The Oil and the Glory

Does the U.S. have a worse business climate than Turkmenistan?

Does the U.S. have a worse business climate than Turkmenistan?

When it comes to energy policy, is the United States worse than Turkmenistan? How about Russia, where a contract is a contract only when President-elect Vladimir Putin so decides? Is it less congenial than Brazil, where according to Reuters, Chevron executives seem likely to face criminal charges over a leak of 2,400 barrels of oil, 0.1 percent the size of BP’s 2010 Gulf of Mexico spill?

In a speech Friday, ExxonMobil CEO Rex Tillerson (pictured above left, with Putin) said the U.S. compares unfavorably from an energy policy standpoint not just to those countries, but also to China, Argentina and Kazakhstan. The backdrop is a humongous, high-stakes boom in U.S. oil and gas drilling, and a superlative election-year battle between the U.S. industry and the Obama Administration. Both sides think the bonanza will much improve the U.S. economy and its balance of payments, but after that their respective fact sheets barely coincide.

I won’t parse the whole flurry of industry and Administration statements. But Tillerson’s speech — delivered at the IHS CERA annual oil conference in Houston — caught my eye both because he runs the industry’s most successful company, and for his atypical rhetorical flourishes. You can watch yourself.

Here are Tillerson’s remarks:

The U.S. policy approach differs from other important resource-owning countries. We know from experience that there are common elements to the successful development of energy supplies. 

Whether it is Brazil or Russia, China or Argentina, Turkmenistan or Kazakhstan, when leaders recognize the fundamental role of energy, the vital contribution of oil and natural gas, and the benefits of developing their national resources, they can begin to put in place sound, lasting policies. 

In different ways, each of these nations has shown that when our industry is given resource access, policy stability, and the opportunity to compete and plan over the long term, there is a corresponding increase in the investment and innovation that can bring transformative progress.

As previously discussed, ExxonMobil, Chevron and others have been working long and laboriously to obtain access to Turkmenistan President Gurbanguly Berdymukhamedov’s enormous onshore natural gas fields, but to no avail. So far, he has signed such a deal only with the China National Petroleum Corp., which is developing South Yolotan, the second-largest natural gas field in the world.

Simply put, Turkmenistan is not a model of reliable oil policy; it is the hardest of the Caspian states to navigate, not the least because Berdymukhamedov is known to juggle and fire his underlings in the midst of dealmaking.

Kazakhstan and Russia are easier than Turkmenistan, but also have squeezed contract term concessions from their Big Oil players (including fields in which ExxonMobil is a primary shareholder, such as Tengiz, Kashagan and Sakhalin I). Do big oil companies prefer the energy policies of these former Soviet republics to that of the United States? One senses the opposite from the activity of foreign companies in U.S. fields.

I emailed ExxonMobil spokesman Alan Jeffers on whether he wanted to add anything to Tillerson’s juxtaposition of U.S. energy policy with that of such countries. "I don’t have anything to add," Jeffers said.