You are here
Melody Meyer, President, Chevron Asia Pacific exploration and production
Melody Meyer, president of Chevron Asia Pacific exploration and production, discusses the changing landscape of Asia's oil and gas industry
Oil & Gas Technology: How would you assess the market in Asia?
Melody Meyer: Throughout Asian culture the dragon has been revered as a magical and often benevolent creature, while in Western folklore, it is typically seen as something to be fought and defeated.
I think our Asia-Pac energy dragon is a little of both—it has a few heads. It’s challenging side—delivering the substantial energy supply that will drive Asia’s economic growth. On its opportunistic side—fuelling the energy and economic growth in the region signals hope for better lives and prosperity for hundreds of millions of Asians in the region. Growing all types of energy resources and delivering them reliably and affordably is a big challenge.
But I believe we can do it—together.
We all know that the mythical dragon slayers were individuals that finally got it right—the hero, by himself or herself—the silver bullet concept. It makes for a good story but it doesn’t work in today’s complex environment.
To tame our modern-day dragon, we can’t count on just one hero. We need a team of talented partners from the IOCs, the NOCs, research labs, governments and consultants. We need governments committed to creating an optimum investment climate and regulatory environment for the responsible development of natural resources.
The enthusiasm of the IOCs alone won’t be enough. New ideas, technologies and R&D, by themselves, aren’t enough. World-class environmental standards and clean, safe operations—on their own—won’t get us there. Wise government policies and trade relationships aren’t enough. We need all these elements working together to tame the dragon. The good news is: We’re working on it. The bad news is: We are not doing this fast enough.
OGT: How large is this challenge?
MM: The International Energy Agency estimates that Asia’s energy sector will require more than USD700 billion in capital investment through 2035, with most of that needed for gas exploration, production, LNG infrastructure and pipelines. The IEA also says China is entering a golden age of gas, with consumption forecast to double within five years. And even with domestic gas production expected to grow 65 per cent, China will need LNG to meet a lot of its new gas demand.
Looking more broadly, the IEA also believes that overall Asian LNG demand will double in the next ten years. However, when we add up the new LNG capacity we now have under construction, we’re looking at a potential supply shortfall in 2025 of around 100 million tons per year. That’s the equivalent of seven projects the size of our huge Gorgon development in Australia.
In my view, projections like these should fill us all with a sense of urgency.
OGT: What role does gas have to play in this?
MM: Here is a clean and abundant hydrocarbon of truly formidable value. Where would the economies of Bangladesh and Thailand be today without natural gas? And in the aftermath of Fukishima, where would the Japanese economy today be without LNG?
Two years ago I said that energy development partnerships are the key to developing the Asia-Pacific energy future. Today I believe this more than ever. Yes, we have to work on renewables, nuclear and energy efficiency are a big part of the equation. Indeed, we need to grow all forms of energy. But we especially need continuous investment in the core resources of oil and gas to meet both domestic and international trade needs.
For our part, Chevron and its partners are investing USD80 billion to develop the Gorgon and Wheatstone LNG projects in Australia. Together, these two projects will add more than 24 million tons per year of LNG capacity to the region—and most of that is already under contract to Asian customers.
OGT: How does Chevron fit into this scenario?
MM: In Bangladesh, where we are the top domestic gas supplier, our USD500 million expansion will boost gas production to about 1.4 billion cubic feet per day. In Indonesia, we produce about 40 per cent of the country’s oil and we are pursuing government approvals that could enable the country’s first ultra-deepwater gas project. We are aiming to add three trillion cubic feet of reserves—and a billion cubic feet of production per day to Indonesia’s energy mix. Elsewhere, new phases in our established partnerships continue to help fill the energy supply pipelines, sustaining economic growth.
In 2011, we completed a USD3 billion project which boosted Thailand’s gas output by more than 300 million cubic feet per day—a 10 per cent increase in that nation’s gas production.
A big part of our job as an IOC partner is to bring technology and know-how to Asia-Pacific. We have achieved this at the giant Minas Field in Indonesia, where we’re advancing techniques to recover new oil from old fields. At the same time, we continue to explore across the region, from deepwater China to the remote frontiers of Australia. Our ongoing exploration programme in the Carnarvon Basin has yielded more than 20 discoveries and a potential ten trillion cubic feet of new gas over the last several years. Last fall we added new exploratory tracts in the Bight Basin off Australia’s southern coast. And these are just a few examples of how we’re making it happen, project by project, well by well, along with our partners in the Asia-Pacific, many of them in this room today.
OGT: What else needs to be done to ensure security of supply in the region?
MM: We need to do a lot more. For governments, this means a focus on attracting and sustaining investment. We need stable legal frameworks, predictable tax regimes and sanctity of contracts. To compete with other opportunities around the world, timely project approvals and clear regulations are essential.
Our investments have a long cycle time. Stability is often needed for more than 20 years. Sustaining and trusting partnerships are critical. Investors want to make an economic return for shareholders; governments want energy security and to optimise the benefits of their resource development; and customers want reliable and affordable energy. Strong relationships are needed over many decades. We need to balance local content with competitive pricing—and set stable terms for concessions and production sharing contracts.
OGT: What more do IOCs need from local governments?
MM: Speed and a sense of urgency are all the more important for domestic gas development. They provide lower-cost supplies compared to imports and they generate jobs and significant government revenue. We believe that governments should be taking a leading role to promote and enable these home-grown energy opportunities.
Working together to create the necessary investment climate is all the more important because in the energy game, not every prospect works, and regulatory approvals and construction can take longer than they should. But every struggle makes us stronger and smarter. And we need to keep asking, “How can we accelerate our progress?”
OGT: How will this abundance of gas help the local economies?
MM: Perhaps one way is to fully appreciate energy development for its extraordinary contributions as a catalyst for economic activity and growth—and not just in the host countries. I’ve already mentioned the impact of Chevron’s global projects on the busy shipyards and fabrication yards of South Korea. By turning out the giant components for deepwater and LNG projects in Asia, Australia, Africa and beyond, these proud facilities are supporting thousands of jobs in South Korea.
In fact, the closer we look, the more compelling the evidence becomes for promoting new Asia-Pacific energy development.
Last year, Chevron asked IHS to measure the economic value of our long-standing partnership with Thailand—jobs, GDP, pay cheques, government revenue and more. Of course, many of you know that our operations produce some 40 per cent of the country’s natural gas. To help make that happen, in 2013 alone, Chevron Thailand completed around 400 wells. Our super-efficient drilling operations there are almost an industry in themselves. But beyond our direct impact, IHS found that every Chevron Thailand job supports another 29 jobs—that’s more than 200,000 Thai jobs—and by 2016, it will grow to 220,000 jobs.
OGT: Where there any other interesting findings from IHS?
MM: Based on revenue, Chevron Thailand is nearly half as large as the entire tourism industry and a quarter the size of the country’s vehicle manufacturing industry. In 2012, the company paid over USD2.4 billion in royalties and corporate taxes to the Thai Government. And our business activities stimulated an additional USD310 million in government revenues from workers and suppliers.
There are still more reasons to keep core energy development top of mind. Major IOC projects today are conceived, designed and executed with local communities and economies top of mind. The best energy companies bring considerable skills and capabilities in community engagement with built-in benefits to local citizens.
We want to create a world-class model for this essential element of major energy projects and become a catalyst for local community opportunity. We’ll do this by working more closely with Village Development Organisations, local chambers of commerce and others—not just to fund programmes, but to build capacity and elevate business skills in the community.