Arctic oil drilling brings risks, lessons, ExxonMobil CEO Tillerson says
WASHINGTON — The Arctic is the next great frontier for oil and gas — and one of the most environmentally fragile places on earth.
An Energy Department advisory council study adopted last week said the United States should start exploring for oil and gas in the Arctic soon in order to feed future demand, and that the industry is ready to safely exploit the Arctic’s huge reserves, despite recent mishaps.
In an interview with The Associated Press, ExxonMobil CEO Rex Tillerson, who led the committee that produced the report, talked about why he thinks Arctic exploration is worth the risk. Exxon has decades of experience in working in that part of the world, including successful projects in Russia — but also a catastrophic oil spill in Alaska’s Prince William Sound when the Exxon Valdez oil tanker ran aground in 1989.
Below are excerpts of the interview, edited for length and clarity.
AP: Why now?
Tillerson: There are two important elements for people to understand. One is the time lines that are required. Anytime you are dealing in these frontier areas where you are really driven by technology, these are very long time frames, multi-decade time frames.
The second element is just the enormity of the energy demand in the world. It’s between 85 (million) and 90 million barrels of oil per day. That takes huge resources to supply that in a reliable way.
We are in the depletion business. There will come a time when all the resources that are supplying the world’s economies today are going to go in decline. This will be what’s needed next. If we start today, it’ll take 20, 30, 40 years for those to come on.
AP: Why the Arctic?
Tillerson: The size of the resource prize has to be large to support the risked capital that has to be put in place. The Arctic is one of the few places left where we believe those opportunities exist.
AP: Environmentalists would also say that it’s one of the last few places left that are unspoiled. Why not leave it alone?
Tillerson: Because eventually we are going to need it. It’s back to that insatiable appetite that the world has for energy. Oil demand is going to continue to grow as population grows. If you look out 25 years from now, we are going to have another couple of billion people on the planet; we’re going to be at 9 billion people. Something like 3 billion people are going to move from poverty into middle-class status. When they do that, the energy demand goes up enormously.
As we move out into the middle of this century, our outlook shows you are going to need those resources, even with a lot of other alternative forms of energy continuing at a fairly aggressive growth rate.
AP: Why put your company’s reputation at risk, especially after Valdez?
Tillerson: Valdez was a devastating experience for our corporation. What emerged from that was a commitment to develop a systematic approach to managing risk in advance.
Since Valdez, we have gone into some very challenging environments, and we have been very successful in developing those using this approach, which identifies the risk, takes steps to mitigate that risk, but then recognizes importantly that you cannot eliminate that risk.
None of us live in a zero-risk world. We don’t think it’s appropriate, nor do we think it’s what our shareholders want for us to walk away from something because we had a bad experience. Rather, we choose to take that challenge on, and we have.
AP: How can you try to convince people that this is the right thing to do?
Tillerson: First, we try to work at a very broad context so the American people understand this is important to them.
Obviously, we’ve got a huge economy here that has to be fed. If we stopped today, everybody’s lights would be going off before not too long, because there wouldn’t be anything to fuel that.
When we’re trying to influence policy and regulation, it’s really around how do we get the right regulatory and fiscal regime in place that allows us to continually do what we need to do, which is replace all of this, and sustain it, and grow it for the future economic growth and demand that we know is coming.