Chevron CEO talks energy issues in Silicon Valley

In this July 31, 2009 file photo, a Chevron gas station pump is shown in Vallejo, California. (AP Photo/Paul Sakuma, file)

October 6, 2010 7:14:20 PM PDT
An appearance by Chevron's chairman and CEO in Silicon Valley might be considered a foray into enemy territory with many of the venture capitalists backing and encouraging the development of green technology to wean Americans away from fossil fuels. However, it's clear that with the U.S. officially out of recession and showing some signs of nascent recovery in some sectors that energy consumption could rise after a two-year slump.

Chevron is California's largest employer with 10,000 people. And to the surprise of tech leaders and investors, they learned the oil giant remains bullish on fossil fuel, despite the Valley's efforts to grow clean tech.

John Watson attracted a group of 200 Valley leaders to the Sharon Heights Country Club in Menlo Park Wednesday morning, where he engaged in an unscripted conversation with Alan Murray, deputy managing editor of The Wall Street Journal.

Watson kicked off the conversation by saying he expects the transition away from fossil fuels will take generations. He predicted that in 2030 the world will still get 70 percent of its energy from oil. That does not mean Chevron is not supporting renewable energy.

"By 2030, fossil fuels will still provide 70 percent of the world's energy, even if all of those things come true," said Watson.

Watson says that kind of demand requires it to stick to oil and gas exploration and refining. However, he disclosed the company has made $250 million in technology investments in biofuel, wind and solar projects.

It's working with Oakland's BrightSource Energy to use solar to help extract heavy oil from wells in Kern County. The oil is so thick there it has to be heated by steam so it can be pumped out of the ground. Chevron is trying to determine if solar can be more economical than natural gas to create steam. It could also help tap heavy oil in the Middle East.

"We need to prove it out. It needs to be cost effective and we'll see how it develops. I'm encouraged by what I've heard so far," says Watson.

Vinod Khosla is one of Silicon Valley's leading investors in clean tech. He doesn't fault Chevron's CEO for its modest commitment.

"It takes nanotechnology, biotechnology, semiconductors, all kinds of things that they don't have experience with," says Khosla.

Watson said Chevron's investment arm has put money into wind and solar farms. Its geo-thermal operations in Indonesia and the Philippines generate more power than solar production in the U.S.

The conversation quickly turned to the BP Gulf rig incident, which Watson has described as a tragedy on multiple occasions. He says during the moratorium the oil industry has been working on raising drilling and exploration standards to prevent a future disaster. He said Chevron has invested $1 billion, along with money from other oil companies, to develop better spill containment systems. Watson said Chevron is prepared to resume operations in the Gulf where it holds more drilling leases than any other company. He is hopeful this will happen next month. However, he points out that lifting the six-month moratorium does not necessarily mean permits will be issued to allow new drilling.

Another hot-button issue came up: Ecuador. Watson expressed frustration that attorneys continue to battle Chevron over environmental issues there, even though it has settled one such case.


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