CEO Speaker Series With Mike Wirth of Chevron

Chevron Chairman and CEO Mike Wirth discusses the current state of energy, including the role of fossil fuels and the energy transition to renewable and low-carbon sources, and how geopolitical crises affect global energy security.

The CEO Speaker Series is a unique forum for leading global CEOs to share their insights on issues at the center of commerce and foreign policy, and to discuss the changing role of business globally.

YERGIN: Well, it looks like lunch has proceeded. Welcome, everybody, to today’s Council on Foreign Relations CEO luncheon meeting and Speaker Series with Mike Wirth, who’s the chairman and CEO of Chevron. I’m Dan Yergin. I’m going to be chairing this session. I’m vice chairman of S&P Global and a member of the Council’s board, and I will be presiding, as I say.

So we’re very glad to have you all here. And there are about two hundred people online who will also be participating in the discussion.

So, Mike, welcome to the Council.

WIRTH: Thanks, Dan.

YERGIN: I thought what we’d do—what we’ll do is we’ll—Mike and I will talk for about a half-hour, and then we’ll open it to questions, both to you and to the people online.

So, Mike, I think the first question we should start with the news and kind of a two-part news question. One is you’re just in the process of doing a large merger with Hess and why. And now there’s a—and Guyana’s part of it, and now there’s a Venezuelan overlay about that. So why the merger? And what’s going on with Hess in Guyana?

WIRTH: Well, first off, on the merger itself, the Hess trucks are safe. (Laughter.) That’s all anybody—that’s all anybody wanted to ask about—(laughter)—in the first week, was, are the Hess trucks going to continue? And I didn’t grow up on the East Coast where the Hess trucks were such a tradition. So they will carry on, I assure you.

So the—you know, the story on the deal is a pretty simple one. You know, ours is a resource-depletion business. We produce about a billion barrels of oil every year. And so unless you’re going into liquidation—which some people would say we should be, but the world’s still using our products—you need to replace that. And so there’s really three ways we replace it. We go out and find for it, so we explore. You can use technology to unlock molecules that you know where they are, you just can’t get them to flow economically; so that’s kind of the story of shale in the Permian Basin, is technology took a resource that we knew where it was and made it producible. Or you can go out and acquire. And we do all three of those things in, you know, different proportions over time. This is a great company with a really strong portfolio of resources that was a good fit with ours, and it’s about long-term value and long-term growth for our company.

YERGIN: And what’s the story with Guyana?

WIRTH: So Guyana is the country in the world which has had the largest new oil discovery over the last, you know, probably two decades, and it is growing very rapidly today. It happens to be adjacent to Venezuela down in South America, and there’s a simmering border dispute that goes back a long time that has been on the front page of the news again here. And essentially, Venezuela is, I think, asserting that the—a border that’s been in place for 125 years is not in the right place and Guyana believes the opposite.

And so these things happen around the world. You know, we’ve got a position in Saudi Arabia on the border between Saudi Arabia and Kuwait that’s been in dispute, similar thing in Southeast Asia between Cambodia and Thailand. Israel and Lebanon we’ve got a gas field which sits just adjacent to a disputed border. Normally these things are resolved through discussions between the parties, and I would certainly hope that in this case that’s the path that we’ll find things on.

YERGIN: I mean, Guyana is very interesting because five years ago it was nowhere and now it’s the fastest-growing offshore oil—

WIRTH: And the reason—there’s a nexus to the Hess transaction—it’s a big part of Hess’ portfolio.

YERGIN: Right, right.

Let’s switch now, then, to—just take a couple minutes to talk about the oil market. There are two wars going on, a lot of geopolitical tension around the world, and the main question about oil prices right now is how low are they going to go. How do you see the market?

WIRTH: It’s been quite an interesting year. You know, prices started out relatively high still in response, at least in part, to the risks associated with the war in Russia and Ukraine. And then we have another war in the world. And demand is at record highs. We’ve never seen oil demand higher than it is this year. And so it’s not really a demand story. The Chinese economy has opened back up, and while maybe not as strong as it was a few years ago is growing. I think what’s really been the surprise has been on the supply side. And so you’ve seen more supply out of a few countries than people might have expected. The U.S. is at the front of that pack, but also Canada, Brazil, and Guyana. And then there was a belief that we would see some supply taken off the market through sanctions. The U.S. and Europe have sanctions in place on Russia, sanctions on Iran, sanctions on Venezuela, all of which have either been maybe more lightly enforced or actually relaxed than I think people might have expected at the beginning of this year. So we’ve seen more supply in the market even at record demand, which is why prices have kind of trended the direction that they have over the course of the year.

YERGIN: So you’re—Chevron’s a big player in the—in the Permian, and you sort of talked about supply increasing. You know, a year ago this time people would have expected the U.S. to grow a little bit, but not a lot. But today, the U.S. is at 13.2 million barrels a day. No country’s ever produced that much oil. And yet, the drilling rigs are going down. How is this happening? What’s going on in the Permian?

WIRTH: Well, what you’re seeing is the continued growth in productivity. I mean, the early days of shale, if you go back a decade or so ago, was what I describe as brute force trial and error. And we would—we knew how to drill wells, and then turn them and drill them a long way horizontally, and then use water and sand to kind of break the rock up; but the spacing, the length of the wells, the amount of water and sand, and the pressure, people would try things and if it worked you’d do more of that, if it didn’t work you’d do less of that. And since then, we’ve actually been applying the science and engineering that organizations—large companies have to understand why things work and to continue to get better and better and better. And so we’re seeing more productivity. Every year we’re seeing more efficiency. And you’re seeing, through a number of acquisitions and consolidations, companies that have the scale to bring these capabilities to bear in a way that just drives further efficiency and industrial kind of progress there.

YERGIN: So would you expect U.S. production to continue to increase?

WIRTH: Yeah, we expect U.S. production to continue to grow, grow again next year. Maybe not quite as much as it’s grown this year, but I don’t think we’re at a point where we’re—we should expect to see the Permian plateau.

YERGIN: Right.

Now, if we turn to natural gas, you know, Europe was in a gas crisis. It turned out the U.S. became a major supplier of gas to Europe. You, through LNG, again, you’re very much in the gas business as well. How do you see this global gas market developing? It, you know, involves geopolitics and involves markets.

WIRTH: Yeah. So gas demand is growing faster than oil demand for sure. It’s displacing coal in power generation in much of the world, and we think it’s going to be a part of the lower-carbon energy story for decades to come. And so gas demand is strong.

European gas supply now no longer comes in on the Nord Steam pipeline from Russia because the pipelines have, you know, suffered this explosion that’s still not entirely understood. And—

YERGIN: Somewhat more understood, but not completely, right.

WIRTH: Not completely understood yet. And Europe has had to—you know, we’ve seen a reduction in industrial demand, which is probably not a good thing in the long term for their economy, but we’ve also seen a diversification of sources. They brought in—you can put on a ship the equipment to regasify LNG, and so they brought in what is called floating regasification units, and importing liquefied natural gas now from the U.S., the Middle East, and other places. So they managed to replace some of their supplies. We had a very mild winter last year in the Northern Hemisphere around the world, not just North America and Europe but also in Asia, and that took some of the pressure off of this market as well.

It’s a market that needs more investment to create more supply. The U.S. is leading the way in that. The Middle East, Qatar in particular, also some big investments underway. And I think you’re going to see gas markets continue to grow and the world’s going to need more liquefied natural gas in the future than exists today.

YERGIN: And the U.S. will continue, of course, to be in a leadership role now.

WIRTH: We have an enormous amount of natural gas in this country, some of it which you can produce just because it’s a gas field but a lot of it comes with oil production. And so as oil production grows, you typically also have natural gas that comes from those wells. And, yeah, the U.S. is the largest oil and gas producer now in the world.

YERGIN: You know, it’s amazing. The U.S. first exported LNG in 2016, I think it was, and the U.S. is now the largest exporter of LNG. How did that happen?

WIRTH: Well, the U.S. is—this is going to—this is not intended to sound like a political statement, but it’s an energy superpower, right? It really does have tremendous natural resources. I travel the world and I get asked by people in other countries, you know, how is it that your—you know, your country has it all and it’s not more supported, maybe, than it is. Because you’ve got oil, you’ve got gas, you’ve got coal, and you’ve got wind, you’ve got solar, you’ve got great universities, you’ve got the rule of law, you’ve got a strong economy; you know, that’s a formidable combination for sure.

And I think the other thing we’re blessed with in this country is we’ve got the most qualified and capable oil and gas industry in the world. And there are some countries that have a national oil company that’s very good. You’ve got some companies in Europe that are very good. But nowhere do you have the amount of talent, capability, financial strength, and technical know-how that the industry has here. And so you match that up with the resource base and an economy that’s market-based, and you can still with a lot of work get permits to do things, and we’ve seen that part of our economy just continue to strengthen.

YERGIN: Do you think it’s taken for granted or not well understood here?

WIRTH: Well, you know what? When I travel the world, many countries have a very clear point of view on energy, either because it’s their primary export—so think of the Middle Eastern countries, you know, OPEC countries—or because they are heavily dependent upon energy imports for their economy. So think Japan, Korea, they don’t have a lot of natural resources, so they have to be really sharp on how they think about energy as a part of their economy. We’re the biggest producer. We’re the biggest consumer. We’ve got this great big capable industry. We can get by being a little less sharp on it because we are so blessed with this endowment and this economic strength that I just think we don’t get the consistency in thinking and in policy that you see in some other countries in the world.

YERGIN: So if you take that, if you were asked to say what should be the principles of U.S. energy policy, what would you be looking for?

WIRTH: Yeah. There’s really three things. The discussion has gotten very polarized, and I think we need a more pragmatic and balanced conversation. Hopefully, it’ll lead to pragmatic and balanced policy.

There are three things that really matter when you talk about energy: affordability, reliability, and the environment.

And energy, if you can’t afford it, it doesn’t change lives, particularly in the developing world. But even in the developed world, you know, a year-and-a-half ago we had high prices here and it was a—it was a real concern.

Reliable supply matters because it’s what keeps the lights on. And when I travel to places that don’t have reliable energy systems, they can’t build an economy. You can’t build an education system. You can’t build the foundation for the kind of life that people want to live.

And then everybody has a stake in a cleaner environment.

And if you get energy policy that focuses in on only one of those, you can create unintended consequences and have something that I think is not sustainable. And so recognizing the importance of affordability, reliability, and the environment.

And then the other thing I like to talk about is we need to rule solutions in. A lot of the discussion today we’ll say we can’t have this, right? We want to phase out fossil fuels. Ask people about nuclear—how do you feel about nuclear energy? Oh, we can’t have—we can’t have nuclear energy. So if you start to rule out parts of the solution set, you’re never going to solve the problem. And so we need to—we need to rule things in.

We need to find solutions that can scale. You know, there’s 8 billion people on the planet. There’s going to be 10 billion people by the middle of this century and the economy’s growing. And so things that work at a small level, if we can’t scale them up they can’t really make—they can’t make a difference.

And then if you—if you get solutions that work on scale, then we need to do it with some speed. And that’s where capital markets come in and you harness private investment.

And so I think policy that recognizes and incentivizes, without choosing winners and losers and without over-indexing on any one of those dimensions, is really what we need.

YERGIN: Of course, if you say speed, that brings up one thing that characterizes our system in terms of policy, in terms of permitting, is lack of speed.

WIRTH: Putting it nicely.

YERGIN: Well, do you want to say a word about—

WIRTH: Yeah. You know, it’s just—it’s become so difficult. Anybody here who has remodeled a home, or at least where I live in California, it takes a long time to get a permit to do something you would think is pretty simple.

YERGIN: Try and get permission to take down a tree that’s going to fall on your house in Washington, D.C.

WIRTH: Yeah, so same kind of thing. So in, you know, matters both kind of relatively small and also quite large, we have a system now that makes it easier for people to stop things from getting built than it does facilitate building things in a way that’s appropriate and respects stakeholder input and codes and standards, but allows us to build things. And this is a country that was founded upon and our great strength is having built the interstate highway system, you know, the infrastructure that we all rely on, and now it is so difficult.

And so if we’re going to get wind and solar to the scale it could be, we need a different grid. But nobody wants power lines running, you know, through their town or through their field. And the process is set up now so that various interest groups and the legal system can be used to just drag decisions out interminably until, you know, the goal is to just get people to give up and go home. And we’re not going to—we’re not going to build a new energy system if we can’t get the permits to mobilize the capital and actually build out what’s needed.

YERGIN: So that’s going to be very important in terms of the actual implementation of the IRA.

WIRTH: Absolutely.

YERGIN: Yeah.

WIRTH: A hundred percent.

YERGIN: Yeah.

So when you describe the policy, one theme that runs through all of that, of course, is energy security. As you say, you travel the world. You talk to a lot of governments. Do you find a different—how thinking on energy security you’ve been to the last couple of years have changed thinking?

WIRTH: Yeah. I mean, it’s certainly on the front of people’s minds after the situation in Ukraine, where you’ve seen Europe, which had for a couple of decades continued to grow its economy based on reliable and affordable Russian gas and a not-very-diverse set of alternatives, and energy security is high on the minds of people not just in Europe these days but elsewhere, as we see these other conflicts underway. And thankfully, things in the Middle East have not expanded the way some worried that they might. We’re certainly not past the point where that’s a risk, but you know, most of the people in the room here have seen that story before where, you know, supplies out of the—some key parts of the world can become threatened and have real serious consequences. So we can, you know—

YERGIN: One thing that is happening right now as we’re meeting is COP-28. It’s coming to a conclusion. A lot of the debate is about what to say about fossil fuels. Coming out of COP-28, some have said that the oil and gas industry is not doing enough in terms of low carbon and energy transition. What’s Chevron doing?

WIRTH: Well, we are doing a lot. We are reducing the emissions associated with our own operations. So when the Paris Agreement was enacted in 2016, we set targets to reduce the scope one and two intensity of our oil and gas business, reduce by nearly 50 percent by 2028—we’re well on the way to doing that—to reduce methane emissions by—methane emissions intensity by half already in just a few short years. We’ve set targets to grow new energy businesses. We’re the second-largest producer of renewable fuels in the United States today. We’re investing and we’re under construction on a green hydrogen project that when it comes up I think will be the largest green hydrogen project in the U.S. in 2025.

YERGIN: Can you describe—describe that project?

WIRTH: Yeah. It’s a project in the Western U.S., in Utah, where we’ll take renewable power—wind that comes out of some of the big wind farms in the West—and we’ll hydrolyze water. We’ll break H2O into the H and O, and the hydrogen we’ll store in underground salt caverns—this is an area where we can store it—to bring it back to be co-fired with a natural gas power plant to reduce the emissions from power generation, and then the power will be sold into California. So that’s what’s known as green hydrogen because it comes from renewable electricity and breaking water apart. There’s a different flavor of hydrogen known as blue hydrogen, which is manufactured the traditional way, which has some CO2 emissions, and you capture the emissions and then you store those. So we’re working on blue hydrogen projects on the Gulf Coast. We currently have carbon capture and storage projects that we’re involved in that are operating in both Australia and Canada. We’re working on additional projects, a big one here in the U.S. So—

YERGIN: Well, let’s just stop for a second on hydrogen again. Just for the benefit of everybody, how hard is it to do a green hydrogen?

WIRTH: Well, it’s incredibly—I mean, it’s—

YERGIN: Everybody hears about green hydrogen, but—

WIRTH: Yeah, you can do it. I mean, I remember doing—you can do this in physics lab. And so I remember making—you know, breaking water apart in physics lab with electrolysis when I was a youngster.

YERGIN: That was small scale.

WIRTH: Yeah. This is—this is back—and this gets to the issue of scale.

YERGIN: Yeah.

WIRTH: You know, but doing it at industrial scale is very expensive, you know, several times. If you think of what’s called gray hydrogen costs X, green hydrogen is 7(X), 8(X), 9X to produce. And so we’ve got to find a way to get the cost down so that consumers of hydrogen actually can afford to buy green hydrogen. And some of that will come through technology improvements. Right now some of that’s being incentivized by the IRA, although the rules are still being written and the rules matter because there’s going to be details about the renewable power, in particular how it’s brought into the system and how closely it’s matched with hydrogen production. So there’s a lot of—there’s a lot of work to be done to begin to stimulate the growth of a green hydrogen economy, which will not be economic in and of itself in the beginning. But a lot of these things over time you can drive the cost down as you start to scale them.

YERGIN: And do you have a customer for the green hydrogen?

WIRTH: That’s the big question right now. You know, typically—we talked about LNG before—these tend to be multibillion-dollar investments. And so if you look at liquefied natural gas as an analog, those projects can’t get financing and can’t get sanctioned until they have customers that have agreed to long-term contracts so that you—the financing agent knows that there’s somebody there to buy it to create a revenue stream to pay the loan back. Same thing on hydrogen. It’s going to require the same scale of investment. And it’s been difficult to get people to sign up because they don’t understand what the costs are likely to be, how this is likely to play out.

And so I think the most likely customers will be existing users of hydrogen, so those are people that manufacture fertilizer right now. It’s the petrochemical industry. So there are some big hydrogen users today that are the natural first buyers. But you know, their alternative is X and they’re not ready to say I’ll pay 3(X), 4(X), 5(X), 7(X), 8X. Yeah.

YERGIN: So this project that you’re doing, a customer, though, is a—

WIRTH: It’s a power plant, a power plant in Utah. And we’ve got a—we’ve got a structure where we are essentially tolling—I don’t want to get into the commercial trivia of this—but we’re paid a fee to manufacture and store the hydrogen, and then sell it back. And more of the risk actually rests with the power utility, and they’re going to capture some of the value by selling into the highest-value power market, which is the California market.

YERGIN: I was going to say, which would be California, yes?

WIRTH: Yes.

YERGIN: Yeah.

Maybe just explain you’re doing a CCUS project and what that involves, because, again, that’s (the subject ?) of discussion.

WIRTH: Yeah. So, you know, there’s CO2 in the air. We’re breathing right here. We’re exhaling it with each breath at very dilute concentrations. Industrial processes emit CO2 in more concentrated form. Ethanol manufacturing, there’s almost pure CO2 coming off of that, so easy to capture a pure stream. Most other—like, think of a power plant or a steel or cement plant. Maybe single-digit concentrations—2, 3 percent, 4 percent in a combustion stream—and so you’ve got to have technology to capture that because you got 98 percent of the molecules that pass through. And then once you capture it, you have to concentrate it typically into a form that you can transport efficiently. And then you have to move it somewhere through a pipe to get it into the ground where we can store it, and we know how to do this. You know, our industry takes molecules out of the ground, and gets them to the surface, and moves them to a market. This is kind of the reverse of that. So we actually know how to do it technically and operationally.

There’s not a real business model for it today because there’s not a market for storage and there’s not a price for that, which the IRA, again, has an incentive here in the U.S. to try to create that market. Ultimately, a price on carbon is the right way to do this. If you had a carbon price, that would incentivize the investment and you’d see—I think you’d see the investment flow more readily.

YERGIN: And what would be the ideal storage venue for CO2?

WIRTH: There’s two basic geologic storage venues. One is a depleted oil and gas field where you’ve got pore space that was opened up because you took molecules out of it. The other one is large saline aquifers. So these are non-drinking water aquifers. They’re typically deeper in the Earth. And they’re very salty, so they’re not good for anything. But they can hold the CO2 in these large underground aquifers. So those are the two basic ways that you can store it in the Earth.

YERGIN: And CCUS right now is still very much a nascent business.

WIRTH: Yeah. It’s done around the world. A lot of carbon capture is used for enhanced oil recovery. As I mentioned, we’ve got two projects, one in Canada and one in Australia, where we actually store, and there are several big projects in the U.S. that are being advanced that I think the second half of this decade you’ll start to see construction and operations before the end of the decade. Permitting, we come back to that. I mean, getting the permits to actually drill the wells—the storage wells—

YERGIN: Let’s go back to permitting.

WIRTH: Well, there’s been only a few of these storage wells permitted, but it’s several years—up to six years to get a permit to do this, which is a long time.

YERGIN: Right. So that is, in a sense, in terms of all the efforts to—big programs, IRA, permitting is an overhang for getting everything done.

WIRTH: Permitting will be an issue.

I think the other issue I’m concerned about is labor. If you think about, you know, the skills you need to build not just hydrogen plants, carbon capture and storage, LNG export, but also chip fabs, of all this infrastructure that’s covered in the Infrastructure Act, you need welders, pipefitters, boilermakers, electricians, and some—a lot of trades that young people don’t go into these days. And if you talk to people in the labor unions, their workforce is what they call graying out, right? They’re retiring. And we’re embarking upon—you know, stimulated by a number of these different pieces of legislation—this massive construction phase in our economy, which is something we haven’t seen for a long time, without the workforce to do the work.

And so I worry. You know, we’re already seeing inflation push through into a lot of parts of the economy. Not many of these projects are under construction yet and there’s a finite number of workers that have the skills that are needed. You know, I talk to people in the construction sector who, basically, you start to add up all the projects and the requirements for them and it just doesn’t balance out, so.

YERGIN: So that’s a constraint that’s really not well-recognized.

WIRTH: It’s not well-recognized. We haven’t started to run up against it quiet yet, but it’s not—it’s not far away.

YERGIN: Right. And I guess just when one thought inflation might be vanquished, it would be a—

WIRTH: Yeah. I mean, the energy transition is inherently likely to be inflationary because it’s going to put a—draw on a lot of raw materials and we’re building a redundant—you know, a second system to do what we already have a system to do today. And so it’s not really creating economic value as much as you’re switching, you know, over time from one to the other, and so there are some costs there with higher-cost technologies.

YERGIN: So before we go to questions, I’ll just ask two more questions before we go to the audience.

One is the energy transition. Just with all the turbulence we’ve seen since 2021 and 2020, how has your thinking evolved about the energy transition at the conceptual level?

WIRTH: Yeah. I mean, I think everybody’s thinking about it has sharpened as it’s moved from the realm of the—kind of the aspirational into the realm of the practical. We’ve certainly found that as we’ve turned our engineers loose on our own emissions we’ve been able to drive them down faster than we thought we would be able to. We’ve been able to grow some of our new energy businesses faster. I mentioned renewable fuels, which has been very successful. Renewable natural gas is another one that we’ve seen a lot of growth in. And so we’re in the game. We’re practically doing these things now and we’ve learned a lot about what it takes.

I think what that also has clarified is, you know, you do the smartest things first, right? You get the most emissions for every dollar you spend. And so we’re getting to the lower-hanging fruit first. As you start to lay it out for the next five years, ten years, twenty years out, you can start to see, particularly in the—you know, the industrial parts of the economy—so shipping, aviation, cement and steel and aluminum manufacturing, fertilizer, petrochemicals—these are very difficult to decarbonize using renewable power alone, and so we’re going to have to have other solutions. And these are the kinds of things that we’re working on today that we’ve been talking about. But it also impresses upon you the time and the scale of the challenges.

YERGIN: Right.

So let me—this is called the CEO Speaker Series, so let me conclude this part of the discussion with a CEO question. Chevron has tens of thousands of employees around the world, operates on six continents. As CEO, what—how do you guide all of that workforce through these volatile times, what your message is?

WIRTH: Well, we’ve long had a—kind of a foundational set of beliefs that are codified in something called the Chevron Way. And it’s got, you know, purpose: to, you know, develop the affordable, reliable, ever-cleaner energy that enables human progress; and then within that a vision to be the global energy company most admired for our people, partnership, and performance. And it follows on with values and strategies. And it’s really the foundation for people around the world, whether it’s dealing with the pandemic, dealing with the energy transition. You know, you can’t go wrong if you stay true to our values and our core beliefs about the future.

And the way this unfolds is very different in developing economies than in developed economies, in places where we’re a big producer versus where we might be a refiner and a marketer. And so our business is quite varied around the world. And we’re growing this new energy business now, which has got a completely different set of customers and value chains and technologies, and so you really have to ground back in some core values and use that as a guide when there isn’t a roadmap. Because there is—there is no clear roadmap for the energy transition or there was no clear roadmap for a pandemic. We’ve got wars going on which are inherently unpredictable. And so you’ve got to, you know, stay focused on keeping people safe, producing your energy in a reliable and a responsible manner, and then people working together to sustain that into the future.

YERGIN: Right, and building resilience into the system.

WIRTH: Yeah.

YERGIN: Right.

Well, I think we’re now open for questions and I see a flurry of hands going up. Over there. Everybody please identify yourself and question, not speeches.

Q: Thank you. Isaac Stone Fish, CEO of Strategy Risks, a China-focused risk firm.

You guys do such a wonderful job of planning for a very complex future. I’d love to hear more about how you plan for the possibility of a Chinese invasion of Taiwan. (Laughter.)

YERGIN: Maybe you don’t have to answer that question if you don’t want to.

WIRTH: Well, but the—but the issue of planning for an uncertain future is core. Dan and I were talking a little bit here before we walked in the room. Sometimes I tell people that our core competence is in risk management—geopolitical risk, physical security risk, commodity price risk, geologic risk, cybersecurity risk. And so we think about all of those. We have a very disciplined risk-management approach, and we have to have contingency plans, and we drill for these things. And so we just completed a five-day cybersecurity drill where we simulated a massive cyberattack, and there’s no SEC reporting rules that are in place now so we had to involve board directors and outside resources to determine do we report this or not, do you pay a ransom or not.

And so you simulate things like conflicts and other types of events and prepare, and what you learn whenever you go through that is you’ve got gaps in your plans and it’s the old adage about, you know, plans are worthless but planning is really valuable.

We do a lot of planning for things that we hope never happen and I would say that, you know, military conflicts are one of those.

YERGIN: Right. A question right here in the front and then we’ll go to the—

Q: Harry Andreades, nuclear advisor at ARPA-E.

A question—how have you considered decarbonizing your refineries? Have you considered nuclear?

WIRTH: So refineries are very difficult to decarbonize. They’re already highly energy efficient and certain units lend themselves to carbon capture better than others do. Longer term I am an optimist about small modular nuclear reactors and both refineries, and then we’ve talked a little bit about LNG.

We have some very remote facilities that have a high energy demand and small modular reactors could be a really elegant solution for those.

So I am leading the cheers to see SNRs become successful and hope that we can find a way to integrate it with our business.

YERGIN: Let’s go to the virtual audience.

OPERATOR: We’ll take our next question from Tara Hariharan.

Q: Thank you so much. My name is Tara Hariharan. I come from NWI, which is a New York-based hedge fund.

Could you please give us an update on your joint venture Tengizchevroil and the status of the Tengiz’s future growth project in Kazakhstan? I know investors are a bit concerned about delays and higher costs associated with the output expansion there.

WIRTH: Yeah. So for people that aren’t familiar this is an oilfield that we joined—went into Kazakhstan right after the fall of the Soviet Union and production there has gone from ten thousand barrels a day originally to about 650,000 barrels a day.

Now we’re expanding it to a million barrels a day with the intent to go through a phased startup over 2024 and 2025. We’ve updated the market with all of our guidance on that at our most recent conference call which is available online and rather than dragging people through a lot of those details I’d just refer you to that for more of the specifics on that project.

Thanks.

YERGIN: So the lady right there.

Q: Thanks, Diane. That lady is Paula. Paula Stern, Stern Group Consulting.

Very interested in your concern about labor, an adequate workforce. We always hear about it with regard to the CHIPS Act particularly in the semiconductor arena.

But one of the patchwork solutions has been immigration policies that are directly related to particular skills. Is that something that your industry is pursuing or considering pursuing in light of the IRA and the requirements that you’ve described so, you know, clearly?

WIRTH: Yeah. We work with the big engineering procurement and construction firms. So think Bechtel, Fluor, people like that who do really all of the hiring of those types of skills to do projects. We don’t staff our organization up with all of those trades because it’s—you know, it ebbs and it flows and their business is really to manage the whole portfolio of those things.

So I have had discussions with people in that sector and they do believe that immigration is a very good solution. A very politically thorny issue in this country, obviously, but bringing in people that have a desire to acquire the skills and become part of that workforce that we need to build these kinds of projects in our country I think has got to be considered as part of the response, yeah.

YERGIN: And I think—and I think the point you made, really, and that Paula raises really deserves emphasis because the wave of construction hasn’t started yet. It’s when it starts that—

WIRTH: The second half of this decade, I think, is really when it starts to hit.

YERGIN: Right. Right. So there’s a question there and then we’ll go to the virtual.

Q: I’m Whitney Debevoise of Arnold & Porter.

Chevron recently pushed hard to get sanctions against Venezuela lifted. How much is Chevron prepared to invest to recover those fields so they can actually produce the oil that everyone thinks is in the geopolitical interest of the world?

WIRTH: Yeah. So I might just describe it a little bit differently. We don’t really push hard to get sanctions imposed or lifted. Those are policy decisions made by governments.

We engage with the government to help them understand the impact of the sanctions that they put in place and as they consider changes they’ll reach out to us and ask for input on potential changes. But we don’t really advocate for or against sanctions. That’s—you know, those are political decisions.

In the short term the relief that was granted about a year ago has allowed us to participate more fully than we had been before in Venezuela with basic engineering and maintenance and operations, which has resulted in an improvement of production from maybe fifty thousand barrels a day to about a hundred and fifty-thousand barrels by addressing constraints in the operations that were, you know, relatively straightforward to address.

We haven’t put much new capital into Venezuela yet. We’re recovering some past due funds that—you know, part of this whole thing is for us to get access to some funds that had been overdue and then, obviously, you know, the sanctions—the prospect of elections next year.

The U.S. and Venezuela are still talking about, you know, the sanctions are kind of temporarily relieved with the possibility they could come back. And so to allocate long-term capital to anything that would grow would require much more certainty, stability, and a clearer line of sight on a long-term future in Venezuela than anything that we see at the present.

YERGIN: I think we’ll take two questions from—virtually now.

OPERATOR: We’ll take the next—we’ll take the next question from Clifford Krauss.

Q: Good morning, Mike. How are you doing?

Thanks for doing this. I wanted to ask you about COP. There was discussions, debates, people who are arguing, particularly environmentalists, of course, some government people, that we should be phasing out fossil fuels—the world, that is—and I wanted to get your opinion on that if that’s reasonable, if it’s possible, if it’s a long-term goal.

YERGIN: Thank you, Clifford. For those who don’t know, Clifford is the energy writer for the New York Times.

WIRTH: Yeah. So, Cliff, I think we’re all aligned on the objective to build a lower-carbon energy system. The place where I think the discussions get more challenging is what does that really look like, how fast can you get there, and what is the role for all these different sources of energy, and our belief is that oil and gas is going to be in demand into the future.

I just mentioned earlier that we’re seeing record demand this year and demand will grow again next year and the year after that and so we have to find a way to produce oil and gas in a lower carbon intensity manner.

Today even as we’re building out these new energy systems—we’ve been talking about biofuels, hydrogen, nuclear, a bigger role for nuclear—and so the—you know, that’s where I think, you know, you get a lot of different agendas that start to show up is, you know, you have people that want to choose which are the acceptable forms of energy and which ones maybe should be eliminated from the system.

I think that’s best determined by markets and customers and in technology and innovation, and I’m an optimist that we’re going to address this challenge, Cliff, but it’s going to require tremendous amounts of technological innovation. If you look at the IEA’s net zero study most of the technologies that they have as part of that scenario don’t yet exist or haven’t been proven at scale.

So we need great technology advancements. We’re going to need tremendous ingenuity and business model and application of these things and integrating them into a world that’s already running on the system that it’s running today and then we’ve got to mobilize the capital to invest.

And so all of those are big, complex challenges that we’re all working on and I think that’s where you start to find these divergences—you know, the different opinions.

YERGIN: If I could just add something. I was struck—if you look at the scenario for net zero from 2021 from the IEA exactly what you say, all the assumptions that are there about what’s going to happen they’re not happening yet or they haven’t been proved yet. And so everything’s supposed to go smoothly and the world doesn’t seem to go smoothly.

The other thing I was thinking about this morning when I was reading about the debate that Cliff is talking about in Dubai is just think how would a hospital room operate? So many of the things in the hospital room are products of oil and gas and I think that sort of gets lost in all the discussion, too. It’s not just the fuel that goes into transportation.

Whoa, this table has a lot of questions. The second gentleman—(inaudible).

Q: Hi, there. I’m Mark Lagon, chief policy officer at Friends of the Global Fight Against AIDS, TB, and Malaria, and I happen to know that Chevron is engaged in the importance of global health because our organization is a grantee through your chief medical officer.

You referred to the pandemic and to your concerns about labor. Where does health and health of communities, health of workforces, come into your thinking about your business globally?

WIRTH: Yeah. It’s central to what we talk about. We have a system to operate our business. We talk about our operational excellence management system. Health, environment, and safety sit at the core of that and so the safety of our people in these very difficult operating environments, protecting the environment from inadvertent releases of our products and then, of course, the health of our workforce, and so that’s fundamental.

When you get into communities that’s important as well because we are oftentimes a source of medical treatment in some of the remote parts of the world where we operate. We try to invest in—you know, for years and years HIV/AIDS and malaria have been a big focus for us to support efforts to try to eradicate those—you know, those diseases.

And, you know, I’ll go back to our Hess discussion. I was in Guyana right before Thanksgiving with John Hess, who’s working with Cedars Sinai to bring expertise to a country that doesn’t have great health care infrastructure today and would like to improve health outcomes, and I was just incredibly impressed by the great work that the Hess Corporation is doing to advance the quality of health care across an entire country where they’re operating.

And so I think you’ll see companies in our industry do this as a part of our business. We’ve been around for a hundred and forty-four years and have learned that if we don’t have a healthy workforce and if we don’t have communities that are healthy and we’re not a positive influence on that we can’t do what we need to do. So it’s part and parcel to the way we approach everything we do.

YERGIN: The gentleman right in front.

Q: Thank you. Chris Isham with CT Group.

I just wanted to dig back into the Guyana-Venezuela dispute because that could—if that blew up that actually could be a serious threat to your investment. Maduro has made some very aggressive statements. He held a referendum which he had, you know, practically unanimous support for.

How concerned are you that Maduro might try to march across the border? He would encounter very little resistance. And what are you hearing from some of the neighboring countries and from the U.S. government about this?

I mean, how serious a threat do you think it is and what kinds of disincentives could be put in front of him that might discourage him from making that kind of a move?

YERGIN: That’s a sort of secretary of state question but please take it.

WIRTH: Yeah. You know, I think whenever you see these kinds of things brought up you need to take them seriously.

These are leaders of countries that are expressing themselves. But as I said we—you know, we believe and the overwhelming evidence—and you can cite evidence ongoing in the world today to the contrary but in our experience around the world these things are much more often resolved through discussion, negotiation, and compromise than they are through, you know, military types of engagement.

They can go on for quite some time. I’ll give you an example. In the partition zone between Kuwait and Saudi Arabia we were shut down on an oil field that was producing 200,000 barrels a day for five years as the two countries resolved things, but they ultimately did and it was through negotiation.

And so we’ve got real experience with these. You know, we’re not a political actor so we don’t come down on one side or another on these kinds of things. We’re a business player in these economies and so, you know, we always encourage discussion, negotiation, and efforts to peacefully resolve.

So I really can’t say anything more. This is all kind of breaking news here over the last period of time. But, yeah, we pay attention to that. But, you know, I was—Dan and I were talking beforehand.

There are other places in the world where we have ongoing developments that are generally not seen in the public that are also very concerning. It’s kind of part of our business that we have to be paying attention to these kinds of things everywhere all the time.

YERGIN: And should add, I mean, the U.S. government has clearly directly and indirectly expressed very strong support for Guyana and Venezuela does have an interest in not having sanctions reimposed.

So I think we have a question online.

OPERATOR: We’ll take the next question from Henri Barkey.

Q: Thank you. Henri Barkey from Lehigh University and the Council.

There was a recent report that suggested that oil-exporting countries will see their revenues halved by 2040, which means that also affects oil companies. So do you think that—

YERGIN: Wait. Henri, halved by what date did you have?

Q: By 2040 that the revenues will go from 17 trillion (dollars) to 9 trillion (dollars)—that was the prediction—from carbon tax and, obviously, this will also impact oil companies. Do you think this is a realistic assessment and if it is how is Chevron preparing itself for it?

WIRTH: Yeah. I haven’t seen the study so I can’t really comment specifically on it, Henri. I would just say that the—you know, the clear trends in the world today are for demand to grow, not to shrink, for oil and gas.

The population continues to grow, the global economy continues to develop, and oil in particular is very difficult to substitute for in most of its applications. So people look at electric vehicles and light-duty vehicles and they think, oh, well, we see these coming into the world; this is going to, you know, reduce demand for oil.

You can look at Norway. I won’t go into the details but Norway, which is 85 percent of their vehicle sales now are electric vehicles through a variety of incentives, and oil demand there has barely moved. It’s come off just a tiny little bit.

The reality is about a quarter of a barrel of oil ends up in light-duty transportation and three-quarters ends up in ships, airplanes, mining, and off-road applications, long-haul transportation, petrochemicals, which go into the products that Dan was referring to earlier, and there are not easy ways to electrify any of those.

And so we’ve got to continue to work for other solutions for these but in the meantime as the economy grows the demand continues to grow and I think by 2040—you know, people build different scenarios based on different assumptions and we look at a wide range of potential futures. But it’s unlikely that by 2040 we would have seen demand for oil and gas drop in half.

YERGIN: Yeah. I mean, oil demand hasn’t even peaked yet and the question is does it peak. Some say it’s by the end of this decade, next decade, or the next decade and, you know, time will tell.

You know, Mike, a couple years ago people said, oh, oil demand had peaked in 2019. This year it grew by 2 million barrels a day.

Doug Rediker, right here in front.

Q: Doug Rediker, International Capital Strategies in Brookings.

Simple question. Could you describe the state of your relationship with the current administration?

WIRTH: (Laughter.) Simple question. Look, I was—just before here I was over in the Eisenhower Building meeting with a senior administration official. I will participate in a meeting tomorrow with Secretary Granholm.

I’m chairing a study that she requested on hydrogen, how a hydrogen economy can evolve in the country, and we’ve got an interim update to her on a report that will be issued in the second quarter of next year.

So we engage across the board with different members of the administration on a whole range of issues and a whole range of policy questions. And sometimes we, you know, see things similarly, sometimes we see things differently but like with every administration the important thing is to listen and engage and be sure that we understand what they’re trying to accomplish.

We have a chance to provide input in terms of how we think those goals can be best accomplished and so that kind of give and take is going on with this administration like it does with every other.

YERGIN: OK. Right there.

Q: Thank you very much for this conversation, and I’m Zoe Liu. I’m here at—I’m a fellow here—

YERGIN: Can you hold the mic a little closer?

Q: I’m Zoe Liu. I’m a fellow here at the Council.

I’m very curious about your view on the—what kind of currencies are going to be used in global oil and gas market trading, considering that in the past two years renminbi as well as other currencies has emerged to be sort of settlement currencies. Do you see the U.S. dollar is continuing going to be the dominant currency in the commodities market? Thank you.

YERGIN: That’s a very topical question because for years people have said does oil remain in dollars. It’s always assumed yes but we see certainly a concerted effort by some countries to substitute. So—

WIRTH: Yeah. I think it’s going to be very interesting to watch. I think, you know, the—and I should have someone with me from our finance and treasury organization to give you deep thoughts on this. But I don’t think there’s any real threat to the U.S. dollar as a reserve currency that—you know, that we see anytime soon.

That said, you do see certain bilateral trading relationships opening up between energy producers and energy importers and discussions about denominating those transactions in other currencies.

And so I think, you know, it’s quite possible you can see some of that. I mean, you mentioned China. I think, you know, Russia has had concerns about its—you know, the currency its transactions are settled in.

And so I think—I don’t think it’ll be a global commodity market shift but you could see in some bilateral trading relationships that the mix in the currency could evolve a little bit over time.

YERGIN: So did you have a question right here, Mike? And then we’ll go back to virtual.

Q: Mike Kostiw, most recently senior adviser to the director of national intelligence, previously with Chevron for a number of years.

YERGIN: You can still ask a question. (Laughter.)

Q: A simple question. FTC continues to question the acquisition. Are you concerned about that? I mean, this is sort of the second tier of questioning. Is that coming to an end soon?

WIRTH: Yeah.

YERGIN: Do you want to give an answer to that question?

WIRTH: Yeah. We got a what’s called a second request from the FTC. We did a transaction earlier this year which we announced in the second quarter. It actually closed in the third quarter and went through a pretty, you know, expedient review process with the FTC.

It’s smaller than the transaction between Chevron and Hess and so we’ve received a second request. We’re in the process of producing the—you know, the response to that, which will take some time. And so we had hoped to, perhaps, close in the first quarter. I think this will extend further out in the year, not unusual, and, you know, this is an FTC that’s taken an interest in a range of different transactions and so we’ll work with them to try to satisfy their queries.

There’s really very little overlap between Chevron and Hess in the U.S. and so we don’t see any substantive problems with the transaction.

YERGIN: A virtual question.

OPERATOR: We’ll take the next question from Robert Nelson.

Q: Hi. Robert Nelson from Pillsbury Winthrop.

This is sort of like a XCOM (ph) meeting of the energy all-stars with Mr. Wirth and the world’s premier energy writer.

Mr. Wirth, you talked before about sort of Chevron’s core competencies as they can really relate to the energy transition. One that we haven’t talked about is geothermal.

Chevron has background in geothermal and traditional vertical drilling but there are some exciting new things in geothermal and horizontal drilling which would seem to fit in with what you mentioned before about sort of advanced fracking techniques. I’m curious if you think that’s something which holds a good deal of promise.

WIRTH: It’s something we’re very interested in. We’re actively engaged in, work with a number of different interesting startup companies.

YERGIN: You have to explain what geothermal is.

WIRTH: So geothermal—if you think of Yellowstone and Old Faithful, the heat within the Earth can heat up water which can create steam, and so traditional geothermal which Robert mentioned is just that. It’s finding ways typically near the ring of fire in the Pacific where you could drill down into the Earth and you could inject water, bring steam back up, and turn a steam turbine.

So very low carbon footprint. A good source of energy. We were very big in this in particularly Indonesia and the Philippines for a number of years. The idea now is how do we find places to access the heat of the Earth in a more distributed way so you don’t just have to be where you’re close to this extremely hot, you know, section that’s a few thousand feet down.

And a simple way to describe one of the techniques is think of a radiator where you could drill down, say, a mile, and then turn and go horizontally the way that we do in our unconventionals, and break that out into several different laterals, maybe fracture the rock, and then bring together the wellbore and bring it back up. And you put water down, expose the water to the heat of the Earth, and then bring up either steam or perhaps just a warmer version of whatever your heat transfer fluid is—water or some other medium—and then extract that heat to generate power.

And so when used our horizontal drilling technologies that have been developed potentially fracturing or you could complete these with wells and have pipes that go through the Earth like a radiator and use that to circulate and extract heat we’re in the process of doing a pilot on one of these technologies in Japan with one of the Japanese companies. We’ve got other work going on in some other parts of the country.

So we’re optimistic about it. The technology needs to be proven and we got to find out how economic it is versus all these other alternatives that we’ve been discussing today. But it’s technically something that an industry like ours has the capability to do and ought to be involved in.

YERGIN: So given this does this fit into your traditional drilling business or into your new energies business?

WIRTH: This is our new energies business.

YERGIN: Right. So—

WIRTH: But what I’ll say about our new energies business, and this is the reason, again, I think companies like ours are going to be part of the solution in the energy transition is our traditional business has all the technology and capabilities to enable this.

The new energies business is really involved because it is policy, it’s markets, it’s finding ways to bring zero-carbon energy or low-carbon energy out to the market and work with customers.

But all of our businesses—hydrogen, renewable fuels, carbon capture and storage—leverage the capabilities of our existing organization extensively and so there’s a great big internal kind of matrix that our new energies team accesses all these skills and capabilities across the globe to help build these new technologies.

YERGIN: I think we have time for one or two more questions. Anything else in the audience here?

I don’t see anything. And one more virtual.

OPERATOR: We’ll take the next question from the Mahesh Kotecha.

Q: Thank you very much. A very rich discussion, very impressive. Around the world tour, as it were, of the energy markets.

My question is on strategy. You mentioned, Mr. Wirth, something about the new energies and the traditional, of course, hydrocarbons. My question relates to your observation about the industry. To what extent do you think the industry—the fossil fuels industry—is committed to and actually focusing on new sources as you are?

How committed are they? Is that a defensive posture to protect the existing business, to sort of not—I mean, in effect or is it—is it to promote the—getting diversification in case the new energies take off? How do you observe the industry?

WIRTH: Yeah. So the industry is a broad term and let me just kind of break it into some pieces and talk about the part that I’m most familiar with.

So, you know, we have state-owned companies like Aramco that you can think of and many governments around the world have a state-owned company. You have integrated companies like Chevron, ExxonMobil, Shell, BP, and then you have a lot of independent upstream and downstream companies.

I’m most familiar with the integrated companies that are, you know, kind of our peers and I would tell you I know the CEOs of each one of them and they are absolutely committed to investing in the technology and the development of these new energy systems.

Everybody’s got a little bit of a different strategy which is, I think, a good thing. If we’re all doing the same thing I would worry about that. Our European peers have done a lot in offshore wind. They’ve done a lot in power.

We’ve tended to focus on things that we feel are closer to our unique strengths and capabilities, which is managing molecules, and so I’ve talked about renewable fuels, hydrogen, carbon capture, geothermal, things that leverage our unique talents and capabilities where we think we can actually do things that are differentiated.

But I don’t talk to anybody who is, you know, under the illusion that this is all some way to just, you know, make it look like we’re trying to do something so we can just, you know, go back and do what we’ve always done.

We all see a lower carbon energy system. We all want to be part of that. Our industry has evolved for a hundred and forty-five years as—our company has for that long, the industry longer—as society’s expectations and needs have evolved from where we began which was really creating products for light.

In the beginning kerosene was used for lamp oil because whale oil was the alternative and whales were being hunted into extinction. And so today, obviously, a different set of issues and a different set of challenges that we face and a different set of end markets and consumers that energy is used by.

But it’s the history of innovation and evolution and technology that I’m very proud of for our company and I think the peer companies that I know that are integrated and global like we are are absolutely a hundred percent committed to being part of that journey for a long, long time into the future.

YERGIN: Well, that was actually a very good wrap-up question. To say this has been a wide-ranging discussion I think would be something of an understatement.

But, please, everybody join me in thanking Mike for a great conversation and for the clarity. (Applause.)

(END)