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Chevron’s Nicholls expects demand to increase in 2010 and continue in coming years

 

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Chevron’s Mauricio Nicholls is responsible for Chevron operations on the “downstream” or fuel side of the business in the Caribbean Basin

Talk about energy with Chevron’s Mauricio Nicholls at WorldCity’s CEO Club on Jan. 29, and topics range from global trends to working with Venezuela’s government and even tips to spot the best gas station.

Where to fill up? In Latin America, at least, “if you see a gas station with a lot of taxis, that’s the one where to get gas,” Nicholls advised. The reason: Most Latin American nations control the price of gas, but allow some slight leeway on how much is pumped as a liter, a margin of error.

 

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Quaxar’s Leonel Azuela was one of about two dozen multinational leaders at the CEO Club

Taxi drivers take care to buy the most gas for their money, so where they choose to pump, “it’s the most exact measure,” Nicholls said at the event, which is sponsored by the University of Miami School of Business and the international law firm Diaz Reus.

About two dozen members and guests attended the inaugural meeting of the 2010 season for the CEO Club, now in its third year, to share with Nicholls, general manager for Chevron Product Co.’s retail, commercial and industrial division for the Caribbean, Central America and Andean region.

Here are highlights from the far-ranging conversation, studded with questions from attendees.

On global demand for energy: Nicholls said demand for energy slid in 2009 because of the global recession, but should rise this year as the world economy picks up. Longer-term, demand will jump, as the world population grows and people in China, India, Brazil and other developing nations buy “more cars, bigger homes and nicer vacations.”

Annual demand could rise 45 percent by 2030, propelled largely by China. The Asian giant will add more than 100 million cars on its roads in the next decade, according to some forecasts.

On energy sources: Efforts are increasing to conserve energy and produce more from renewable sources such as wind, sun and plants. But even if renewables triple in importance to supply 20 percent of world demand by 2030, oil and other fossil fuels will still supply the bulk of energy, he said.

“There is no single solution to the energy demand the world needs,” Nicholls said.

On finding more oil and gas: Finding and developing new oil fields to meet demand is becoming more difficult and more expensive. The easier fields already have been tapped, and the remaining ones often are located in deep waters offshore or contain so-called “heavy oil” that is tougher to process, Nicholls said.

Chevron invested about $23 billion last year to develop fields, about twice its annual earnings, he said.

On Venezuela: Extracting oil means working in the countries where the fields are and dealing with their governments. In Venezuela, some of Chevron’s competitors left when the administration led by President Hugo Chavez renegotiated oil contracts. Chevron instead renegotiated and stayed.

“We really try to work with governments to see where they’re headed and what we can bring to the table,” emphasizing partnerships as a prime business strategy, Nicholls said.

Rafael Castillo, CEO for the Alta Group’s Latin American region, asked about the outlook for Venezuela. Nicholls said Chevron remains profitable there and is looking to “maybe double production .”

On Brazil: Henry Martinez, managing director for Discovery Networks Latin America and U.S. Hispanic, asked about oil potential for Brazil. South America’s largest nation recently discovered large deposits offshore and, by some accounts, could become a major oil exporter.

Nicholls said Brazil’s state oil company Petrobras likely will need international companies to help exploit those deepwater reserves, and tapping them could take as much as seven years more.

On competition: Andres Otero, managing director in Miami for Kroll Associates, asked about the biggest competitive threat to Chevron and the oil industry.

Nicholls’ answer: “Restricted access to new oil and gas resources, and competition from national oil companies,” which often are favored by their own governments over other energy firms.

On gas stations: Some oil companies are departing the business of retail gas stations, where profits are relatively small. Shell, for example, has exited some Caribbean and Central American markets and sold gas stations there to local business groups, Nicholls said.

In the United States, most gas stations now are owned by independent operators. The owners tend to mark up the price of gas by about 20 cents a gallon and from that, cover such expenses as salaries, rent and electricity. An average station sells about 50,000 gallons a month, so its markup may be $10,000 a month, Nicholls said. To profit, the stations increasingly rely on sales from convenience stores.