10Q: How Green is Hess's Oil?
New York oil company Hess Corp. (HES) is known for its tradition of bringing out a new toy truck bearing its green-and-white logo every Christmas season.
It's also the most forthcoming of 2,454 oil companies about its performance as a sustainable company, based on Bloomberg's proprietary index of environmental, social and corporate-governance disclosure.
Hess operations span the globe, including the oil frontiers of North Dakota and offshore Ghana and the political hotspots of Iraqi Kurdistan and Libya. Bloomberg News energy reporter Jim Polson sat down with Gerald Bresnick, Hess's vice president for environment, health, safety and social responsibility.
Q: What is sustainability?
A: Sustainability is a strategy, not a business project. We should be able to say our business is here for the long term. That means providing what [Harvard Professor] Michael Porter called shared social benefit: the company benefits, society benefits, the planet benefits.
Q: How do you pursue sustainable development of a finite resource?
A: That finite resource seems to be awfully elastic. We keep pushing the date off on peak supply. What we're seeing is that additional resources are available, providing the technology, the people, the capital and the will are available. To achieve sustainability you operate very, very well. That means efficiency and capital discipline. You work toward the point that eventually, when fossil fuels are no longer a prime energy source, you're one of the companies that's part of the changeover. That's going to be in the very distant future, I believe.
Q: Is there an amount of carbon that is too much to put into the
A: CO2 emissions have a potential impact on world climate and pose potential problems for society. It can only be addressed on a worldwide basis. Can one company make a decision that it has emitted enough CO2? It would put us at a terribly competitive disadvantage. We're moving more production into natural gas, which has a lower carbon content than oil or coal.
Q: Does that give Hess a competitive advantage?
A: There's a direct benefit for business. I can point to the educational program we do in Equatorial Guinea. Half of their 2,400 primary school teachers weren't certified. We started a two-year training program that graduated its first class of 992 teachers in April 2010. Officials in Equatorial Guinea told a delegation from Ghana that Hess is a company that tries to leave the country and society better off. We were able to secure some very favorable leases in Ghana.
Q: You mentioned efficiencies. Hess energy consumption to sales has been
rising faster than that of other companies. Is that a concern?
A: We like to use energy intensity relative to production because oil prices vary so much. Based on that we were up about 3 percent in 2010.
Q: But your consumption is still up 3 percent. Is that a concern?
A: Yes. We're trying to get there using better energy efficiency. You have to understand that we've set a goal of reducing our greenhouse gas emissions per barrel of production 20 percent by 2013. By the end of 2010, we'd reduced it about 15 percent. A lot of that came from reduced flaring of natural gas.
Q: What's the effect of the U.S. failing to pass carbon legislation and
the possible unraveling of the Kyoto Protocol in Durban?
A: It eliminates things like carbon capture and storage, because the costs are so outrageous that companies and, frankly, nations can't absorb those costs.
Q: How do you fit in the chain of command at Hess?
A: I report to the chief legal officer, who reports to John Hess, the chairman and chief executive officer. I have unfettered access to Mr. Hess and I report on at least an annual basis to the board of directors. I sit on the operational excellence group, which are senior folks and is chaired by Greg Hill, who is head of our exploration and production. I also sit on the risk management group.
Q: What's been the reaction by investors?
A: The investment community at large views this as a part of good management. There should be a premium for good management. But, again, sustainability is a strategy: It's not a quarterly kind of measurement I can point to and say, this is worth X amount in our share price.
Q: What are you reading?
A: I just finished the "House of Silk," a new Sherlock Holmes mystery. I've been a Sherlock Holmes fan since I was a boy. I just started on "Unbroken," by Laura Hillenbrand, which is a World War II history. I'm trying to plow through "The Delinquent Teenager Who Was Mistaken for the World's Top Climate Expert," an expose of the Intergovernmental Panel on Climate Change. It would make a nice article, but a very long book.
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