Chevron fears other countries may follow US lead on tax benefits

Ali Moshiri, president of Chevron’s African and Latin American exploration and production businesses, sees the US move to remove some tax benefits for the oil and gas industry as setting a dangerous precedent.

He says the best way to discourage investment in any country is taxation. And a lot of countries look at the US attitude toward these issues before formulating their own. How the US funds its stimulus package might well come back to haunt US companies as they seek fair treatment abroad. “Taxation is a quick solution to the problem, but a long term danger,” he says.

He should know what much of the world is thinking. Mr Moshiri is in charge of Chevron’s exploration and production business in the hot spots of Africa and Latin America. And, in this hemisphere, he notes, each area has its own set of challenges.

Brazil, he says, is continuing with exploration and production despite the economic downturn. Its big issue is how to manage the development of oil reserves in the “pre-salt” region off the coast of Brazil.

Mexico, on the other hand, is in the process of reforming to possibly open its doors to international oil companies by year’s end. “We are hopeful the outcome will be good enough for international oil companies to participate.”

And Venezuela is focused on planning and budgeting, with the big drop in commodity prices hitting into the profitability of assets it relies on to fund the economy.

Despite having to wait to see how these individual issues play out, Mr Moshiri says he is not even contemplating letting any staff go during this downturn. Given the technical and nationalistic challenges facing international oil companies today, staff must be very talented and sophisticated. “We’re drilling in 10,000 feet of water and multiple horizonal wells.”

And oil and gas development will be in demand once the economy picks up, he says. If Chevron lets people go now, it will be very difficult to get them back. Layoffs used to be the number one way to manage a slowdown, Mr Moshiri says, but not anymore.”If we don’t do it right this time, we could lose a lot of credibility.”

Related links:

US producers run low on energy to beat recession (FT, 20/04/09)

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