The Rising Influence of Rising Affluence

[DewDiligence]

Chevron CEO Pushes Back

[“Stop work” authority vested in every production employee and contractor is a policy Toyota implemented several decades ago on all of its assembly lines (when Toyota had the best reputation for quality in the auto industry). How well does this practice carry over to the oil & gas business?]

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/06/16/BUBA1DVDIJ.DTL

›by Andrew S. Ross
June 16, 2010

San Ramon's Chevron Corp. is the largest leaseholder in the Gulf of Mexico. Of its 669 leases, 423 are located in deepwater, i.e., depths greater than 1,000 feet. Its total daily energy production in the gulf and from onshore fields in the region averages 243,000 barrels per day [almost 10% of CVX’s worldwide production].

If, as congressional inquisitors suggested at Tuesday's hearings in Washington, Chevron is just another "bad apple" in the rotten oil company barrel alongside BP - and its "cookie-cutter" oil-spill-response plan is as "worthless" as BP's - then we've got even more to worry about.

It was Chevron CEO John Watson's job to put those ideas to rest, primarily by distancing Chevron from BP.

The spill was "preventable," Watson said in prepared testimony, echoing what he and other Chevron executives have previously said. "The expectation we share with the American people (that) the energy that we need will be produced safely and reliably ... did not happen here."

By way of contrast, he said, Chevron's own internal review, conducted in the aftermath of the spill, "confirmed what our regular audits have told us. Chevron's drilling and control practices for deepwater wells are safe and environmentally sound."

Digging the knife deeper, Watson said Chevron immediately "reinforced our own safety practices, which include what we call 'stop work' authority—the responsibility of any employee or contractor to stop work immediately if they see anything unsafe. All our people clearly understand they have that authority." As opposed to BP, which ignored employee warnings that some things didn't look right.

Yes, keep drilling: As for lawmakers' disbelief that his company has a better handle on such matters, Watson pointed out that "Chevron has successfully drilled 375 deepwater wells around the world." Whether Chevron, which claims to have a "robust" containment plan could handle a spill of BP proportions any better is an open question.

Still, Chevron, like other energy companies and various interests in the gulf, wants the six-month moratorium, imposed by the Obama administration last month on all drilling below 500 feet, lifted ASAP. Watson's reasoning: "For the last two years—and for the first time since 1970—U.S. crude output has increased for one reason: deepwater development in the Gulf of Mexico."

The gulf, he said, also accounts for 15 percent of the nation's natural gas, and 27 percent of its domestic oil supply, he noted. In addition to the loss of production, and concomitant royalties and taxes, tens of thousands of jobs in the gulf region are at stake.

"Any extension of the moratorium will only exacerbate the economic consequences," Watson said. Whatever its merits, the argument is gaining force and a shortening of the moratorium would not be surprising [I hadn’t heard that].

It's not just about oil: "We need ... a sharpened focus on alternatives and renewables, even as we continue to develop our domestic oil and gas resources." Especially natural gas, said Watson. Plus, "a 20 percent improvement in U.S. energy efficiency could result in saving the equivalent of 10 million barrels of oil and reducing 1.5 billion metric tons of CO{-2} emissions per year." Chevron has reduced its own energy use by 30 percent since 1992, Watson said.

Whether, as congressional critics said, oil company CEOs like Watson are chiefly engaged in PR, Chevron's chief executive set a high bar by which he and his company are to be judged. (Full text of the testimony at links.sfgate.com/ZJVT)

"We all know," he concluded, "that actions speak louder than words. Chevron's top priority over the coming days, weeks and months will be to demonstrate to you, your colleagues and the American public that we understand that we operate by public permission."‹