Chevron's John Watson Should Follow Pronuclear Words with Nuclear Energy Investments
- June 17, 2015
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During an OPEC meeting in Vienna held in early June 2015, John Watson, the CEO of Chevron, the second largest oil and gas company in the United States, made a comment that deserves more attention and follow up from journalists.
The context of the below comment was that Watson was explaining why his company will not be joining six large European oil and gas producers in their call for a global price on carbon dioxide emissions.
Aside: I don’t favor the common communications approach of shortening carbon dioxide to “carbon.” It is not only lazy writing or speaking, but also quite misleading. Carbon (C) is a different chemical than carbon dioxide (CO2). It is not emitted in large quantities to the atmosphere. The language choice often results in serious confusion about the magnitude of the problem since CO2 (44) has a molecular mass that is 3.67 times as large as C (12). End Aside.
“I understand the concerns but I don’t think putting a price on carbon is an answer… I don’t think it is a policy that can be effective,” Watson said.
Instead, Europe should develop its gas resources, he said, alluding to the reluctance of European governments to develop shale gas in a process known as fracking which has radically transformed the U.S. market.
“We need to make sure we develop the natural gas resources that we have, here in Europe – although Europe is choosing not to develop its resources – but also elsewhere in the world.”
Nuclear power, which fell out of favour around the world, particularly in Germany, was also key to reducing carbon emissions, Watson said.
“If we are serious about climate change – nuclear power would be on the agenda. We wouldn’t be shutting down nuclear plants around the world,” he said.
Source: Focus on nuclear and shale, not carbon, Chevron boss tells Europe Reuters June 3, 2015
It is important to understand that Watson is not a random energy industry observer. He is the chief executive of one of the world’s largest energy producers, a $200 billion (2014 revenue) company that has a projected capital expenditure (CAPEX) budget for 2015 of $35 billion.
A significant portion of that money ($23.4 billion) is devoted to upstream (exploration and production) projects outside the United States that are intended to make up for the relentless depletion of existing production resources. As impressive as $35 billion is in real terms, it is a 13% decrease from the $40.4 billion that Chevron allocated in 2014 when world oil and gas prices were higher than they are today.
Virtually none of Chevron’s 2015 CAPEX is allocated for nuclear energy development. If Watson was serious about how the world — and specifically his company — would be more successful addressing climate change using nuclear energy instead of a price on carbon dioxide to, I would expect that Chevron’s 2016 and following CAPEX plans will include growing nuclear energy expenditures.
One truth that supports my continuing contention that oil and gas interests hold a smoking gun that has wounded their nuclear energy competitors is the fact that the world’s energy suppliers have little, if any, investment in expanding commercial energy production from uranium and thorium.
They call themselves “energy companies” and frequently talk about their interest in wind, solar, biofuel, and geothermal production.
Here is how Chevron describes itself in a recent press release.
Chevron is one of the world’s leading integrated energy companies, with subsidiaries that conduct business worldwide. The company is involved in virtually every facet of the energy industry. Chevron explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides energy efficiency solutions; and develops the energy resources of the future, including biofuels.
Occasionally they even support those words with marque actions that involve substantial amounts of money, but it has been many years since the days when Exxon, Gulf, Phillips, Kerr-McGee and Royal Dutch Shell invested in the nuclear fuel cycle.
Their forays into the ultra low emission nuclear energy business were not immediately successful, but a lack of immediate success with horizontal drilling and hydraulic fracturing did not deter George Mitchell or Harold Hamm. It also did not deter the geologists who recognized that the Middle East would be a prodigious oil and gas production center in the 1920s, even though substantial production didn’t begin until just before WWII.
With the appropriate business model, there is a vast quantity of money to be made by supplying abundant, ultra low emission energy by taking advantage of proven technologies that use the incredible physical qualities of actinides like uranium, thorium and plutonium. One possible model be to treat nuclear generating facilities as “energy wells.”
A company that accepted that model should recognize that buying a somewhat distressed property that is a proven producer and has room for innovative expansion would be a good investment. That kind of deal happens frequently in the oil and gas business.
A June 7 article published by SFGate.com titled Why U.S. oil companies clash with EU peers on global warming mentioned Watson’s disagreement with the European position, but it summarized Watson’s statement about nuclear energy somewhat differently.
Chevron Corp. CEO John Watson argued that his European colleagues are pushing a policy that consumers would never embrace. Focus instead on developing nuclear plants and natural gas reserves to fight global warming, he said.
“It’s not a policy that is going to be effective, because customers want affordable energy,” Watson said last week, at an OPEC seminar in Vienna. “They want low energy prices, not high energy prices.”
I’m encouraged by the fact that Watson apparently believes that developing nuclear plants to fight global warming is more likely to be embraced by American consumers than a price on carbon dioxide. It’s also nice to know that Watson believes that such a choice would result in lower, not higher energy prices.
Some of my associates have questioned my recent advocacy of aligning with traditional hydrocarbon producers in order to advance the use of nuclear energy. They have told me that those people and companies are the enemy whose product has to be completely displaced.
I disagree. People who’ve devoted their lives to the energy industry know how important their product is to human prosperity. They also understand its importance in geopolitics and they control the capital budgets that will be required to effectively complete a sustainable energy system transition from fossil fuel dominance to a more balanced foundation of abundance that will enable future prosperity.
Hydrocarbons will inevitably play a significant role, but they should no longer dominate economies or political decision making.
We’ve all heard that the stone age did not end for lack of stones and that the bronze age did not end for lack of bronze. We need to also recall that humans did not stop using stones after the stone age ended, we did not stop using bronze after the bronze age ended, we did not stop listening to the radio after television was invented, and we have not stopped using wired telephones after cell phones became abundant.
It would make the world a cleaner and safer place if we used less coal, oil and gas and were less dependent on continuing to find and exploit new reservoirs. However, there are many locations and applications where it will be nearly impossible to find a more convenient, safer, and useful fuel than an appropriately refined liquid, solid or gaseous hydrocarbon.
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