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Royal Dutch Shell has a new face in the driver’s seat for its U.S. operations: Marvin Odum

Houston Chronicle

July 11, 2008, 10:50PM

Q&A

A key Shell concern — access

The company’s top U.S. executive says a ‘full basket’ of global energy sources will be needed by 2050

Royal Dutch Shell has a new face in the driver’s seat for its U.S. operations. Marvin Odum became president of Shell Oil Co. more than a month ago upon John Hofmeister’s retirement.

Odum, 49, is a native Houstonian who joined Shell in 1982 as a mechanical engineer. He stuck with the company through the oil bust of the 1980s, lean times amid low oil prices in the next decade, and through the current run-up that has pushed oil past $140 a barrel and gasoline north of $4 a gallon.

In his first interview since becoming the Netherlands-based company’s top U.S. executive, Odum discussed challenges facing the oil industry at a time of tight supply, growing global demand and concern about energy affordability.

Q: It’s an interesting time to take a top post at an oil company. Oil prices are setting records, gasoline prices are at all-time highs, climate change is at the forefront and companies are struggling to maintain, much less increase, oil and gas production. What do you think is the top challenge facing the industry, and how can it be tackled?

A: I’d almost call it even an aversion to the idea of what’s “the” challenge or the biggest challenge. I can bring the whole challenge down to five words: More energy, less carbon dioxide.

The big challenge associated with the need for more energy is access. Advancement and development of alternative energies is clearly a challenge for us. We need to ensure that we have the right supply makeup of people with the technical skills and other skills required for this industry. Those are a few of the top concerns.

Q: In terms of access, are you talking about increasing access in the U.S. and getting better access globally? Shell experienced a host country taking control of an operation when Russia’s Gazprom took over the majority of Shell’s natural gas operation on Sakhalin Island in 2006. Other companies have had similar experiences in host countries.

A: Access is clearly a global issue. As we think of this long-term energy picture and this transition that we’ll go through sometime in this century from the fossil fuels of today to a mix of fossil fuel and alternatives ultimately to alternative fuels, then we’re going to need a constant and good supply of conventional oil and gas. It’s extremely important that it’s recognized by the government that the U.S. needs access to its resources. We can do it safely and responsibly and help this overall energy picture.

Q: Are you talking in terms of the recent debate about getting access to U.S. offshore areas that are now off limits as well as the Arctic National Wildlife Refuge?

A: That’s exactly right. It’s onshore and offshore. We are particularly interested in the offshore, the Outer Continental Shelf, including Alaska. We have a lot of experience in that area. We know we can do it well. We know the public doesn’t have to be afraid of developing those resources.

Q: Opponents to drilling in off-limits areas say it won’t lower gasoline prices in the short term. Your thoughts?

A: You’re not going to get any results until you start. It is important to start, and it’s important to start now. That self-help element, the fact that we can solve part of this ourselves, is so important — and an important signal to the rest of the world.

More conventional oil and gas access is not going to solve the entire problem. The energy demand in the world is growing so rapidly. We look at the energy demand of the globe and say by 2050, it will be twice what it is today. We need not only the oil and gas that we can gain access to, but we’ll also need the alternative energies in terms of wind, solar, hydrogen, nuclear power potentially, you name it. It’s going to take this full basket of energy sources to supply the world’s needs.

Q: What do you think of the plan that was unveiled this week by T. Boone Pickens to increase wind power production so some natural gas can switch from generating power to fueling cars?

A: It’s an important component of that “all of the above” answer. And technology is such an important part of this business. Putting that technology to work, using that technology to solve climate issues, as well as the additional resource challenges, is the right way to be looking.

Q: There are a lot of comparisons between what’s happening now with energy prices and the oil shocks of the 1970s. What do you see that’s the same, and what’s different?

A: The difference is this convergence of supply capacity and demand and where the world is in terms of demand. What’s causing a lot of these prices to rise is those that understand the industry are worried about those lines crossing, where demand could even exceed supply. Geopolitics of course are still very important today, but where that may have been heavily driving the exact situation in the ’70s, I think it’s more of a global capacity issue and a global demand issue today.

Q: A lot of consumers blame oil companies for what they pay at the pump. Do oil companies set the price of gasoline, and do they set the price of oil in the market, for that matter?

A: We clearly don’t. This is a supply and demand system. I’ll just point to my own company and say Shell, productionwise worldwide, probably makes somewhere around the order of 3 percent of global oil production. A very small number. It is a multiple group of supplies that come into the market clearly driven by the fundamentals.

Q: Even if it’s far in the future, do you think it’s really possible to completely wean ourselves from fossil fuels?

A: If we make the assumption that energy demand is going to double between now and 2050, then we would make a projection that says in a strong development case, where alternatives get public policy support and investment support they need to move forward, that by the middle of this century, alternative fuels could be supplying something along the order of 40 percent of that total energy demand. But you still have to ask yourself, where is the remaining 60 percent of energy being supplied from? We do think for multiple decades here that hydrocarbons will still have a role. So what you see in parallel to working on new technologies to develop alternative energies is how we can lower the carbon dioxide intensity of the existing hydrocarbon fuels. Technology is the key to all of this.

Q: It seems that the oil industry overall, and the majors more than smaller companies, have a credibility problem. CEOs get pummeled in congressional hearings. Consumers don’t seem to believe what they say. How do you deal with that?

A: I think it’s important for people to hear directly from us what we’re doing as a company to try to solve the problem. I think it was built up over many decades, and part of it, we have to take responsibility for, which is not having told our own story well enough for a long time.

Q: What do you drive?

A: I drive a BMW. And my wife drives a Volkswagen Beetle.

MARVIN ODUM

• Age: 49• Position: President of Shell Oil Co., Royal Dutch Shell’s U.S. arm, and executive vice president in charge of Shell’s Western Hemisphere exploration and production division.

• Background: Joined Shell in 1982 as engineer, has held executive positions in technical and commercial operations.

• Education: Bachelor’s degree in mechanical engineering, University of Texas; master’s in business administration, University of Houston.

• Civic-professional affiliations: Dean’s Council, Harvard Kennedy School; Advisory Board, University of Texas College of Engineering; Board of Directors, Palmer Drug Abuse Program; Chairman, American Petroleum Institute Upstream Committee; University Cancer Foundation Board of Visitors, M.D. Anderson Cancer Center.

Source: Shell Oil

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