EnergyBiz - January/February 2008 - (Page 44) G L O B A L B I G B OyS I N N AT U R A L G A S LNG project may require an initial investment of $5 billion to $10 billion, although the facility would have a lifespan of about 30 years. Shell, BP, France’s Total, ExxonMobil Corporation, British Gas and Chevron are among the biggest players. While Western nations are asking if they can depend on others that are less in tune with their values, the developing countries are debating whether they should give the big oil companies carte blanche over their oil and gas basins. The reality is that most of those nations have well- of the Niger Delta, where many communities lack commercial electricity. It is building transmission cables and installing powergenerating facilities – all to provide 100,000 Delta residents in 20 communities with electric power. “We’ve selected a position that respects both our responsibility to turn a profit in a business that, at its core, is about improving standards of living and our intention to enhance the societies in which we do business,” says Peter Robertson, vice chair of Chevron. “To succeed today, a company like Chevron must demonstrate world-class performance across every aspect of our business, from our technical and financial performance to our impact on society and the environment – the so-called triple bottom line. Nearly every single Chevron employee integrates these values into everyday activities and decision making.” The Deterrents To be sure, the host countries and the oil companies often have uneasy relationships. Consider the 663-mile pipeline from Chad to Cameroon in West Africa. The $3.7 billion deal that culminated in 2003 was a combative process, drawing fire from environmentalists and human rights activists alike. Those critics said revenues from construction activity would not be invested back into the country, pointing out that French, German and U.S. compaThe big had challenge niesIn thewon all the contracts. built based end, the pipeline was is actually upon the expectation that government getting revenues in those African countries would increase by hundreds of millions of dollars. access to But the same issues are still pervasive today. sufficient In fact, discussions are now taking place in gas West Africa that would involve expansions or development of several LNG plants. Financing issues along with internal strife are deterring not just LNG projects but also pipelines and power plants that are needed once the resource is re-gasified. Shell, for example, has delayed some multi-billion dollar deals in the region because of sabotage. Ever-increasing costs are also a deterrent. Chevron has seen escalating cost at its Greater Gorge project in Australia. The facility was expected to come on line in 2010 and to cost about $11 billion. Now, though, the company says it won’t be completed until 2015 and that it will now cost about $14 billion. Shell, meantime, says that the Sakhalin 2 LNG project in Russia is going to rise from $10 billion to $20 billion. While obstacles to LNG development abound, the fact remains that the commodity’s popularity is growing. Scottish Consultancy Wood Mackenzie says that worldwide, LNG demand will triple by 2020. It is predicting consumption will blossom from 7 trillion cubic feet a year now to 25 trillion cubic feet a year. “The big challenge facing the LNG industry in the foreseeable future is actually getting access to sufficient gas reserves, or enough gas supplies to feed growth,” says Frank Harris, head of global LNG for Wood Mackenzie. “We think this is an issue in the short, medium and long term. The national oil and gas companies’ strategies are evolving. To keep growing, the international companies have to do more exploration.” Big oil companies and the nations in which they do business are linked at the hip. It’s a symbiotic relationship and one that will require the hosts to lessen restrictions and the industry to maintain a firm social compact. It’s about creating prosperity and helping to feed the global energy demand. Men fish in the sea near a liquefaction gas plant on Russia’s Sakhaim island. sOurcE : rEuTE rs/sE rg E i k arpuk hin ( russia) positioned national enterprises that control the processes. They seek Western partners primarily for their technological knowledge. Certainly, much of the world has moved beyond the stereotypical images of the multinational corporation as preying upon their people and their profits. They largely see them as sources of prosperity and economic development. Chevron says that 90 percent of everyone it employs in Angola and Nigeria are locals. It says that it is also addressing energy poverty in the remotest sections 44 E n E rgyB i z January/February 2008
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