press release

Chevron Press Release - Chevron Executive Says Cost-Benefit Focus Will Drive Oil Industry In Coming Era

NICE, FRANCE, Sept. 10, 1995 -- Low oil prices, strong demand and investor expectations will drive oil companies even further toward a strong cost-benefit perspective in the years ahead, Richard H. Matzke, president of Chevron Overseas Petroleum Inc., told an American Association of Petroleum Geologists convention here.

Matzke also said the industry needs its exploration sector to become fully integrated with today's cost-benefit realities -- and he questioned whether the "traditional" exploration viewpoint should still be one of the top priorities driving today's oil industry.

"Historically, exploration risk has been viewed as something which shouldn't have to suffer the indignity of a cost/benefit analysis," he said. "And of course, all of us here owe our prosperity to discoveries made by yesterday's explorationists.

"But in hindsight, we've spent a lot of real dollars chasing prospects that didn't pan-out. We can't afford to do that any more.

"E&P used to stand just for exploration and production. Today it has to stand also for efficiency and profitability, economics and planning. We need to focus on the better barrel, not just the barrel. The superior target, not just a lot of targets. The new approach, not the one that always made sense in the past."

In a keynote speech titled, "The E&P Industry Beyond 2000: The Challenge of Creating Value," Matzke said growing oil demand is creating a world of opportunity for oil companies, with big development projects and proposals taking shape in dozens of countries.

"It's almost impossible to keep up with all the examples of real, long-term work that the world's growing petroleum appetite is creating for our industry," said Matzke.

Worldwide demand, presently about 67 million barrels per day, could grow as much as 30 percent by 2010; and natural gas demand by 50 percent, he said. However, forecasts of long-term low oil prices will mean "we can't make major investments on the assumption that oil prices will increase significantly," said Matzke.

"We know the trends of risk management, technological efficiency and cost management are irreversible. We also know that investors, as well as governments in producing countries, expect reasonable returns on their investments in our industry. The accountability for these returns will remain the foremost challenge for managers at all levels.

"Investment dollars today must seek only the best ventures that our best thinking and our best science can conceive," said Matzke. "Low prices aren't just part of the business environment, they are the business environment."

Matzke, who worked as a geologist before moving to management, also said "we can't expect to employ everyone tomorrow who was part of our industry yesterday." But he added that without the on-going contributions of geologists "we know that the industry would die."

For the future, Matzke said, the industry needs professionals who "both understand and appreciate financial limitations as well as performance requirements . . . who want the company to choose the most profitable oil and gas investments regardless of whether they involve exploration."

Updated: September 1995