ponies delivered our products.

Beginning in the 1930s, our Caltex colors flew in Indonesia, the Philippines, Singapore, India, Cambodia and Malaysia. Here in Thailand, we built a major refinery to supply the Caltex system in the mid-1990s and today maintain a retail network of more than 500 stations.

Aside from Indonesia, where we've been the largest oil producer for half a century, natural gas accounts for most of our exploration and production opportunities in the region.

Some of our most exciting prospects and important operations are right here in the Gulf of Thailand - the result of both Unocal and Chevron legacy assets building on a relationship of over 40 years. Our merged operations produce approximately 1.5 billion cubic feet of natural gas per day - almost 30 percent of the Kingdom's total power demand.

We've got current and future projects to produce and supply liquid natural gas (LNG) from Australia to Japan, China, Korea and the North American West Coast and we produce, liquefy and sell natural gas in Indonesia through the Bontang LNG plant.

In addition, we have a growing regional pipeline system, bringing gas to the Philippines from the Malampaya field offshore, supplying Dhaka from Bangladesh gas fields, Indonesian Natuna Sea Gas to Singapore, and of course Myanmar gas to here in Thailand.

We're also active on cutting edge renewable and alternative fuels. In Australia, through our joint venture with Sasol of South Africa, we are evaluating a gas-to-liquids facility that will use natural gas to produce high tech, ultra clean diesel fuels. And adding our new Unocal geothermal operations in Indonesia and the Philippines to our previous steam resources in Indonesia - a total of more than 1,000 megawatts - has made Chevron the world's leading geothermal energy company.

Our success in this region has been built on long-term relationships. Chevron, Unocal and Caltex have partnered with most of Asia's national oil companies: Pertamina in Indonesia; Petronas in Malaysia; and both PTT and PTTEP here in Thailand to name a few.

These relationships have taught us to appreciate the Asian attributes of hard work and patience.

I believe they can also teach us, as producers and consumers, to be better partners in that new framework I described earlier.

Energy - secure energy - is basic to improved standards of living, to individual security and to the growth of economies around the world. Think how much heat, light, power and transportation contribute to each of our lives everyday.

Throughout Asia, growing standards of living and growing economies have been fueled by increased demand for local and world energy supplies.

But in addition to energy production, the partnerships formed to support this industry have had many other benefits. They have led to training, education and jobs for tens of thousands of residents.

More than ten thousand Thai nationals, for example, have been hired and trained by the petroleum industry. The energy industry has helped build schools, health clinics and hospitals. We've supported small business and assisted local communities in teaching occupational skills. We've helped Asia battle HIV-AIDs.

Here in Thailand, Chevron is proud that our operations have helped the Kingdom expand its economy and develop an energy industry. Some 92 percent of our upstream workforce consists of Thai nationals.

Someone once wrote that there can be no happiness if the things we believe in are different from the things we do.

I believe in the good that energy can do.

And the more that energy connects our globe, the less we can afford an "us-or-them" approach to apportioning its resources.

That's why the new framework I'm talking about is so important. Enabled by partnership, supported by open markets, just policies, robust technology, efficient energy use and responsible development, consuming and producing nations can reach a new and positive supply-demand equilibrium. And by embracing - rather than denying - our interdependence we will be well on our way to true energy security.

Thank you.

Published: March 2006