Serving Stockholders, Sustaining Partnerships: A ChevronTexaco Perspective on Transparency

By Peter J. Robertson, Vice Chairman
ChevronTexaco Corporation

ISIS Asset Management Reception and Program for Institutional Investors on the Extractive Industries Transparency Initiative (EITI)

British Embassy, Washington, D.C., Feb. 25, 2004

We appreciate this opportunity to share with investors our views on the Extractive Industries Transparency Initiative.

We all know that developing nations such as Indonesia, Nigeria, Angola, Venezuela and Kazakhstan produce much of the world's energy. ChevronTexaco, for example, is a major oil producer in all of those. We're also producing in the Middle East, and like our competitors, we're prospecting there for new business, and in Russia as well.

I think you can see where I'm going with this. The world's energy, for the most part, comes from places where the international community believes additional transparency is needed the most.

What does this mean for institutional investors? In these countries, the success of companies like ChevronTexaco – and therefore, the success of our stockholders – depends heavily on the quality of our relationships. So while transparency is something we believe in, we also understand that many of the energy-producing countries are reluctant to immediately embrace this demanding standard for doing business. And we don't think our stockholders would want us to walk away or damage our positions because these countries are still struggling with transparency.

After all, investors don't buy shares in countries. They buy shares in companies. What investors want, in our view, is a well-managed company that has good values and lives by those values. They want a company that understands the issues and does the right thing but delivers solid returns at the same time. They want a company that provides and supports programs in health, education, housing, job training, local content, infrastructure, environmental preservation and more. ChevronTexaco does this all over the world. Investors want us to be prudent and pragmatic, not political – because they don't invest in us for that. They invest in us because we're a smart outfit that's been around for 125 years, and we intend to be around for another 125.

I can tell you this: Every day when our people go to work, they take their values to work with them in every one of our partner countries. The senior leaders we place in these countries come to their jobs with sound ethical backgrounds. We advocate sound business practices, we try to model them and we stand up for our principles. We behave as a law-abiding and ethical business partner. And we advocate the principles of transparency. But at the same time, we recognize that no company can afford to be in the business of threatening its government partners.

So, it made sense for us last June to be an active participant in the Multi-Stakeholder Conference in London. Our values and codes of business behavior were already compatible with the direction of the transparency initiative. Also, we discussed both the initiative and the idea of participating in the conference with several of our partner countries beforehand, and we decided that we wanted to be there together.

Today, ChevronTexaco continues to view the initiative's goals as both meaningful and achievable. Because what we've seen here from the start has been collaboration not confrontation. By respecting our partners, the initiative respects the interests of our stockholders.

First – and perhaps foremost – the initiative fully recognizes that transparency and disclosure must be a voluntary decision by each country. The world's energy resources belong to them. And they are the ones who must decide whether to become more transparent. The initiative also says transparency should be inclusive, with disclosure standards applying to all countries and companies, regardless of national origin.

Further, the initiative recognizes that disclosure should respect the sanctity of contracts. Companies like ChevronTexaco live by these contracts. And they give both us and our host governments a solid grounding to work together when the business environment is unstable or unclear.

If you've studied the initiative, you may have noticed it offers guidelines and possible standard formats for compliance on transparency. But none of us should expect a one-size-fits-all solution. Each sovereign nation comes to the table with a different perspective.

For example, one of the countries openly supporting the initiative is Norway. This is a mature and sophisticated resource-based economy with 3 million barrels of daily oil production and a population of about 4.5 million people.

Another supporter is Nigeria. This West African country produces about 2 million barrels a day and has a population of about 125 million. It suffers from an underdeveloped economy, very serious social and health problems, and ethnic tensions.

Nonetheless, Nigeria is a country with great potential and a strong desire for a brighter future. So we were extremely pleased when President (Olusegun) Obasanjo joined the transparency initiative. He also recently created a National Stakeholders Working Group to implement it. There is no doubt in my mind that having a long-term partnership with ChevronTexaco has helped Nigeria choose this positive evolutionary path. Indeed, the president asked ChevronTexaco last year to work with him on the initiative. We agreed without hesitation, and in January, our CEO Dave O'Reilly reaffirmed that pledge. Clearly, Nigeria's president believes that engagement with the outside world is the right path. This has always been the view of ChevronTexaco. And I feel confident that President Obasanjo's example will encourage other countries to follow suit.

I know that some organizations aren't willing to accept a voluntary approach to transparency. They should recognize that a heavy-handed approach most likely would only alienate these countries. And that could push these countries toward other partners who are not inclined to support transparency.

But I don't want to get into those kinds of scenarios. Despite the drama of the debate, this is not a stalemate. True, change will probably come slower than many of us would like. But it will come because the transparency initiative itself is a reflection of much larger forces at work.

The social inequities caused by corruption and mismanagement of revenue have become major concerns within the energy-producing countries. People can see the countries aren't sharing the wealth from the extractive industries. And people are lashing out. At the same time, more leaders have come to fully appreciate the full cost of corruption. It distorts economies and discourages investment. It fans the flames of public discord, and that sends investors an even stronger message to stay away.

So transparency is today more than a moral and political issue, it is an economic issue as well. And leaders throughout the developing world are taking that into consideration and acting on it as they compete for foreign direct investment.

Transparency is a very tough issue, but we have to work on it, and we have to work on it together. With the transparency initiative to guide us, I believe we can make meaningful progress in the years ahead.

Updated: February 2004