Remarks to the World Geothermal Congress
By James Blackwell, President, Asia Pacific Exploration and Production,
World Geothermal Congress
Bali, April 26, 2010
My objective this afternoon is to convey what Chevron believes is essential for growing the geothermal energy sector.
Before I begin, let me take a moment to tell you about Chevron. We have been working in the Asia-Pacific region for almost 100 years. Today about 25 percent of our global reserves and production are located here. Many citizens in the region are part of the Chevron family. We are especially proud to be a sponsor of the World Geothermal Congress in Indonesia, a country of great importance in meeting the world’s growing demand for energy. And Bali is a beautiful venue.
Chevron has operated in Indonesia for 69 years. Today our operations in Indonesia span the energy value chain: from crude oil, to natural gas, to the large geothermal projects in Salak and Darajat. We are proud of our partnership with the government, the communities and the people of Indonesia. Ours is a partnership that has stood the test of time.
Geothermal energy has and will play a significant role in our partnerships here, and in the Philippines, for many years to come. Our geothermal projects in Indonesia and the Philippines make Chevron the largest producer of geothermal power in the world. The future of this sector is very bright with promise. Our challenge is: how we can deliver on that promise?
First, let me offer some context.
Despite the lingering effects of the global recession, the International Energy Agency projects that global energy demand will rise by 40 percent through 2030. Crude oil and natural gas will supply 70 percent of demand, but it is clear that we cannot meet long-term demand on this scale with hydrocarbons alone. We’ll need every form of energy we can produce: hydrocarbons, certainly, but also alternatives and renewable, including – and especially – geothermal energy.
The growth potential for geothermal energy is great, and the Asia-Pacific region can lead the way.
The geologic conditions necessary to create a geothermal resource are found in very few parts of the world. Fortunately, these geologic conditions do exist, and in great abundance, right here in the Asia-Pacific region. Our host for this conference, Indonesia, possesses, by far, the largest base of undeveloped geothermal resources in the world. The government has indicated there are more than 250 separate prospective areas.
At the G-20 Summit last September, President Yudhoyono pledged to reduce greenhouse gas emissions 26 percent by 2020. Indonesia is uniquely positioned to expand its geothermal energy to meet that goal. In fact, Indonesia could become the world’s No. 1 geothermal energy producer.
So, how can we manage the challenges and maximize the opportunities? How can we provide energy to millions of people for whom reliable, affordable energy provides opportunities for a better life?
I believe there are three fundamentals necessary to realize geothermal energy’s full potential. They are: access, partnership and communities.
Let’s take a look at each of them, beginning with access.
As we rise to meet the world’s growing demand for reliable, affordable energy, access to resources is imperative. The key to successful geothermal development is not finding investors or finding new resources. The key is an enabling legal and regulatory framework.
In the Philippines, Chevron’s geothermal exploration started almost 40 years ago. Already the world’s second-largest geothermal producer after the United States, the Philippines recently enacted an investment-friendly renewable energy law to stimulate private investment. The law encourages open, competitive power generation and reduces excessive royalties and taxes. The result – a dramatic improvement of the geothermal investment climate in the Philippines.
Here in Indonesia, about 30 years ago, we signed contracts for Salak and Darajat. These contracts enabled us to invest in exploration for and the development of the geothermal resources. In addition, the geothermal legal regime put in place in the 1980s and 1990s enabled more than $2 billion of investment by private companies in the geothermal sector. The 2003 Geothermal Law in Indonesia fundamentally changed the legal basis for development of new areas.
The law also preserved the original legal and contractual terms of those fields already under development. While new contract areas are being offered, regulations need to be implemented to unlock the many benefits geothermal development can deliver. It also is critical to designate a single regulator for the geothermal sector, one that can bring together the various ministries who have a stake in geothermal development.
So, access is very important. The second fundamental is partnership.
Successful energy projects today require stronger and more aligned partners than ever before. For example, geothermal projects require multi-year investments, large infrastructure projects and close collaboration with host governments.
To fully develop their geothermal resources, host governments also need partners with experience and expertise in: reservoir management; leading technologies and application of those technologies; project management; operational excellence; and, especially, a focus on safety.
The primary ingredients for any successful geothermal partnership are: a stable legal and regulatory regime, which allows for long-term development rights; open markets created by long-term contracts or competitive markets; and long-term prices with certainty of payment.
Partnerships are critical to success. The third fundamental is community.
Our industry fosters sustainable development in ways that contribute to economic and human progress. We do this by making long-term investments that create jobs, enabling and doing business with local suppliers, and also by employing a local workforce. Chevron’s local workforce in Indonesia and the Philippines is roughly 95 percent local employees.
In both countries, Chevron also supports programs that develop local businesses and promote conservation. Together with access and partnership, we recognize that communities are vital to successful geothermal development.
In summary, the geothermal sector is poised to deliver more of what the world needs today –abundant clean energy, investment and vibrant economies.
In Indonesia and the Philippines, the governments have set aggressive goals for developing geothermal energy. The private sector has the expertise, capital and technology to help meet these goals. Chevron is committed to continuing our investments in geothermal energy in both countries.
Together with host governments and our partners, we look forward to developing this valuable energy resource.
To do so we need continued access to resources, regulatory frameworks that allow long-term projects and markets to thrive, and continued investments in the communities where we work. As partners, we all have a common interest providing clean energy to support economic development. And I am confident that we can rise to achieve this goal.
Working together, we can all help build a sustainable future for many millions of people – a legacy we can all be proud of.
Published: April 2010