speech

Three Principles for Partnership

James Blackwell

By James Blackwell, President, Chevron Asia Pacific Exploration and Production
Chevron Corporation

Gastech

Bangkok, Thailand, March 10, 2008

Good morning. It's good to be here in the beautiful country of Thailand and this dynamic region of the world. Chevron is proud to be a sponsor of Gastech 2008.

Our sponsorship reaffirms our conviction that natural gas is essential to a world that needs all the energy it can get for economic growth and human progress.

Chevron's history in the Asia Pacific region goes back almost 100 years. Our Caltex colors have flown across Asia for much of that time, and we have had a long partnership with the people of Thailand.

Many years ago, our products were delivered by elephants deep into the Thai jungle. Our floating service stations, pushed by boatmen with bamboo poles, made deliveries along Bangkok's famous canals.

Today, Chevron is Thailand's top producer of natural gas. There are more than 2,000 Chevron employees in Thailand and 90 percent of them are Thai citizens. More and more, Chevron is deploying talent from our Thai workforce throughout our operations around the world.

At the same time, Chevron's commitment to our Asia Pacific businesses continues to grow and a significant part of that growth story begins today.

This morning, we announced a greenfield LNG project for our Wheatstone field in Australia. The Wheatstone facility will be located on the northwest coast of mainland Australia and will include a domestic gas component to help meet the energy needs of Western Australia.

Wheatstone is a 100 percent Chevron-owned field and a tremendous growth opportunity for us. It provides another platform to commercialize the large gas resources that Chevron has discovered in Western Australia.

Australia is also the setting for the Gorgon LNG project, one of the most important gas projects in our industry today. I'll return to Gorgon in a few minutes, because the success of Gorgon depends on an effective partnership, which is what I'm going to focus my comments on today.

I'm going to talk about partnerships as they relate to the challenges and opportunities of developing the world's natural gas resources. First, I'll describe to you why I believe partnerships have never been more important – to our business, of course, but most importantly to the millions of people around the world who depend on the natural gas we find, produce and deliver.

Then, I'll discuss three principles that are necessary for effective partnerships.

Let me begin by providing some context. For over a century, innovation, collaboration and especially partnerships have been the backbone of a global energy infrastructure that interconnects and powers the world.

Today, we confront growing complexities, such as delivering the energy needed to drive economic growth while at the same time addressing climate change.

Countries at all stages of development face choices about how energy is produced and consumed.

Meeting global demand for energy is one of the most profound challenges of our time. We have a responsibility to address this challenge with a real sense of urgency.

The World Bank expects the global economy to double between 2005 and 2030. That economic growth is expected to increase global energy demand by 50 percent. To meet that demand, we're going to need all the energy we can develop, in every viable form.

During that period, from 2005 to 2030, oil will remain our primary energy source for transportation fuels. However, natural gas supply and demand will grow at a faster pace than oil.

Additionally, the Asia Pacific region is projected to become the largest consumer of oil and gas. This means that both natural gas and the Asia Pacific region are moving to the center of the world energy stage.

If the 20th century was the Age of Oil, then the 21st century is poised to become the Age of Natural Gas. The LNG, GTL and long-distance pipeline projects that are under way will help diversify the world's energy portfolio – an important step toward energy security that all nations seek.

The LNG supply coming online from Qatar, for example, is a dramatic example of this new Age of Natural Gas.

Globally, the use of natural gas in the power, industrial, commercial, residential and transportation sectors will deliver big benefits to our host countries, to consumers and to the environment.

So how do we make that happen? How do we turn promise into performance?

The answer has many complex and far-reaching elements. But the catalyst to successfully developing the world's natural gas resources is stronger, more aligned partnerships.

Let me explain.

We know that large reserves of natural gas around the world await development. We know that there's growing demand for this abundant and clean-burning fuel. And we know that we have the expertise and the technology to connect reserves with markets safer, more economically and with less environmental impact than ever before.

But just knowing all of this is no guarantee of success. To bring projects online more efficiently and faster, we're going to need stronger, more aligned partnerships.

This is an absolute imperative.

Today's gas projects are becoming bigger and more complex. They involve intricate commercial arrangements that use multiple interfaces covering different markets.

They involve multiple partners and stakeholders. They require billions in investment at a time of rising costs, and the twists and turns of the global LNG marketplace add yet another layer of complexity.

The hurdles are high, but so is the urgency of getting new supplies to countries that need natural gas to help sustain economic growth and rising living standards.

So how can we strengthen partnerships in ways that bring projects online more efficiently and faster? I believe partnerships today must be built upon a foundation of three strategic principles. These principles are:

  • Shared respect;
  • Shared capabilities;
  • Shared rewards.

Let's take a look at each one, starting with shared respect.

All partnerships require alignment around common goals. That is why the first and most important principle of partnership must be to respect, appreciate and understand differences.

A good example of shared respect is Sonangol's Angola LNG project, where partnership has been raised to a new level in the Angolan oil industry. The project has multiple joint ventures supplying gas associated with oil production to a liquefaction facility with five partners, including Chevron.

Aligning stakeholders has not been easy. But we've respected differences by focusing on common goals, identifying issues and maintaining a commitment to finding solutions that we can all embrace. As a result, we have forged strong alignment of partner strategies, and now Angola LNG is under construction.

The second principle is shared capabilities.

Recently, Chevron signed a 30-year production-sharing contract with Petrochina for the joint development of the Chuandongbei natural gas fields in central China.

In addition to resources, Petrochina brings to the partnership extensive knowledge about the area, having discovered the fields and started development.

Current plans call for the construction of two sour gas plants at Chuandongbei. Here, Chevron provides expertise we've developed with sour gas projects elsewhere in the world, including Tengiz in Kazakhstan and Carter Creek in the United States.

These kinds of shared capabilities will become increasingly important to the success of partnerships, especially IOC and NOC partnerships.

The third principle of effective partnerships is sharing rewards.

Let me demonstrate this principle with an announcement. It's my pleasure to inform you that Chevron and its partners have reached a final investment decision for the $3.1 billion Platong Gas II project, which is expected to increase processing capacity in the Gulf of Thailand by 420 million cubic feet per day.

This project alone has the potential to satisfy 14 percent of the natural gas used for power generation in the Kingdom.

Platong Gas II is a milestone that builds on the 45-year relationship between Chevron and the Kingdom of Thailand.

In addition, we recently signed a gas sales agreement with Thailand's own PTT, which paves the way for Chevron and our partners to boost production by 68 percent in the Gulf of Thailand.

This is a perfect example of how a well-structured agreement allows all parties to share rewards.

We are extremely proud to have been a long-term partner with Thailand, and we look forward to working together to deliver clean, competitive energy supplies to fuel the Kingdom's growing economy as well as the economies of the greater Asia Pacific Region.

Which brings me back to Gorgon.

Ladies and gentlemen - our world needs the Gorgon project.

Gorgon is no longer a project whose time will come. Gorgon is a project whose time is now.

The Greater Gorgon Area resource of more than 40 trillion cubic feet of gas is located with prime access to the entire Asia Pacific region where strong economic growth is driving demand for natural gas higher and higher. Gorgon has the potential to supply natural gas to Asia Pacific consumers for the next 40 years. That is a lot of energy for a very long time.

The benefits to Australia alone are immense and will include thousands of new jobs; additional export income; additional taxes and royalties; expansion of existing services and industries; and attraction of new ones.

The project will also provide domestic gas supply to Western Australia.

With climate change moving to the forefront of the global agenda, Gorgon will also include one of the world's largest, most advanced carbon sequestration projects. Some 3.7 million tonnes per year of carbon emissions will be sequestered that would otherwise be released into the atmosphere. That's a reduction of 40 percent from business-as-usual emissions.

As the operator, Chevron is working with focused determination to keep Gorgon moving forward to construction with the support of our very capable partners ExxonMobil, Shell, as well as the Western Australia and Australian governments.

Momentum is building for this important project. Gorgon received state and federal environmental approvals last year, capping four years of collaboration with many local and global scientific experts, conservation groups, and government agencies.

In December, the project endorsed a change in scope from two to three trains for a total of 15 million tonnes per year.

In a world where energy supply is racing to keep up with demand, the stakes are simply too high for a project like Gorgon not to move forward.

Shared respect, shared capabilities and shared rewards. Going forward, the partners of choice in our industry will be those who master these three principles of partnership.

The lessons of the past and our recent successes have shown us what is possible with partnership.

What we do today, or what we fail to do, will have consequences five, 10 and 25 years from now.

So we must take action today to move gas projects forward to help ensure economic growth and energy security for the generations that will follow us.

We must take action today to ensure that the billions of dollars of investment going into new gas projects create value at all levels of society.

And we must take action today to build a global gas industry that is guided by partnerships that are built upon the principles of shared respect, shared capabilities and shared rewards.

The challenges are great, but I am confident that our commitment is even greater. Together, we can meet these challenges we face.

Together, we can apply our capabilities and our commitment to build stronger more aligned partnerships.

If we succeed, together, we'll look back on this time as a turning point in the evolution of the global gas business - a time when natural gas assumed a central place in the world's energy portfolio to the great benefit of the environment and humankind.

Thank you.

Updated: March 2008