Tuesday, October 21, 2014

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ExxonMobil CEO Ignores Ground Zero of Energy Security

In a speech Wednesday at the Council on Foreign Relations, ExxonMobil CEO Rex Tillerson spoke about energy security, which he defined as “securing access to energy in a reliable, relatively affordable way.”  He spent much of his speech emphasizing the technology his company invests in to mitigate environmental risks, saying that “as long as we as an industry follow good engineering practices and standards, these risks are entirely manageable.”
 
However, energy security is fundamentally about social risk, which cannot be engineered away.  The geopolitical dimension of these challenges is well-known:  unrest in the resource-rich nations of the Middle East, China’s controversial expansion into Africa.  The intergovernmental aspects of resource development can to some extent be externalized by companies, outsourced to government into the separate world of “policy,” as Tillerson labelled it.
 

But Ground Zero of energy security is not macro but micro, comprising the hundreds of individual projects of companies like ExxonMobil around the world.  The stability and continuity of these projects is the direct responsibility of the operating companies, and requires a different kind of expertise than what Tillerson expounded upon.

The best technical know-how does not prevent labor stoppages and community blockades.  A 2010 United Nations paper compiled various reports detailing these  and related problems, pointing out that “the time for new [oil and gas] projects to come on stream has nearly doubled in the past decade,” and that “non-technical risks accounted for nearly half of all risk factors faced by these companies. 

ExxonMobil knows such challenges all too well.  The company had to shut down its liquified natural gas facility in Aceh, Indonesia for five months in 2001 because of the surrounding civil strife — which some accuse the company of exacerbating.  Eleven Indonesian villagers filed a lawsuit against the company in U.S. federal court that year alleging that the ExxonMobil was complicit in torture, murder, and rape by Indonesian security forces allegedly protecting the facility.  Apart from the tragic human cost, the shutdown cut off 7% of the company’s global natural-gas output — and prevented Indonesia from meeting its supply commitments.  That is the very definition of energy insecurity.

Yet many companies — most notably ExxonMobil — still adhere to the bunker mentality, thinking that building secure perimeters and keeping the local community at arm’s length is the best course of action.  But as then-Arizona Governor Janet Napolitano said in 2005 with regard to preventing illegal immigration, “Show me a 50-foot wall and I’ll show you a 51-foot ladder.”

Some extractive companies are starting to take a more enlightened approach.  The International Council on Mining and Metals convenes companies in that industry to develop best practices on community development.  I spent most of my nine years with BP working with local populations in developing countries to ensure that our presence contributed to rather than decimated their communities — which meant that everyone had a stake in the security of our projects.  The Chinese government has engaged with the British and Swedish governments on corporate social responsibility for its managers — possibly out of concern over the rise of anti-Chinese sentiment in Africa and the threats that poses to investments there.

With regard to hydraulic fracking, Tillerson said that “the consequences of a misstep in a well, while large to the immediate people that live around that well, in the great scheme of things are pretty small… These are not life-threatening, they’re not long-lasting, and they’re not new. They are the same risks that our industry has been managing for more than 100 years in the conventional development of oil and natural gas.”  Tell that to the people of Aceh, or Zambia, of the Gulf of Mexico.  Echoes of ex-BP CEO Tony Hayward pointing out that the Gulf “is a very big ocean” following the 2010 Deepwater Horizon explosion come to mind.

Yes, technology is important, as is managing the environmental risks of development, from local pollution to disaster response to climate change.  But companies cannot focus solely on technological innovation while ignoring the human dimensions of their business.

In his speech, Tillerson cited John F. Kennedy saying that “to lead is to choose” and asked, “Are we going to have energy security and are we willing to deal with the real fears, the real concerns, and manage the risk?”  I certainly hope so.  That would mean taking responsibility for the local social impacts of oil and gas development, and engaging with local communities to identify and mitigate potential risks.  Energy security depends on getting that right.

Christine Bader is Nonresident Senior Fellow at the Kenan Institute for Ethics of Duke University and a Truman Security Fellow.   The Truman National Security Project is a national security leadership institute, the nation's only organization that recruits, trains, and positions a new generation of progressives across America to lead on national security.

This originally appeared on The Truman National Security Project's "The Doctrine Blog":  http://trumanproject.org/doctrine-blog/ 

 

 

 

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