The Sietch Blog

Feb 24
Big Oil

Written by Rt

First mentioned in the Weekly Roundup a few weeks ago Chevron is dipping another toe in the RE market. There are synergies here the oil giant may have begun to realize. First, they can evaluate the risk/reward of the RE business. Big Oil is by nature risky. Large bets are placed with winners and losers. If RE turns out to be a low risk/medium return venture that may fit as a balance to the petroleum biz.

With the investment, Chevron has become one of the first major U.S. oil companies to move out of the laboratory with biofuels and into a factory that actually produces them, a path that biodiesel industry leaders hope its peers will follow.

Chevron’s 22 percent stake in the $10 million plant, also financed by other institutional and private investors, is tiny compared with what it will spend to develop, say, a deepwater oil field in the Gulf of Mexico, which could run into billions of dollars.

They may also learn, and influence, how the biofuels are created so it is easier to blend with their existing products. Given that we can not replace petroleum instantaneously there must be am evolutionary process. Introducing biodiesel as being 80% petroleum is not my idea of a good time, but it’s a start.

The project will allow Chevron to gain experience producing biofuels on a broad scale, he said. In turn, the company will share technology and its refining expertise with an infant industry that is still wrestling with quality issues, he said.

They may also, over time, diminish the “oil is king” culture at the corporate HQ. They may realize they are in the *energy* business not the oil business. It is a leap for a company with so much inertia but bigger leaps have been made before.

“Over the last couple of years, our company has come to the point of view that there is more global demand for energy coming than we know how to meet the way we’ve always done things,” Rick Zalesky, Chevron’s vice president of biofuels and hydrogen, said during a recent tour of the Galveston plant

They may even discover that business is more symbiotic than adversarial. Just because, at first blush, someone seems to be your mortal enemy doesn’t mean there isn’t a way they fit into your business plan. This is why the “Art of War” is such popular reading among business types - you have to examine yourself first, examining your enemy is second.