The World Trade Club International Achievement Award Dinner
Kenneth T. Derr, Chairman of the Board and Chief Executive Officer
International Achievement Award Dinner
San Francisco, California
Also see a press release regarding this speech.
I want to thank all of you for coming this evening. Your kind words and your tribute mean a lot to me and my family. I must tell you that I am truly honored to receive this award. And I'm proud to see that, once again, Chevron has been recognized for its growing role in the global economy.
Chevron's come a long way from its humble beginnings 120 years ago in Pico Canyon north of Los Angeles. I doubt Frederick Taylor, who started the Pacific Coast Oil Company there in 1879, would recognize his little enterprise today.
I'm sure he couldn't imagine drilling in waters a mile deep, or producing oil and gas from platforms built to withstand hurricanes and collisions with icebergs.
Even John D. Rockefeller who bought out Pacific Coast Oil at the turn of the century would be impressed with what's happened to his little California oil company.
Today, Chevron ranks in the top 20 companies in America. But we didn't get where we are today overnight. Even after the courts carved up Rockefeller's Standard Oil Company in 1911, Standard of California remained a small West Coast oil company for many years.
Socal, as it came to be known, didn't begin to look for oil outside the U.S until after the First World War. And we didn't find anything worthwhile until 1931, when we discovered oil in Bahrain, a small island in the Arabian Gulf.
Seven years after that in March of 1938, we made the first significant oil discovery in Saudi Arabia, opening the door to the world's greatest oil deposits.
Socal -- and its partners -- went on to discover other large quantities of oil in Indonesia in the early 1940s.
Then World War II effectively shut down our international search for oil.
When the war was over, and the U.S. economy improved, Socal was able to pump more money into its activities here at home. But we also continued to expand our international operations throughout the 1950s and 60s in places like Indonesia, Venezuela, Canada and elsewhere.
Then the 1970s came along. We were forced, once again, to pull back and concentrate on our U.S. operations.
But . . . it wasn't by choice.
This time foreign governments were buying out some of our most important international operations. Like Saudi Arabia and Venezuela.
It wasn't until we merged with Gulf in 1984, and changed our name to Chevron, did we begin a major shift of focus back to international opportunities.
By the early 1990s, we were spending more money on international projects than we were on projects at home. High costs, growing restrictions on U.S. operations, and better opportunities overseas drove us to focus our efforts outside the U.S.
Today, we invest two dollars overseas for every one we invest here at home. Our international operations have truly become our growth engine.
That fact was really driven home in 1993, when I sat down with President Nazarbeyev of Kazakhstan to sign the historic Tengiz deal. It was the first large joint venture project between a western oil company and a former Soviet republic. That single project will ultimately increase our oil reserves by more than 3 billion barrels.
Today, we're producing about 200,000 barrels a day at Tengiz. By far the most successful . . . and the largest . . . oil industry partnership in the former Soviet Union.
But there are other examples of our international growth too.
In 1996, we returned to Venezuela after 20 years and signed one of the first joint ventures after they re-opened their oil business to foreign investors.
With our partner Texaco, we're still the largest producer of oil in Indonesia.
Our African production is growing steadily. We expect to increase our oil production in both Nigeria and Angola by 50 percent over the next several years.
We've also made some giant discoveries recently in deep water off the coast of Angola. These new fields could hold well in excess of a billion barrels of oil.
We're also expanding our chemicals business in several international locations including China, Singapore and Saudi Arabia.
I could go on and on, but I just wanted to show you that we're involved in a lot of things and we're pushing ahead with our plans to grow our business.
When I was preparing my remarks for this evening, I took a moment to look at the list of esteemed individuals who've received this award before me.
Two of the prior recipients stood out because of their involvement with Chevron. The honorable George Shultz, who served for four years on Chevron's Board, and George Keller, my predecessor in the CEO's chair.
I thought it might be interesting to see what Mr. Shultz and Mr. Keller have said on the subject of trade. Quite a lot as it turns out. Especially our esteemed former Secretary of State.
Mr. Shultz has just re-published his Economic Policy Beyond the Headlines, which first came out in 1977. Scanning through it I was amazed at how little our government's trade policies have changed over the years, despite the great changes that have happened in the world.
For instance . . .
The controversy over which nations would be granted "Most Favored Nation" status was very much alive back in the late 70s, as it is today. Except back then it was the Soviet Union . . . just recently it was China.
Same story, only the cast of characters has changed.
I also discovered that Mr. Shultz had given a speech to the Business Council twenty years ago about the regrettable use of foreign trade as a tactical instrument of foreign policy. Sounds familiar, doesn't it?
George Keller also tackled the subject of free trade when the World Trade Club gave him this award eleven years ago. I read over the speech George gave back then and, once again, I was amazed at how little things have changed.
For instance . . .
George emphasized the need to find as much new oil as possible within the U.S. and elsewhere to reduce our dependence on imported oil. That still rings true today.
George also noted that our appalling trade imbalance at that time was due to two things -- lack of competitiveness among U.S. businesses and restrictive government policies.
Well, we've pretty much taken care of the first problem.
American companies are now some of the most competitive in the world. Where once they were over-staffed and inward-looking . . . today they're in fighting trim and focused on the global marketplace.
It wasn't that long ago that everyone looked to Japan as the model. Now, everyone's looking at us. That's because years of painful re-structuring and cost-cutting have prepared American companies to compete with anyone, anywhere.
Unfortunately, restrictive government policies are still with us.
America's trade policies haven't kept up with America's companies. Our government's unfortunate tendency to impose unilateral and secondary trade sanctions is putting American business at a severe disadvantage.
There's a price to pay for taking a moral stance on commercial transactions.
The price is lost opportunity and lost jobs for American citizens. Besides, unilateral and secondary sanctions seldom work and they often do more harm than good.
You would think that we'd reserve these sanctions for only the worse cases. But you'd be wrong. We even use it on our long-time friends, like Canada.
In just the last four years alone, the United States government has authorized 61 unilateral sanction measures covering 35 countries and 42 percent of the world's population.
It's a shame to see the world's greatest companies barred from participating by their own government before they've had a chance to compete. That's why I find our government's anti-trade actions puzzling, especially since they've done a great deal in some areas to promote U.S. trade.
Anyone who knows me knows I'm a free-trader. And I'm not terribly fond of regulations. Especially those that prevent our company from doing what it's designed to do. That is . . . to be a superior partner . . . with governments . . . with other companies . . . with the public . . . in developing oil and gas resources worldwide. And to deliver a competitive return on investment -- to the owners of our company -- our stockholders.
Unfortunately, these basic concepts are sometimes overlooked. Instead, private business in the U.S. is looked upon by some as just another arm of government. An arm to be used to bend others to narrow and myopic points of view.
I agree with what George Shultz said twenty years ago: "People who want to trade something should be able to develop their market and go ahead. They should not have to ask anyone's permission."
In spite of some of our government's dubious trade policies, Chevron's been busy. We're continuing to grow worldwide in spite of the current low oil prices.
Today, when someone drives into a Chevron station to fill up I doubt it occurs to them what a good deal that tank of gasoline really is. After all, we look for oil in every corner of the world . . . then we ship it . . . refine it . . . and sell it at your local station . . . for less than it costs for a bottle of water from Calistoga.
If that isn't a good deal . . . I don't know what is.
And most people seem to forget how dependent that good deal is on the ability of U.S. companies -- like Chevron -- to partner with nations around the world to find and produce that oil.
In fact, the more sources we have for our oil, the better it is for our customers. And the better it is for our energy security. And, while I recognize and agree, that U.S. business can't operate in a moral vacuum, I believe that engagement between countries works much better than sanctions or any other restrictive trade policies.
I personally have witnessed what engagement has meant to the thousands of citizens of other countries who work in Chevron's operations. Their lives are better for us having been there, there's no doubt in my mind. And I don't mean just paychecks or improved lifestyles.
I'm talking about the intangible . . . hard-to-measure benefits . . . that come from the daily interactions between Chevron people in all the countries where we operate.
These benefits may not be dramatic, or bring instantaneous change, but they have a positive, lasting effect nonetheless.
I could give you numerous examples from our operations in Nigeria . . . or Angola . . . or Indonesia . . . or Papua New Guinea . . . where local communities have benefited from our partnerships.
One key benefit is our safe and clean operations.
U.S. oil companies are often accused of acting one way at home and another way overseas, especially when it comes to the environment.
Nothing could be further from the truth.
As a matter of fact, Chevron's excellent environmental record has actually helped us land several important projects, including those in Kazakhstan and Venezuela.
That's because we follow the same strict guidelines for safety and environmental protection everywhere in the world.
But there are other benefits as well.
This year alone we'll be spending over $12 million on a variety of community projects and programs at our international locations.
Three million of that will go to fund Junior Achievement and other educational programs, TB mobile clinics, holiday food drives, and even Little League Baseball in Kazakhstan.
We'll spend another $3 million in Angola and Congo to build and repair schools, hospital wards and sports facilities, among other things.
But providing the funds is only part of the story.
I've personally witnessed the positive effect that these community projects has on people.
Take Papua New Guinea, for instance. My wife and I visited there in 1993 shortly after our Kutubu project started producing oil. We visited a small community school in the Highlands that Chevron helped build. After the ceremony, the little school children who were dressed in their traditional, brightly-colored costumes, smiled and waved at us as we took off. It's something we will never forget.
Then there was the time, a few years back, when my wife presented a new ambulance to the small village of Karaton near our Tengiz operation in Kazakhstan. The Karaton Hospital, as it turned out, had no vehicle at all for transporting sick or injured patients. So, our rather modest gesture had a profound effect on the citizens there.
It's things like this -- both big and small -- that convince me that our presence in these countries is truly beneficial. Both for us as well as for the citizens of the countries where we operate. Because engagement and trade are two-way streets. And we can only travel those streets if U.S. companies, like Chevron, are allowed to freely engage countries around the globe in unrestricted free trade.
I am truly pleased to receive this International Achievement Award from the World Trade Club.
I want to thank the Club for continuing to promote the exchange of views on international trade and other important business issues.
And speaking of important business issues, just a few days ago I co-signed, along with 100 other CEOs, a letter addressed to the President and all the members of Congress recommending that we take four urgent steps to address the mounting global economic crisis.
- First, we're asking the President and the members of Congress to provide the full $18 billion of U.S. funding for the International Monetary Fund. Although important reforms are needed in the IMF, we shouldn't abandon that institution because its mission is critically important.
- Second, we're asking the Administration to renew the President's fast track trade negotiating authority so that additional free trade treaties can be negotiated. Passage of fast track will show that the United States has not lost its commitment to open markets.
- Third, we are asking that legislation governing and restricting the use of unilateral trade sanctions be passed.
- And fourth, we're strongly encouraging the Federal Reserve to lower U.S. interest rates.
By themselves, of course, these four actions won't bring the world back to complete economic health, but they will certainly get us started down the right road to global economic recovery.
Thank you again for the award and thank you all again for coming tonight.
Updated: September 1998