CHEVRON AND PETROBRÁS ASSURE THAT COOPERATION AND INVESTMENT ARE KEY FOR THE FUTURE OF THE OIL MARKET.

July 3rd 2008

• John Watson, from Chevron, calls for the construction of
“strong alliances to meet energy demand”
• Sergio Gabrielli pointed out that investment can impulse oil
global production in the long-term

The sixth plenary session, held during the fourth and final day of the 19th edition of the World Petroleum Congress, focused on the need of accessing oil reserves and investing in infrastructure in order to meet the increasing oil demand. The speakers of this session were the President of Petrobrás, Sergio Gabrielli, the Executive Vice-President Strategy and Development of Chevron International E&P, John Watson, and Shri M. S. Srinivasan, Secretary of the Ministry of Petroleum and Natural Gas of India, acting as moderator, who all provided a global overview about the importance of cooperation and investment policies, giving as an example the experiences of their own companies.

Facing a new global energetic panorama

Srinivasan explained that the world has consumed over the last century one billion oil barrels, and currently people consume 85 million barrels a day. In order to meet the demand predicted for 2020, a production of 100 million barrels a day is necessary. Moreover, he explained that two other factors have made difficult a more efficient access to resources: the geopolitical situation, and a “disconnection between the available resources and the technologies” due to a lack of cooperation between multinational oil corporations and national ones. The latter represented, according to Srinivasan, 20% of oil resources in the 1980´s, having reached today a figure of 80%.

Cooperation as a “value add” investment

In order to face market challenges, it is necessary to provide acquired knowledge to countries that need it. This is, according to Watson, what Chevron has demonstrated through partnership programmes between companies and local communities. “The current energy system must be strengthened in order to meet the demands, that is the reason why we invest in such programmes.” Watson explained that Chevron, uses five factors to determine the success of each partnership project: technology, task force, local supply chain through the building of platforms, community development on educational and health aspects and a stable tax regime which boosts even more “investment projects throughout the economic and social spectrum.”

Investment, not speculation, is the real challenge

On the other hand, the President of Petrobrás emphasised the different types of problems that the oil market is confronted with, and to which decisions must be taken in the medium and long term. “It is true that speculation determines a great part of the oil price” affirmed Gabrielli, “but this is only a short term trend. However, in the long term, what determines the oil price will be the impact of investments on infrastructures that are carried out today. The real challenge is, on the one hand, that there are fewer oil discoveries, so oil price very much depends on the performance of existing reserves. ON the other hand, given the case of a new discovery, the infrastructure costs will be higher, due to the increase of global inflation of prices.”

Finally, both speakers agreed on the need of development, in a responsible manner, of alternative energy sources in order to respond to the high energy demand.