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Originally published January 6, 2013 at 8:00 PM | Page modified January 7, 2013 at 6:37 AM

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Chevron's investment to deliver energy underestimated, CEO says | In Person

John Watson is a 55-year-old California native who is leading Chevron in an enormous cycle of investment aimed at extracting oil and gas from wherever it hides in the earth’s crust.

The Associated Press


Chairman and CEO, Chevron

Joined company: 1980

Rise at Chevron: Named vice president for strategic planning in 1998. Chief financial officer from 2001 until 2005. President of Chevron International Exploration and Production until 2007; executive VP of strategy and development, 2008-09; vice chairman 2009-10; named chairman and CEO Jan. 1, 2010.

Other roles: Chairman, American Petroleum Institute; member, American Society of Corporate Executives and Business Roundtable; University of California at Davis Chancellor’s Board of Advisors.


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NEW YORK — Chevron CEO John Watson notices something important as he visits his company’s operations around the globe: Governments everywhere find high energy prices much scarier than the threat of global warming.

And that means the world will need a lot more oil and gas in the years to come.

To meet that demand, Chevron is in the midst of an enormous cycle of investment aimed at extracting oil and gas from wherever it hides in the earth’s crust.

Chevron, based in San Ramon, Calif., is the second largest investor-owned oil and gas company in the world, and the third largest American company of any type as measured by revenue and profit. The last year, Chevron has earned $24 billion on revenue of $231 billion.

Every day, the company produces the equivalent of 2.7 million barrels of oil and gas, mostly outside the U.S.

This year Chevron will invest $33 billion — more than it ever has — to drill wells, erect platforms, build refineries and scan for undiscovered deposits of oil and gas. Among its biggest projects: A natural-gas operation in Australia that will ultimately cost Chevron and its partners $65 billion to build. Also planned are three deep-water drilling and production projects in the Gulf of Mexico that will cost $16 billion.

Watson, a 55-year-old California native and Chevron lifer, joined the company in 1980 as a financial analyst. Before becoming CEO in 2010 he was vice chairman in charge of strategic planning, business development and mergers and acquisitions. He also ran the company’s international exploration and production business, led the company’s integration with Texaco and was CFO.

Watson has helped shape Chevron into the best-performing major oil company in the world by several financial benchmarks, including the profit it makes for each barrel of oil it sells.

In an interview, Watson discussed world energy dynamics, U.S. energy policy, hydraulic fracturing and working abroad. Below are excerpts, edited for length and clarity.

Q: What do you think is the biggest misunderstanding about your company or your industry?

A: Just how much we invest in the business and the risks that we take to deliver the oil and gas that we all expect every day. We literally go to the ends of the earth to bring this energy to consumers.

Q: Can the industry continue to produce oil and gas at a price that can keep the world economy growing?

A: I think so. We want to produce at a price our customers can afford, and I think there’s ample resource to do that for the foreseeable future.

Q: Energy companies complain that the U.S. is over-regulated, but at the same time they are expanding here and cite its many advantages. Which is it? Is the U.S. a terrible place to do business, or is it terrific?

A: On balance it’s a good place to do business. We always have to be aware of what other governments are doing, and we have to be sure that we stay competitive. When I met with the president with some of my colleagues a couple weeks ago, that was the first thing that people talked about. It wasn’t about taxes per se, it was about staying competitive.

Q: People on all sides of the energy debate have long complained about the lack of a comprehensive energy policy in the U.S. What would it look like to you?

A: Historically the United States has had a wonderful energy policy. We’re blessed with a diversity of resources. We have oil. We have gas. We have coal. We have nuclear. And renewables. And as a result, one of our biggest competitive advantages has been affordable energy. You need a strong economy and you need affordable energy to fuel that economy.

Q: Do fossil-fuel producers bear the responsibility for curbing greenhouse gas emissions?

A: We have the responsibility to deliver our energy in an environmentally sound fashion. The greatest advancements in living standards in recorded history have taken place in the modern hydrocarbon era.

I don’t think that’s coincidental. Our leaders have to make a decision. Do they want that to continue or do they have a better solution for us? So it’s not my call.

Q: When it’s time to address the carbon issue, how should we do it?

A: It’s very difficult for the United States to go it alone. Watch what (other) governments do. Governments around the world are making the choice that the benefits of lifting people out of squalor are very important. And affordable energy is the way to get there. And that currently comes through oil, gas and coal.

Q: Will fracking be curtailed in this country?

A: I see very little obstacle to it, notwithstanding all the rhetoric. Now it’s being done in some different areas. People aren’t used to it, and there have been legitimate concerns expressed, like truck traffic at a simple level, but also concerns about water supplies. They’re understandable anxieties. And so we have to work through those with the governments. I think in due course we’ll do that because they’ll see the advantages to it.

Q: Will natural gas become a bigger part of the energy mix?

A: Natural gas will displace coal in power generation. Getting natural gas into the transportation fleet is harder. It works best for vehicles that work from centralized fueling facilities like trucking fleets or buses and cabs. That is happening. Before it can make big inroads beyond that, infrastructure is going to need to be developed. It will take some time.

Q: A recent factory fire in Bangladesh killed more a hundred people. What is the responsibility of a company like yours when you go into a developing area?

A: We have global standards for how we operate. We use local labor in almost all cases and we spend an enormous amount of time training people.

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