New risk for energy industry may be to avoid usual risks, say executives

Sam Fletcher
OGJ Online

HOUSTON, Feb. 12 -- In the "shadow" of the Sept. 11 terrorist attacks on New York and Washington, DC, "our greatest new risk could be failing to take the old risks essential to earning the rewards of our business and supplying our customers," said Peter J. Robertson, vice chairman of ChevronTexaco Corp., at a conference of energy executives Tuesday in Houston.

That includes "risks like doing major capital projects in unsettled regions and within complex partnerships" or "investing with countries that need to develop their resources even as they struggle to achieve internal stability," he said.

"If we retreated from these calculated risks, we would indeed see a 'changed world' and probably not a better one," said Robertson in a panel discussion of industry risks at the start of that week-long annual conference sponsored by Cambridge Energy Research Associates (CERA).

The conference's theme, "The New Face of Risk," was reflected in the photograph identity tags issued to each of the reported 1,600 people registered to attend the Houston conference. Police security at the meeting was unusually tight after Attorney General John Ashcroft urged "the highest state of alert" in an international search for 16 suspected terrorists believed to be planning an attack Tuesday against the US or US citizens in Yemen.

Ironically, as attendees lined up to be photographed for their badges, the line extended at times outside the meeting area in the Westin Galleria Hotel and into the crowded Galleria shopping mall with its open access. And there were no picture identification badges on the waiters and maintenance personnel who moved easily among the delegates at the meeting.

At that morning session, Raul Munoz Leos, director general of Petroleos Mexicanos SA (Pemex), Mexico's national oil company, observed that terrorist threats had not caused Houston's energy sector "to retreat or even slow down."

Risk is inherent to the oil and natural gas industry, which knows how to assess and respond to risk, he said.

In his opening address to the conference, Philip Watts, chairman of the Royal Dutch/Shell Group's committee of managing directors, said energy markets have a good record of keeping supplies flowing even during periods of unusual risk.

That was the case "during the Gulf War when 7% of production was removed from the market," he said. "Russian gas supplies to Europe were maintained despite all the upheavals following the collapse of the Soviet Union."

However, Watts said Shell officials last year developed a new set of scenarios to "consider how people with diverse perspectives, values, and motivations may react to these forces."

One scenario, dubbed the "business class" for that class of corporate frequent flyers in a world where "most people never fly," is "focused on efficiency and individual choice driven by an interconnected global elite influenced by US values and ideas," said Watts.

The second "prism" scenario "describes a future shaped not by what we have in common but by the interplay of our differences."

In that scenario, Watts said, "People find their values in their roots. They are interested in economic well-being and growth, but also social cohesion, religious faith and national pride. Countries find their own development paths to suit their individual economic, political, and social circumstances."

The Sept. 11 attacks did not invalidate those scenarios, Watts said. However, he said, before those events, Shell employees when asked which of the two scenarios seemed most prevalent generally picked the "business class" approach."

"But after Sept. 11, their responses flip-flopped to the "prism" side," he said. "Events did not change the scenarios, but it may have altered our perceptions."

Contact Sam Fletcher at [email protected]