Three Pillars of Partnership

Ian MacDonald

By Ian MacDonald, Vice President
Chevron Europe, Eurasia and Middle East Exploration & Production Limited

Remarks at the Kurdistan-Iraq Oil & Gas Conference

Erbil, Kurdistan Region of Iraq, December 3, 2012

On behalf of Chevron, it's a delight and privilege to be here and to join you for this 2nd Annual Kurdistan-Iraq Oil & Gas Conference.

Chevron is excited about the future of oil and gas development in Iraqi Kurdistan, not only for ourselves – and the new venture we're pursuing – but also for the Kurdistan Region of Iraq, and our international energy industry. I'm especially happy to see so many representatives of our industry here this morning.

I believe all of us stand on the threshold of a great adventure.

Our general manager for Kurdistan Donnie MacDonald and his team are in place in Erbil developing detailed drilling plans for our very promising Rovi and Sarta blocks. Donnie has lived and worked in the region since 2006.

Since this is the first time a Chevron representative has addressed this gathering, I've been asking myself, how should I introduce my company? What would I describe as Chevron's defining characteristic?

We are one of the oldest of the international oil companies. We trace our history back to the 1870s. A hundred years ago, our kerosene signs and posters hung above the streets of Shanghai.

Several firms, however, some of them represented in this room, have similarly long pedigrees.

I could talk about our scope and project queue. Today, Chevron produces oil and gas in 40 countries across six continents. Over the next three years, we will be developing more than two dozen major upstream projects. In 11 of those, our share is $1 billion or greater.

Or, I could wax poetically about our sheer breadth – from exploration and production to refining and marketing, from petrochemicals to power generation, from energy conservation to direct investments in renewables. I think it's an impressive list, but then, I'm biased. I recognize that our competitors also have impressive lists, and, like us, they're building capital projects around the world.

Finally, I decided that, if I had to pick one attribute – just one single characteristic – that sets Chevron apart, it would be our attitude toward partnership. From the very beginning, we recognized we could never achieve our objectives alone. So our strategy has been to reach out, to focus on seeking people who could help us pursue common business goals.

It was in the Middle East that Chevron – and the Kingdom of Saudi Arabia – sketched the earliest outlines of an international oil industry. Thus began what still remains the region's longest continuing private partnership.

This leads me to what I believe is the first pillar of any successful partnership – persistence.

No one ever said that finding and developing oil and gas resources would be easy. Indeed, the first two years of our venture in Saudi Arabia were marked by unbroken disappointment: stuck drill pipe, snapped rotary chains, lost bits, cave-ins, everything.

But our partnership persisted. And after four years of dry holes and no-shows, our explorers spudded Dammam No. 7. All of us here know the rest. Dammam No. 7, and the discoveries that followed, became the greatest additions to energy supplies the world has ever known.

But, I am convinced none of those discoveries would have happened had it not been for that first pillar of partnership – persistence.

We also could not have achieved that success, which eventually would encompass more than 50 oil fields in the Middle East, without the second pillar of successful partnership – that's collaboration.

By collaboration, I mean companies, governments and communities working together. Not just to develop petroleum resources, but also to develop human resources to help people progress in their lives and families.

By their nature, energy partnerships open wide windows of sharing. That's especially true of technical skills and knowledge. Partnerships break down barriers that can isolate people and nations from a world of ideas.

I was deeply involved in one of the largest collaborations ever undertaken by Chevron: the Caspian Pipeline. Until it was built, we hauled oil from the giant Tengiz Field to the Black Sea using thousands of rail cars.

The pipeline eventually stretched 1,500 kilometers [932 miles] across two nations to a new terminal and port on the Black Sea, allowing us to pipe crude directly to tankers and to bring Tengiz production to full capacity.

But it took collaboration – by three governments and ten companies from six countries to succeed.

In 2010, we achieved another milestone when the same partners agreed to more than double the capacity of the pipeline to 1.5 million barrels of oil per day. This act of collaboration overcame one of the most challenging tasks in our industry, putting in place the agreements necessary to construct a cross-border pipeline. And, in Kazakhstan and elsewhere, we fully appreciate how important such a development is for a land-locked region.

I'm convinced that by collaborating, Chevron – and the other firms at this conference – can help Iraqi Kurdistan get where it wants to go as a modern, prosperous, open society respected beyond its borders.

For Chevron, collaboration and partnership mean investing in the people where we operate. Through the years, our company helped sponsor numerous community engagement initiatives throughout this region.

In Iraq, since launching the Iraqi Technical Assistance Program, we've helped train hundreds of oil ministry professionals. Working with the Natonal Iraqi Assistance Center, Chevron supported bringing injured Iraqi children to the United States for treatment.

Embracing the spirit of collaboration, however, doesn't mean that a company can ignore the reality of sound business practices. No partnership is perfect.

There's an old saying that if two partners always agree, one of them is unnecessary. A squabble along the way may even be a sign that we're heading in the right direction. The key is collaboration – continuing to work together to find a solution, one that steadily moves the partnership toward the common good.

The last and most critical pillar of partnership is integrity.

In the words of a recent Chevron chairman, "How we do business is as important as the business we do." It's a philosophy our company can trace to its earliest roots. In 1915, a panel at the Panama-Pacific International Exposition awarded Chevron its Medal of Honor for "business morals and practices."

In a 1927 speech, one of our early directors linked ethical standards with financial performance. Citing integrity, loyalty and lawful conduct, he asked, "Is there any one of them that can be ignored without hazarding continuing business success?"

In 1962, Chevron published What We Believe which instructed us to practice positive conservation measures and sound community development. Rare for the time, it included a special subsection titled, "Human Rights." In 1977, Chevron became a charter signatory to the Sullivan Principles opposing South African apartheid.

Today, our business activities and decisions are guided by a small but important document called, simply, The Chevron Way.

Published in 16 languages, including Kurdish, The Chevron Way expands upon and refines our values and our commitment to deliver energy safely, reliably and cleanly. It commands us to operate at the highest standards of excellence, and identifies the protection of people and the environment as our highest priority.

All this may be well and good, you say, but what's in it for a long-term Chevron partner? Well, let's look again at our oldest partnership in the Middle East.

Three years ago we renewed our agreement in the Partitioned Zone. The pact there was extended until 2039, a date that will bring us to nearly a century of operations with Saudi Arabia. During that time, our partnership has delivered more than 3.6 billion barrels of energy to world markets.

Elsewhere in Central Asia, in 1993 Chevron was proud to become a founding member and 50 percent partner in the giant Tengizchevroil project in a newly independent Kazakhstan. This super-giant, high-pressure sour carbonate field has set numerous industry firsts from its record-breaking state of the art gas processing facilities through to the development and execution of the high-pressure sour gas re-injection facilities.

Today, Tengiz produces 550,000 barrels of oil per day, has created thousands of jobs and generated billions of dollars in direct and indirect investments. It has transferred new technologies, served as a resource for scientific and technical training, and built an 86 percent top-to-bottom Kazakhstani workforce.

Each of these accomplishments is a direct outcome of partnership.

I'm convinced we can write the same story in the Kurdistan Region of Iraq. With its bustling streets and sprouting high-rise towers, Erbil, like much of the rest of Iraqi Kurdistan, is unrecognizable from even a few years ago. Reflecting the wishes of the Kurdish people, the government has created attractive conditions for foreign investment.

Until recently, the potential of Kurdish oil and gas seemed like a distant dream. But in the space of a few years, a score of discoveries have silenced the skeptics. It is almost as if the region, stretching and growing, has wakened from a sleep. Like a spring uncoiling, Iraqi Kurdistan is releasing its own pent-up energy.

I'm told of an old Kurdish proverb that goes, "The Kurds have no friends but the mountains."

Speaking for Chevron and our business colleagues here today, I hope and believe we can build on the very evident desire of Kurds to engage with the outside world.

The long years of isolation have hurt this region. We are proud to be part of this new chapter – this time of partnership as we together build a very promising oil and gas industry.

Mr. Prime Minister, over the last few months, we have together taken the first steps in what I hope will be a partnership that lasts for decades.

Thank you.

Updated: December 2012