Vicki Hollub is the President and CEO of Occidental Petroleum -- one of the largest oil and gas exploration and production companies in the U.S. and a major player in the Permian Basin. She joins host Jason Bordoff at the 2019 Columbia Global Energy Summit to discuss carbon pricing, the battle for dominance in the Permian Basin, what’s next for LNG, and the business case for advancing a lower carbon future.
Vicki Hollub is the first woman to head a major American oil company, serving as an industry leader since she joined Occidental in 1982. In her 35 years with the company, she has held management and technical positions with responsibilities on three continents, including overseeing operations in the United States, Russia, Venezuela, and Ecuador. She is the chair of the U.S. Secretary of Energy Advisory Board and a member of the World Economic Forum and the Oil and Gas Climate Initiative.
On April 10, the 2019 Columbia Global Energy Summit in New York City hosted top politicians, business leaders, and academics for a variety of lively discussions on what to expect in changes to the oil and gas landscape, the latest research on powering the low-carbon transition, navigating U.S. political fields to advance climate solutions, how to assess risk and build grid resilience, and much more.
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Bill Loveless: Hello and welcome to the Columbia Energy Exchange. A podcast from the Center on Global Energy Policy at Columbia University School of International and Public Affairs. I’m Bill Loveless. This episode of the Columbia Energy Exchange is part of a special series recorded in front of a live audience at the 2019 Columbia Global Energy Summit in New York City on April 10th. The gatherings are a variety of energy sector leaders with CEOs, politicians and researchers presenting and discussing cutting-edge research for climate solutions, emerging challenges in energy geopolitics, changes to the oil and gas landscape, the view on energy and climate from Washington and more. You can catch the recording of all these conversations by visiting Energypolicy.columbia.edu. One of the speakers at the summit who Jason Bordoff talked to was Vicki Hollub, President and CEO of Occidental Petroleum. One of the largest oil and gas exploration and production companies in the U.S. and a major player in the Permian basin. We hear from her on Occy’s aim to become a carbon neutral oil producer and where the last barrel will come from and putting a price on carbon, what to expect next from LNG and a message for young people on taking up careers in oil and gas. Here is their conversation.
Jason Bordoff: We’re really delighted for this keynote conversation to welcome Vicki Hollub to Columbia Center on Global Energy Policy for the first time. Hopefully, not the last time. As I said, the CEO of Occidental Petroleum. I believe, the fifth largest U.S. oil group by market map. Maybe, it’s fourth, somewhere around there.
Vicki Hollub: We are shooting forward.
Jason Bordoff: Major player in the Permian as well as production in the Middle East and South America. She has been working on this for a very long time. Joined the company that soon became Occidental straight out of the University of Alabama where she earned a degree in mineral engineering. Has led teams all over the world, from Venezuela to Ecuador to Russia and holds numerous board and esteemed chair positions including, I think recently venue chair of the U.S. Secretary of Energy Advisory Board along with lots of other distinguished leadership roles and is the first woman to run a major U.S. oil and gas company as well as a devoted fan of Alabama Crimson Football. So, as a reminder, you can submit questions on Twitter or to text them at the number on that business card on your table. So, let’s dive right into the conversation. We finished up the last panel on geopoliticians talking about issues of energy transition and climate. I want to start there with you because you’ve been really vocal on this issue recently. You recently announced the goal for Occidental Petroleum to be carbon neutral, not just for the energy in your operations but emissions from the U.S. of the products that you bring to market. Talk a little bit about why you did that? Why that’s important and how do you achieve that?
Vicki Hollub: Okay. First, I’ll start with by saying that I’m really proud of our industry. Where we’ve come, the technology we’ve developed. All we’ve been able to do is bring a high quality of life to people around the world and also to provide the fuel for transportation and make the world a community when they maybe were like neighbors rather than the way we are today but we have connected the world and well, I’m proud that what we’ve done for the people of the world in that connection, I think that what we need to focus on now as an industry is what we do for our earth. What we do for climate and we’re developing now the technology that to start to have a smaller footprint, not only from a land perspective, environmentally and our fresh water but also a smaller footprint with respect to emissions. And our commitment is to do that more aggressively. The good thing about where we sit today as a company is our core expertise to be able to enhance our oil production with CO2 injection and for a number of years, we’ve done it with organic CO2. But what we’ve started to do now is recently started to inject anthropogenic CO2. Now we inject about 20 million metric tons a year and sequester that in our CO reservoirs and we are moving towards a strategy which would enable us to gather anthropogenic CO2 from industries, take that to the Permian and sequester that in the Permian as well. We feel like, we need to do, this is something that’s fairly unique for us and something that we’re being more proactive about and aggressive about in terms of our contribution to emission reduction in the U.S.
Jason Bordoff: And can you talk a little bit about where you see potential uses for CO2 beyond EOR?
Vicki Hollub: Well, I think that beyond EOR, there is also the possibility to use CO2 for products and for other things. There is CO2 now being used to make cement and there is CO2 that can actually make products that, that you might use for containers and for things like that in your home. So, there has been a lot of advancements recently in the way we look at CO2. So, for us, it’s first we recently want to focus on our hands on recovery with CO2 first is that well, 45Q, the[00:05:12] that was passed just a couple of years ago, while it provides.
Jason Bordoff: The tax credit providing incentives for.
Vicki Hollub: Yes, the tax credit that provides incentive to install carbon capture _____ [00:05:58] industries. That provided a way for us to start the process of making carbon capture happen in a bigger way in the united states. So, but as we make that happen, it’s still, you have to work on the economics of the whole process and so, the part of that, that we can do and work on is taking that anthropogenic CO2 and sequestering it in oil reservoirs which enables us to be able to pay the source some fee for the CO2. So, with the combination of the future act and the fact that we can afford to pay a little bit for that CO2, it helps the whole system start working and as we get that working, then over time, we’ll make that carbon capture equipment less and less expensive as we get it installed and optimize it and that’s where I think the other products come in because the other products need a much lower cost of capturing CO2, to be able to make their products more economical.
Jason Bordoff: We heard governor Ainsley this morning who I think is fair to say was somewhat skeptical about the role of carbon capture broadly, not just utilization of EOR. What’s your view of the broader opportunity for carbon capture technology and sequestration to be part of this energy transition?
Vicki Hollub: Well, I think without a doubt, there is, we have no choice. We have to make carbon capture used in sequestration and/or utilization in products. We have to make that work because if you look at all the models, there is really no way to have the impact that we need to have on the environment to reduce the volume of CO2 that we need to reduce without having a carbon capture. Renewables are not enough to get us there. So without carbon capture, we are not gonna get there. That’s part of the reason, we are so committed to making it work.
Jason Bordoff: You recently had Occi join the oil and gas climate initiative. A coalition of major companies that have put capital into investment in low carbon technologies. Talk about some of the technologies you’re particularly excited about and why you joined OGCI more broadly?
Vicki Hollub: Well, the reason we joined OGCI is because we found that as we were working to support the passage of the future act, we were with a broad coalition and that broad coalition included not just, not just environmental groups but regulatory groups. It included power companies, coal companies and oil companies and the strength of that coalition was so amazing that what I wanted to do by joining OGCI is join a group of companies that I personally had found to be very committed to emission reduction in our industry. OGCI was started by a group of European companies and as I became more familiar with them, when I became CEO of Occidental in 2016, I became a part of the oil and gas governors of the world economic forum. So I had a lot more exposure to some of the CEOs of European companies and Saudi Aramco and some others and Ecopetrol. And that relationship and that ability to see their commitment and that behind the scenes, they really meant what they say about reducing emissions. So, I saw the sincerity, I saw the commitment and I knew that the only way that we can advance our industry, help our industry down the road of transitioning from emissions, from this high emission state that we are today to a much lower emission state and hopefully for some others to become carbon neutral or negative. But to do that is to join together. So now, this organization has 13 companies. The 13 companies make up 30% of the world’s production and part of our commitment is to reduce methane emissions and we have a target. Each of us contribute a target to get there and we are put pressure, holding each other accountable to achieve those targets. We’re a very strong organization in that, not only do we have 30% of the world’s production, we are in a 130 different countries, the 13 members and we in 2017, this collective group back then was only 10 companies, spent $6.1 billion toward emission reduction. That’s a huge commitment and now each member company has to commit a billion dollars to go toward emission reduction projects. And we’re the only U.S. company of that coalition that actually contributed to a project to capture carbon in a project in the U.K. So, we’ve already started in a big way to do that and you asked me about our technology, sorry it took me a long time to get there. OGCI have a passion around because it’s a great organization. It’s gonna move the industry, move the needle for all the companies around the world. But some of the other technologies that we’re personally looking into is not only are we doing all the things that a lot of the companies here in the U.S. and elsewhere are doing to lower emissions, you know, along operations. And there are several ways to do that. One of the ways besides improving our operations and becoming more efficient is that we are putting solar in our operations. We’re installing one of the largest solar panels, sets of panels in the Permian, that’s in the oil industry today to power some of our _____ [00:11:29] operations, repeating solar _____ [00:11:31]. So, we are using renewables. But we also recently invested in two really neat technologies. One is net power and net power is a way to generate electricity at lower cost than the traditional power plant and with low emissions because what it does is it separates out CO2 from that process without having to later, retrofit carbon capture. It’s a part of where combustion process to separate out the CO2. Now, we can take that CO2 and sequester underground in our operations. And so, net power is such a unique way to do it, that it won the technology award at _____ [00:12:12] which is now the largest oil and gas conference in the world. So, that technology is important for us and we are using that. Another technology is direct air capture. So, in addition for us to making sure that, that we are doing in our operations that we are putting in electrical power generation that ultimately will be lower cost and therefore benefits our shareholders but we also are gonna be using direct air capture in some of the oil field operations where we’ll be able to just take air and get the CO2 from the air, spread it off and again sequester that underground and enhance recovery. So, we are using all those processes and just like it’s gonna take in the world, it’s gonna take more than renewables to get to where we need to get to and the oil and gas industry and for us as a company, it’s gonna take more than one technology to reduce CO2, to not only have a process of voiding the emissions but reducing the emissions or eliminating them and then making sure that from direct air, we capture and sequester that as well.
Jason Bordoff: We talked at the last panel about the impact that the U.S. shale boom has had some support for that.
Vicki Hollub: Thank you.
Jason Bordoff: And the numbers are stunning, right. 5 to 12 million barrels a day in U.S. production, the Premian largest oil field in the world. We’ll hear from our next panel from _____ [00:13:32] a bit about that as well. You’re one of the major producers in the Permian, I think double production in the last three years. How much will technology continue to improve? How much can cost continue to come down? How big is this going to get?
Vicki Hollub: Well, we’ve already had, you’ve already seen the shale revolution in the United States and _____ [00:13:52] his company was one of the early companies to be really successful at it and so, we all learn a lot from what he and a couple of others have done. But the technology was there. When we needed the technology to do something that hadn’t been done before, it was there. And to me what we’ve seen in terms of technology breakthroughs in the past is only a fraction of what’s gonna happen over the next few years. From what we are seeing in terms of how we are starting to understand our surface better, we’re starting to realize that we can do our Frack jobs differently. We are using a lot of different techniques today than what we were just using two years ago and I think that there is still technology that’s gonna happen, that’s gonna enable us to not only get more from the reservoirs that we run today but to engineer the hydrocarbons out of additional reservoirs as well that are in the Permian. The Permian has hydrocarbons all the way from less than a thousand feet to 20,000 feet. So, there is plenty of potential for the permian to continue to not only import them but to continue to grow.
Jason Bordoff: And what, when we produce liquids in the permian, we get a lot of gas along with it. We talked a little bit this morning about some of the infrastructure constraints with governor Ainsley, with chairman Chatterjee. How big a barrier is infrastructure going to be and where is all these gas gonna go?
Vicki Hollub: That’s gonna be really important for some of the companies, selling _____ [00:15:22] to install LNG. We are gonna need and we will see increasing LNG exports out of the country. That’s gonna be important for our country. Also, I think ultimately, we’ll see more at some point, more gas going to Mexico.
Jason Bordoff: Can you talk about the Indian, the need for a clean energy transition, a lower carbon future but also to address some of the challenges, you’re dealing with today by bringing supply to market and infrastructure constraints? What is the right role for government policy? What policies do you think make sense when we think about trying to achieve the objectives of addressing climate change and also providing stable regulatory environment for industry to work in?
Vicki Hollub: Well, I think, I’ll just go back to what I said earlier. It’s really important that people recognize that while some people don’t like this, it’s really going to take carbon sequestration and the best way to advance that technology is to use it in oil reservoirs. But even with that, it really is going to take some support early on from the government to with either policy and or support for some of the infrastructure that’s going to be needed to get the CO2 from industrial sources to the storage reservoirs. So, while the 45Q was a great thing that happened to us and _____ [00:16:49] drove that and it’s been important for us but there is gonna have to be more policy and legislation than that. The future act is something that could help us as well. In combination with the future act, I think that as long as we get some dedicated resources to that infrastructure, I think we’ll be able to do to the technology of carbon capture what has happened to wind and solar power over the last couple of decades. We’ll make it better and better and better so that it becomes something that’s available and something that’s useful to make the other products and that’s how we have to get to those other products. We can’t get straight to there now very economically.
Jason Bordoff: And 45Q again, provided financial incentive to do carbon capture. So, does that mean that more broadly that sort of incentive in the form of price on carbon, carbon tax would be sensible policy?
Vicki Hollub: I think there needs to be a price on carbon in the form of a carbon tax or something else. When we talk about carbon tax, I think it’s important that whatever policies are put in place, that it helps promotes the advancement of technology.
Jason Bordoff: Just on this outlook for where shale can go. There has been increasing focus, you know, recently about demands for capital efficiency, positive free _____ [00:18:15] you hear in New York with investment community is. How big of an impact is that having on the way companies operate on the production network?
Vicki Hollub: I think, it has a big impact. I think a lot of companies in the Permian and elsewhere are budgets have been cut. I think budgets are down by about 10% for most of the Permian operators on the average. And I think that many companies are focusing on now insuring that they are generating returns and/or at least staying within cash flow. If you’re in early part of the project that it’s more difficult to generate those returns. But I think there is a renewed discipline generally. We’ll see. But as far I think with the way the budgets are looking that, I think that there is gonna be more discipline going forward.
Jason Bordoff: And how do you think the entrance of the majors more and more into shale is gonna affect that outlook?
Vicki Hollub: I don’t know. The majors are coming into the Permian in a big way. But I get back to the fact that, there is this smaller independence that figured it out and there was this smaller independence that made it economical, not only economical but very, very efficient. And they drove the technology and what they have learnt is how to do things from a logistics standpoint and how to be really, really efficient. I think, you really have to take a different, you have to take a different view of how do you develop the Permian or how do you develop on for U.S. in the shale play and it’s not like doing major projects and actually except that some of the things that are similars, you have to get the logistics exactly right. You got to be really good at logistics and you got to be really good at your field development plan so that you’re maximizing the value that you get while ensuring that not too much of your capital is spent on the infrastructure. So, we do a whole development plan where we optimize our pace of development. We’re not after trying to race our development, trying to go faster. We are not trying to ensure that, that we get the best returns for the total project.
Jason Bordoff: I want to get your reaction to one sentiment, I feel like I hear sometimes from people in the industry which is increasing investor pressure to show that there is planning for a lower carbon future. But that when companies move too quickly in that direction, they actually again penalized and so do you think consumers and investors are rewarding companies now that are more forward leaning on the climate issues?
Vicki Hollub: Well, I think that you have to remember whatever you do, you have to do it in a way that creates value for the shareholders. We’ve created a low carbon research team. But that team is charged with making sure that what we do from a climate change perspective and what we are doing with respect to lowering our emissions and all of that. We’re doing it in a way that actually adds value to our shareholders. For example, the use of alternative energies. Those alternative energies are now at the point where that reduces our _____ [00:21:21] all the time. So, it reduces our cost structure. We’re using anthroprogenic CO2 from industrial sources. We have the model that we have in place and what we believe we’re gonna be able to achieve. That’s gonna lower our cost for CO2 enhance or recovery operations. So the best way to ensure that we can continue to advance the technologies around carbon capture and emission reduction is to make sure you are doing it with a business case that benefits your shareholders, your employees, the communities, and you’re lowering emissions and you’re making the world a better place. We feel like, we can check all those boxes. But the only way, we can do that is to continue to improve the technology.
Jason Bordoff: We’ve been talking a lot about the U.S. landscape for production and for policy as I mentioned in the introduction, your significant operations in the middleeast especially the UAE and Oman. The gulf Arab states are really undertaking a lot of interesting transition now in how their national oil companies operate. Of course, we saw the successful Saudi Aramco bond issuance this week. But in some of the countries, you operate in, NOCs taking more steps to open up to foreign investors and foreign partners like ADNOC. What opportunities is that creating and what do you think it means for the region’s production potential?
Vicki Hollub: For the middle east, I have a lot of respect for ADNOC and Oman Oil. Those are the two countries where we have our largest, most important operations. Both countries, the National Oil Companies, I believe, they are very forward thinking and progressive. You take both countries are trying to look at innovative ways to develop their resources, to maximize value. But they are also doing it with a green perspective. Oman’s 2040 vision is very much focused on moving Oman into a scenario where they are focused on reducing any negative impacts on the environment in all phases. And while continuing development in a more green and friendly way. ADNOC is the same thing. ADNOC is looking at, they’ve recently, we had a person team, helping them as they looked at this. But they now have carbon capture _____ [00:23:34] and they are putting the CO2 into an oil reservoir and they are also, they have a plan to looking forward to not only involving other companies to come in and help them develop their resource but there has to be that component that addresses the climate change issues and so I think both countries are really paired to be partners with them because they both are very focused on that.
Jason Bordoff: And one of the audience questions relates to that from the standpoint of some of these oil producing countries as well as for a company like Occy, which is as you said, there are opportunities to lower the carbon footprint of production methane emissions, EOR, various steps that can be taken. As you go deeper and deeper into decarbonization and meeting long term decarbonization targets, even with a large role for CCUS that probably we’re reducing demand as well for oil. Does that, what kind of opportunities or challengeses to that present and how do you think about what it means for these countries and what it means for the long term strategy of a company like Occi?
Vicki Hollub: Well, I think it’s really important that the world understands and know that over time as we transition away from oil and by the way, this is the other thing that many in this audience will not want to hear but that’s gonna take a long time. So, as we are transitioning away from the use of oil, it’s important to know that if you, I think the last barrel of oil produced in the world should be a barrel from enhanced oil recovery because to produce a barrel in enhanced oil recovery with CO2, but you normally, you have to inject more CO2 into the reservoir than the barrel that you produce from that CO2 when it’s burnt. So, basically, if you look at the net CO2 that goes into the atmosphere associated with CO2 enhanced oil recovery, the emission is 25% of what a regular or normal non-CO2 enhanced oil recovery barrel is. So, 25%, so if we can get to the point where we are doing more of that as we move away from oil, ultimately, the last barrel should be from CO2 enhanced oil recovery. I believe, we’re having an impact on helping that happen and we are getting calls from many places around the world to help others do that. That’s gonna be the part that we play. It’s not just for our own operations. It’s for other operations around the world. And ultimately we need a lot more of this to happen.
Jason Bordoff: One of the programs that we’ve prioritized here at the center for global energy policy is our women in energy leadership program. I mentioned in the introduction, you’re the first woman to in a major U.S. oil and gas company. You started working on oil rigs in Mississippi, in the early 1980s, a long time ago. What was it like working in the industry back then for a woman and let’s talk about how it’s changed?
Vicki Hollub: Well, back then, the thing that helped me is, I graduated from the University of Alabama and Jason said, I was an avid football fan. What helped me to break into the industry and working in South Mississippi and Louisiana, Alabama, Texas is the fact that at that time, I knew just about every statistic that was for any team playing in FCC. So, I could talk to, I had a way of talking and connecting with the men that I was working with on locations on the rigs and so we had something to talk about. And it’s that way, anywhere you go, and when I think about, like moving from that more male dominated environment to working in Russia, to working in Venezuela and Ecuador, it’s always a matter of connection. How can you connect with the people you are working with and how can you wreck the barriers and… So, I think it’s football that helped me blend and now, I always try to find a way to connect and that’s what I was saying, when I first started out in the world, now that we are connected as a world, if we could just connect personally. A lot of things can be solved when you realize that the person that you’re working with or talking to deep inside is probably just like you.
Jason Bordoff: And things have changed a lot obviously, in those decades. But there still aren’t a huge number of women leading in leadership roles in the energy sector. Some and of course, we’ll hear from Meg _____ [00:28:07] in a few minutes and others today. What do you think the industry needs to do to promote more female leadership?
Vicki Hollub: Well, I think first of all the industry, I wish there was a way that the industry could recognize the women that have been in the oil and gas industry that actually were working out in the north sea, working out in the gulf of Mexico, that we are doing the technical work. A lot of really tough technical work and that put in place a lot of the processes that we use today and maybe a lot of the discoveries that we made today. Women have been driving this industry. It just hasn’t been at the CEO level as much but it there have been a lot of women who’s probably made a bigger impact in their career than any female CEOs might do. And so they had a huge part of developing our industry and what it is today. But I think that people should recognize that it takes men within these companies to recognize the women that really need to get the opportunity, the driven technical work successfully, they can drive companies successfully and so it takes men know too to help with that.
Jason Bordoff: And you mentioned knowledge of football as being helpful that may work for some not all. So, what broader advice would you have for young women who are interested in entering the energy sector, oil and gas sector or other parts of the energy sector.
Vicki Hollub: I would say, you got to pursue your dream. The oil industry is a great industry. If you love the technical challenge, if you love to be a part of making the world a better place, I think it’s a great industry. But you got to be really persistent, focused and develop a passion. I think the thing that’s always easy to notice than anything else is passion. So, if you have a passion about what you do, you are likely to get some help along the way.
Jason Bordoff: Vicki Hollub, thanks for your leadership in the industry and on some of the issues of energy transition, we talked about and thanks for making time to be with us here today at our Global Energy Summit. Please join me in thanking Vicki Hollub.
Vicki Hollub: Thank you.
Bill Loveless: For more information about the Columbia Energy Exchange and the Center on Global Energy Policy, visit us online at Energypolicy.columbia.edu or follow us on social media at Columbiauenergy. I’m Bill Loveless. We’ll see you tomorrow.