Chevron: Asia Must Develop Untapped Gas Deposits

SINGAPORE (THE WALL STREET JOURNAL via Dow Jones), Nov. 13, 2009

Asian governments need to act more aggressively to boost energy security, including making it easier to develop untapped gas deposits and alternative energy to prevent shortfalls, a top Chevron Corp. official said Thursday.

The region's countries "have discussed strategies, policy frameworks and best practices for 10 years," said George Kirkland, Chevron's executive vice president for upstream and gas, at a meeting at the annual Asia-Pacific Economic Cooperation conference in Singapore. "Now is the time to take action."

In an interview, Mr. Kirkland said Chevron is reviewing whether to participate in bidding for Iraq oil assets next month. He also said Chevron supports U.S. efforts to increase dialogue with Myanmar, adding that the company wouldn't divest its assets there.

In terms of developing Asia-Pacific assets, Mr. Kirkland singled out Australia as a model because it offers a stable political environment and reliable fiscal terms. It also worked with Chevron to support strategies to trap carbon dioxide generated in the production of natural gas there and bury it underground, assuming long-term liability for the emissions, he said.

Chevron recently green-lighted one of the world's largest liquefied natural gas projects there -- the 43 billion Australian dollar (US$40 billion) Gorgon project offshore -- and hopes to proceed with a planned Wheatstone development in Australia as well, he said.

"Australia got it right with natural gas," he said.

Indonesia, where Chevron has long operated, has become more difficult to work in, he said. Other parts of Asia with potential remain unstable or off-limits to further exploration by Western companies, such as Myanmar, where U.S. sanctions prevent many major companies from expanding their presence.

Mr. Kirkland's comments come at a time when many parts of the world are awash in natural gas. He said potential surpluses could disappear if more investments aren't made, especially in Asia. Unlike the U.S., where much of the domestic gas supply is transported through pipelines, Asia relies heavily on imported liquefied natural gas, which requires capital to develop.

"You have to spend a lot of money, and until you spend the money, you don't have the gas," Mr. Kirkland said.

Mr. Kirkland suggested Chevron may play a part in an upcoming second round of bidding in December for oil assets in Iraq. He said Iraqi officials had taken steps to clarify contractual terms that could make the second round more attractive to foreign investors.

"For a big company, it will be difficult not to be there," he said, though he added, "we've not reached a final decision on our bids."

Mr. Kirkland said Chevron also remains interested in Myanmar, but won't expand there so long as U.S. sanctions -- put in place because of the country's long history of human-rights abuses -- remain. Mr. Kirkland said Chevron is "strongly supportive" of a recent initiative by the Obama administration to expand dialogue with Myanmar's ruling military regime.

"You can't make progress unless people are talking," he said, adding that Chevron would "love to see" diplomatic progress in the country, which could lead to improvements in living standards for Myanmar residents as well as potential investment opportunities for Chevron, though any further opening of the country could be years if not decades away.

Chevron has come under criticism from international rights activists for its Myanmar investments, which it acquired when it bought U.S. oil-and-gas producer Unocal Corp. several years ago. But Mr. Kirkland said Chevron has no intention of pulling out.

Myanmar has "some good basins" and "there just isn't an unlimited number of basins" left in the world to explore and develop, he said. It is unlikely Chevron would decide to move out of the country, he said.

"You hate to exit," he said. "Once you exit, it's hard to return."

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