Archive for the ‘John Hofmeister’ Category

Posted by Gail the Actuary John Hofmeister, recently retired president of Shell Oil Company, gave a luncheon speech at the Offshore Technology Conference on our energy predicament, and the challenges the oil and gas industry faces, viewed from inside the industry. I am not certain we will agree with everything he says, but thought we might think about the issues raised. I quote from an article that begins on page 3 of OTC2010.
More recently, despite the high oil price “wake up” call delivered to the US during the period 2005-2008, policymakers have been unable or unwilling to address the nation’s energy security, economic competitiveness that comes from affordable energy, and the potential jobs creation initiatives that a sound energy policy would and should deliver.
Given the current trajectory of an aging infrastructure, decades of restrictions on drilling, failure to tackle the obstacles that prevent both more nuclear plant and clean coal plant projects, frittering at the edges of renewable energy, and avoidance of other energy “hard choices,” within the decade the nation faces an unprecedented energy abyss.
By 2020, there will be inadequate supplies of liquid fuels and electricity taking the nation toward inevitable gas lines, brown-outs, black-outs and extraordinary high prices. The energy abyss will stick around for up to a full decade with all of the national insecurity, economic decline, joblessness and social malaise that accompanies energy shortages in third world countries.
The energy industry, despite its technological, geological, chemical, physical, molecular, logistical, scientific and engineering expertise and capacity to deliver affordable energy in endless supply, given all of the natural sources of energy in this country, and the world, will be unable to supply the demand because of public policy constraints. Yet, it will bear the brunt of the blame for energy shortages. Today’s energy professionals will bear the reputational burden of our national decline and failure because who else is blameable?
Are you prepared to accept that blame, or are there viable alternatives, things you can do, to change the nation’s current trajectory?
Understanding the scope and depth of the energy system’s problems requires careful understanding of just how entrenched the obstacles are to sound enabling public policy. What do we do about “political time” dominance in the political process, up against “energy time” requirements to get projects launched and completed?
How do you respond to the dysfunctional structures that our three independent branches of government have created over the course of time? Is it really necessary to have 13 executive branch agencies govern energy and the environment? Do we need 26 congressional committees and subcommittees writing legislation on energy? Should every federal district court have authority to delay and ultimately prevent citizens from having the energy they need because of the power of the judicial bench?
How long can you tolerate the paralysis of partisanship where right and left wing interest groups, demagogues and authority figures, elected as well as appointed, prohibit mainstream, centrist Americans, most likely the majority of citizens, from achieving needed policy objectives? Are you willing to accept zigzag efforts to move energy policy forward forever?
The nation has to come to grips with its energy future sooner, not later. The time is now not then. We can’t wait for a ninth president and 19th congress to promise us whatever it takes to get elected and then lead us down another failed path.
We should have learned by now but we haven’t. So what can change and what can you do to make a difference as an energy professional and as a citizen of this or any country.
John Hofmeister is candid in acknowledging approaching energy constraints–probably more than most energy insiders. We at The Oil Drum know that there are real physical constraints that the oil and gas industry is up against, but in my view, no one is up to admitting to that issue. Instead, we have many groups running around, blaming each other, each with a phony promise that the situation can be fixed, “if only” the fix of the day is implemented.
On one side, we have the oil companies, blaming the political groups for trying to over-regulate the industry, and thus hold down oil supplies. Perhaps there is a bit of truth to the issue, but the basic issue remains that the cheap oil and gas have mostly been extracted, and our economy cannot really afford expensive oil and gas.
On another side, we have many encouraging outrageously optimistic views regarding what alternative energy sources can do, but not considering the issue that maintaining such basics as food and heat for the current population would be a major challenge. There is also an issue regarding how much of these alternatives our financial system can really afford. If we can’t afford $150 oil, it is not clear we can afford high priced alternatives, especially if they cannot operate our current oil-based infrastructure.
No one is really willing to look at what our energy future is really likely to look like, and plan and make regulations on that basis. In my view, we really should be planning for what industry and transportation will need to look like, with no (or very little) fossil fuels. We need to look at what kind of roads we can maintain, and what, if any, kinds of vehicles will be able to run on them. If we don’t look to see where we are really headed, it is hard to see that we can take steps that will get us in the right direction.

The Gulf oil disaster is an anomaly. The industry is vital for America’s needs and knows what it’s doing
When the president calls your top executive “ridiculous” from the rose garden of the White House, it’s a low point. When late-night TV hosts make demeaning jokes about your company, it’s a bad day. When your industry distances itself, you are lonely. When the facts are awful (11 deaths, a lost rig, an open well flowing into the sea), it’s a very bad time.
Having sat in the US chair for Shell and knowing what America thinks of foreign-owned companies operating in its critical industries, here’s my view. BP is, for now, Uncle Remus’ Br’er Rabbit fighting the tar baby in the briar patch. In the background are unforgotten memories of legacy Amoco and Arco acquisition properties, which produced their own bad days. Nonetheless, BP must endure. Its board and executives must get past their fears. BP makes an important contribution to America.
To keep up with demand the US needs to keep producing energy from every available source, despite the associated risks. There are more energy resources in the US than it needs, and plenty of room for many producers, domestic and foreign. It is a country where companies can profit while delivering sustainable solutions for US energy challenges. Producers are needed, but must learn their hosts’ ways.
BP must know that in the US politics and energy are conjoined twins. You can’t succeed without your twin, no matter how difficult it is. The craving for energy means industry leads; risks gone wrong, or prices too high mean politicians lead. We walk back and forth most days, going nowhere. Yet you have to respect your twin, even if you can’t bear him or her.
Complicating BP’s life is the US media and its craving for the headline news: full coverage of every descriptive detail so the tar baby can be tossed about until another one comes along.
The ultimate business challenge is to appreciate the consuming public. It wants ever more inexpensive gasoline but won’t stand to taste, touch, see or smell it or its production. It also chooses its elected officials, who want the same.
Shell and the other US oil majors have known all this for a century. They’re unlikely to share their knowledge. They’d face an anti-trust charge. Much of the US legal industry lives off the productive efforts of the energy industry.
So BP must learn to operate invisibly, adjoin politicians as partners, engage media as witness, befriend needy, greedy consumers and accept legal costs as structural. When mistakes happen, it must soldier on. Time passes painfully but that’s America, where we hate the oil companies.
In the fullness of time the Gulf incident will be an anomaly: deadly, expensive and unfortunate, unprecedented in 40 years of offshore operations. The industry knows what it is doing.
From what I see, BP’s crisis response team is doing what it’s designed to do: suspending corporate structures for chain of command control; creating a worldwide team of experts to design and implement every option to stop or channel the well flow; initiating the agonising process of drilling the relief well that will ultimately shut the flow; and organising an armada of ships to contain and capture the released oil.
In addition they have recruited 13,000 people to clean up, opened their website and telephone lines to every offer of help and damning complaint from the public, kept the media well informed, met with sceptical federal officials from an array of agencies, organised for legal recriminations – and kept their head while running the rest of their company. This takes capacity and competence.

by Mike Magda (RSS feed)
Shell president John Hofmeister is touring the country as part of a 50-city dog-and-pony show to explain high gas prices and listen to consumer concerns about the oil industry, the environment and just about anything else on the minds of his customers. It’s a bold move, considering the public sentiment toward big oil. But I’m personally aware of Shell’s efforts to strike a green chord in the hearts and minds of the public. I get calls or emails from Shell representatives every week, offering to supply information. It is a very efficient operation.

In a recent wide-ranging interview with the San Antonio Express News, Hofmeister offered his companies views on a number of topics, including the infrastructure changes needed to accommodate E85.

“Do customers want E85? We don’t know the answer to that yet?” said Hofmeister, noting that consumers see the high cost of E85 and are realizing that the fuel economy is less.

Hofmeister said Shell’s position on the source of E85 fuel is clear: the expressed preference is cellulosic ethanol but notes there is no large-scale effort from this segment. Hofmeister says he’s concerned about food prices going up if corn is used to produce E85.

On another note, Hofmeister said if subsidies weren’t available, then ethanol would be far less popular.