Strength through regulatory certainty and firm partnerships: Chevron [LNG2023]
The energy industry needs regulatory certainty, the ability to attract capital and long-term offtake agreements to avert future energy crises, Freeman Shaheen, president of Chevron Global Gas, tells NGW.
Even before COVID-19 rocked global energy markets, the natural gas industry saw capital drying up as uncertainty weighed over the future demand for gas during the energy transition. And the situation was further exacerbated while the pandemic hit, Shaheen says.
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As economies exited lockdowns post-pandemic, though, demand for oil and gas soared but there was insufficient past investment in supply to cover it, resulting in price spikes, he says. Then came the war in Ukraine, creating further volatility, particularly as Europe lost most of its pipeline gas supply from Russia and had to scramble for LNG to replace it.
To prevent further volatility, the energy sector needs “regulatory certainty and partnerships – those partnerships look like capital investments with long- term offtake investments,” Shaheen says.
Prior and even during the pandemic, an increasing number of major financiers were announcing plans to scale back support for hydrocarbon projects. While responses vary across the world, Shaheen believes that “an important lesson has been learned that oil and gas has a key role to play for decades to come.”
“It will take decades to make the world greener, and investing in gas today will help in that pursuit by displacing higher carbon intensity coal,” he continues. “We’re also working to make gas cleaner,” he notes, pointing to Chevron’s efforts in the Permian basin, where it is increasingly monitoring methane emissions by deploying and scaling advanced detection technologies, as well as using renewables where possible to power its operations. “I’m really proud to see how things have evolved in my 30-year career. I see this energy around the way we’re making the production much cleaner,” he says. “We’re proud of what we do, and I think it has a key role to play in the world, a very responsible role. There are many developing countries, markets and people that haven’t experienced the safety, security and reliability of energy and the prosperity that’s associated with it. And they deserve that.”
Building up an LNG base
Asia has a very disciplined approach to long-term LNG contracting so they weren’t so susceptible to spot price spikes seen over the past year, he notes. “Europe is now moving towards those longer-term commitments, and we’re also seeing more discussions about regulatory certainty and streamlining processes.”
Is Chevron setting up as a global LNG supplier? “We’re contracted for more liquefaction volume out of the US. We’ve got a joint venture operation with Angola LNG that can deliver to Europe. We’re also working on assets in Equatorial Guinea which we picked up in the Noble deal,” Shaheen says.
Chevron made a “bold move” to expand its geographical focus with the acquisition of Noble Energy in 2020, in the midst of the pandemic. The deal worth $5bn gave Chevron a position in the gas-rich East Mediterranean, including operatorship of the Leviathan and Tamar gas fields off Israel, as well as the as-yet-undeveloped Aprophidite gas field off Cyprus. Planning is underway for potential LNG exports from these assets.
The company is also continuing to optimise its Western Australian LNG operations, he says.
“We really do believe that gas leads to a lower carbon future, especially by displacing coal,” Shaheen says. “It really takes capital coming into the market. These assets don’t get built overnight. It takes three to four years to get trains up and running. Further capital when there are low-carbon technologies employed such as at Gorgon LNG, so a long-term offtaking commitment is needed from customers to support this.”
Chevron has now emerged as the biggest producer in the Permian basin, and is eager to link that supply with global markets. Last year it contracted 4mn mt/yr of liquefaction coming out of the US while it also provides supply to the LNG producers. Those LNG exporters can enjoy cleaner gas that has been produced without routine flaring and regular methane monitoring, Shaheen says.
“And that means a lot, especially to the Europeans. Often their first question is how is your gas cleaner?” he says.
On the benefits of US gas, both in terms of cost and environmental impact, Sha- heen notes that the country, which only 15 years ago was expected to become the biggest importer of gas, is now on track to becoming the biggest exporter.
“It has a vast, low-cost resource base and the skills, and it takes the right types of partners and long-term contracts to realise the US investment portfolio, he says.
Hitting back against concerns about hydraulic fracking, Shaheen says he’s very proud of the way the US is producing and supplying the market while doing it more cleanly and with more responsibility.
He points to new initiatives gaining momentum such as MiQ, Equitable Origin and Project Canary that certify the gas as responsibly-sourced.
This interview was originally published in the LNG2023 Daily, produced by NGW during the LNG2023 conference in Vancouver July 10-13.