WEBVTT - Chevron Chairman & CEO Mike Wirth Talks Lower Oil Prices, Venezuela

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>President Donald Trump touting lower prices.

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<v Speaker 3>We're down lower than we've been in seven years, and

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<v Speaker 3>gasoline prices and oil prices, not just the three states

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<v Speaker 3>that I talk about. With one ninety ninety.

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<v Speaker 1>Gallon, how would you like to have one ninety nine?

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<v Speaker 3>Do you know that's that's the equivalent of a very.

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<v Speaker 2>Major tax cut, you know, when you get the energy

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<v Speaker 2>prices down, the national average for gas falling below three

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<v Speaker 2>dollars a gallon for the first time since twenty twenty one.

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<v Speaker 2>Mike Worth, the CEO of Chevron, joins us now for

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<v Speaker 2>an exclusive interview. I am so glad that we're going

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<v Speaker 2>to speak with you, Mike. Thank you so much for

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<v Speaker 2>being here with us.

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<v Speaker 3>You're welcome, Lisa.

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<v Speaker 2>So let's start about that one ninety nine a gallon.

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<v Speaker 2>It might be great for a lot of people in

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<v Speaker 2>terms of filling up their gas tanks. A real question

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<v Speaker 2>around drill, baby, drill, and how much you're incentivized to

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<v Speaker 2>increase production given the lower cost of all.

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<v Speaker 3>Well, you know, we make our investment plans on a

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<v Speaker 3>long term basis. We look at supply and demand well

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<v Speaker 3>out into the future, and so the price of oil

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<v Speaker 3>today can affect short term financial performance of the company,

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<v Speaker 3>but it really doesn't play as much into some of

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<v Speaker 3>the longer term investment plans as we look down the road,

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<v Speaker 3>not really out the window as we decide what the

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<v Speaker 3>capital program looks like.

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<v Speaker 1>But how do you reconcile the too sure doing a

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<v Speaker 1>lot of exploration internationally, and to Lisa's point, prices are

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<v Speaker 1>low and potentially are going to even go lower.

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<v Speaker 3>Well, exploration is a long cycle business. We just brought

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<v Speaker 3>a project online in the Gulf of America last year

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<v Speaker 3>where the discovery was made twenty years prior, and so

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<v Speaker 3>the timeline between when you actually make a discovery, when

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<v Speaker 3>you appraise that and you ultimately develop and bring it

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<v Speaker 3>to market can be years or even decades. And so

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<v Speaker 3>we really have to take that long view on the business.

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<v Speaker 3>And you know, in the short term we'll keep cost tight.

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<v Speaker 3>We've got to industry leading free cash flow over the

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<v Speaker 3>next few years as we'ringing cost down, capital spending down,

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<v Speaker 3>increase the synergies on the hes transaction. So we're going

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<v Speaker 3>to deliver strong financial performance through the cycle.

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<v Speaker 1>Based on what the IA has said recalibrated where they

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<v Speaker 1>see oil demand growing. It was twenty thirty, now it's

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<v Speaker 1>twenty fifty. Ope says they had a rendezvous with reality,

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<v Speaker 1>seeing that the world needs a lot more of this,

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<v Speaker 1>a lot more fossil fuels.

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<v Speaker 2>If outlook is.

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<v Speaker 1>So strong, should Chevron, should all.

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<v Speaker 3>Of these big oil companies?

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<v Speaker 1>So do they increasing more of that investment?

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<v Speaker 3>Well, on the idea, even a blow broken clock is

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<v Speaker 3>right twice a day. So they have finally acknowledged what

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<v Speaker 3>we've long known, which is that the world will continue

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<v Speaker 3>using oil and gas for many decades into the future.

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<v Speaker 3>We are in that long cycle business and the capital

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<v Speaker 3>spending amory has become more efficient in our industry. A

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<v Speaker 3>decade ago, we were spending money on big projects. There's

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<v Speaker 3>a lot of growth going on in shale at a

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<v Speaker 3>relatively high cost structure, and the entire industry has found

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<v Speaker 3>ways to standardize designs, simplify projects, and actually get more

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<v Speaker 3>for every capital dollar that we spend, so the size

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<v Speaker 3>of our capital spending doesn't necessarily correlate to the growth.

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<v Speaker 1>The way that it would have in years gone by

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<v Speaker 1>when it comes to expansion. The US government is backing

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<v Speaker 1>this plan of Rock has to transfer Louke Oil stakes

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<v Speaker 1>to an American company, So it's really only your x

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<v Speaker 1>on how are those negotiations going.

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<v Speaker 3>Well, I can't comment on commercial negotiations. What I will

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<v Speaker 3>say is we've got a well established reputation as a

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<v Speaker 3>good partner, as a world class operator in international locations.

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<v Speaker 3>We're sought out as a partner in countries around the world.

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<v Speaker 3>We got long history working in the Middle East, and

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<v Speaker 3>we put a real premium on partnership and that goes

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<v Speaker 3>to every country we work with and every company we

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<v Speaker 3>work with.

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<v Speaker 1>Can you talk about those assets though, do you think

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<v Speaker 1>those would be good assets the Chevron portfolio?

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<v Speaker 3>Well, we always look to strengthen our portfolio. Iraq is

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<v Speaker 3>a country that's blessed with very substantial petroleum resources and

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<v Speaker 3>some of the largest fields in the world, and so

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<v Speaker 3>those are the kinds of things that we always look at.

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<v Speaker 2>If you're talking about the capital profile and investments, and

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<v Speaker 2>how it's become a lot more efficient to make the

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<v Speaker 2>same kinds of investments and frankly the same kind of output.

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<v Speaker 2>Where is this sufficiency coming from. Is it coming from

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<v Speaker 2>artificial intelligence? Is is it coming from just better technology

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<v Speaker 2>and getting oil and gas out of the ground.

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<v Speaker 3>Yeah, So in shale, for instance, which is something the

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<v Speaker 3>US has been a world leader. In a decade ago,

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<v Speaker 3>break evens were seventy or eighty dollars a barrel. Today

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<v Speaker 3>they're not even half of that, as we found ways

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<v Speaker 3>to drill longer laterals, to optimize the spacing of wells,

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<v Speaker 3>to complete wells at lower cost with greater production coming

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<v Speaker 3>out of them. So it's a series of things. In

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<v Speaker 3>the deep water, we've simplified and standardized designs, and what

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<v Speaker 3>used to take thirty dollars a barrel or more in

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<v Speaker 3>terms of cost of capital to go into a project

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<v Speaker 3>now has been cut in half. And so it's not

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<v Speaker 3>driven by AI yet. I do think over time we're

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<v Speaker 3>going to see technologies like that continue this path and

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<v Speaker 3>we're on We're going to get.

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<v Speaker 2>To that in just a second. If that's the case,

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<v Speaker 2>if you can get more even at a break even cost,

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<v Speaker 2>it's a lot lower. Why has the rig count gone

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<v Speaker 2>down so much? Why aren't there more rigs coming online

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<v Speaker 2>given the capacity here in the United States?

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<v Speaker 3>Because we can drill more feet per day with a

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<v Speaker 3>rig today than we could in the past, and so

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<v Speaker 3>rig count is not nearly as interesting a metric as

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<v Speaker 3>how many feet a day you can drill, how many

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<v Speaker 3>wells you can complete in a period of time, and

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<v Speaker 3>so we're getting more work done out of fewer pieces

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<v Speaker 3>of equipment.

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<v Speaker 2>Today, you talk about how AI isn't delivering those efficiencies yet,

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<v Speaker 2>the indication being that maybe down the road it might

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<v Speaker 2>be the case. Where specifically are you thinking, and I'm

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<v Speaker 2>saying at a time when Chevron's cutting staff, so are

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<v Speaker 2>other people. Is this a headcount issue? Is this something else?

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<v Speaker 2>How are you seeing it be deployed?

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<v Speaker 3>Well, we're in I think we're still in the very

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<v Speaker 3>early days of applying AI at scale in our industry.

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<v Speaker 3>One of the things that's undeniable about AI is it

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<v Speaker 3>needs lots of data. A company like ours has as

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<v Speaker 3>much data as just about any company in the world,

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<v Speaker 3>and so we've got decades and decades of geologic data,

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<v Speaker 3>seismic data, operating data, all of which can be used

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<v Speaker 3>to feed these models, to optimize operations, to improve our

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<v Speaker 3>exploration success, to squeeze more production out of existing assets.

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<v Speaker 3>And so we see huge opportunities to run our business

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<v Speaker 3>with smarter technology, get better decisions made faster, and so

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<v Speaker 3>there's certainly a cost dimension to this, but I think

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<v Speaker 3>the real opportunity is going to be about the productivity

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<v Speaker 3>of our assets in our business.

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<v Speaker 1>You announced this project, the first of its kind, to

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<v Speaker 1>provide natural gas fired power for data centers. Do you

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<v Speaker 1>expect to do more of these projects and what's the

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<v Speaker 1>update on this one in West Texas well.

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<v Speaker 3>Certainly, the demand for power has been talked about now

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<v Speaker 3>for the last year or so, as the constraint in

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<v Speaker 3>the growth of AI data centers and the ambition for

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<v Speaker 3>data centers at a scale we've never seen before has

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<v Speaker 3>become a commonplace. The reality is we need large scale power.

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<v Speaker 3>What we're working on is off the grid power because

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<v Speaker 3>it's also becoming an issue with electricity prices and we're

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<v Speaker 3>seeing this show up in consumer sentiment and elections. Our

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<v Speaker 3>approach is to develop gigawatt scale power generation, not through

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<v Speaker 3>the grid, but dedicated to data centers. We've got a

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<v Speaker 3>project in a couple of sites actually we're working on

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<v Speaker 3>in West Texas where we've got a lot of natural gas.

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<v Speaker 3>We've got large gas turbines, the largest in the world

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<v Speaker 3>being delivered starting next year, and we're deep into discussions

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<v Speaker 3>with multiple customers that would like to cite data centers

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<v Speaker 3>to use this power You're.

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<v Speaker 1>At the center of a lot of politically very important

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<v Speaker 1>converse stations, not just when it comes to AI and

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<v Speaker 1>not just when it comes to Luke oil assets. Also

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<v Speaker 1>Venezuela the only American company left. Can you give us

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<v Speaker 1>an update on either conversation with the administration, your team

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<v Speaker 1>on the ground. What is the future of Chevron in

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<v Speaker 1>this country? Is the president's sense maybe he's going to

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<v Speaker 1>send troops there?

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<v Speaker 3>Yeah, I don't know what the presence intentions are. We've

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<v Speaker 3>been in Venezuela for the last one hundred years. Our

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<v Speaker 3>presence there, we believe is important for the local economy,

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<v Speaker 3>the regional economy, the people of Venezuela. The Venezuelan oil

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<v Speaker 3>is sought after by US refiners, and we operate there

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<v Speaker 3>in full compliance with all US law and sanctions. We're

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<v Speaker 3>in discussions with the administration to ensure that we stay

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<v Speaker 3>in compliance, that they understand the value that our presence

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<v Speaker 3>brings to America.

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<v Speaker 1>And so you know that's and you plan on being

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<v Speaker 1>there for the long term.

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<v Speaker 3>Venezuela actually has more oil and gas resource than Saudi Arabia.

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<v Speaker 3>It's right here in our hemisphere, very close to the

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<v Speaker 3>Gulf coast. Refine and in complex and we've been there

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<v Speaker 3>through ups and downs, and like many places in the world,

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<v Speaker 3>we have to take a long view on our presence

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<v Speaker 3>in countries like this.

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<v Speaker 1>You talked about succession yesterday at this conference. How are

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<v Speaker 1>you thinking about that as you talk to the board?

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<v Speaker 1>Is there something you want to get done before you

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<v Speaker 1>hand over the reins?

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<v Speaker 3>Well, succession discussions begin on day one. I think for

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<v Speaker 3>most CEOs it's part of a board's responsibility to be

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<v Speaker 3>thinking about the next generational leadership. I have a long

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<v Speaker 3>list of things, some of which have been accomplished. I

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<v Speaker 3>mentioned the Hest transaction, which was a big one for

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<v Speaker 3>US earlier this year. We have laid out a plan

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<v Speaker 3>for the next several years to investors last month that

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<v Speaker 3>grows free cash flow, that drives a significant return to

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<v Speaker 3>cash to shareholders. All of those are things that I

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<v Speaker 3>want to make progress on. But when the time is

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<v Speaker 3>right for someone to follow me in this job, the

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<v Speaker 3>board will make that determination and I will happily hand over.

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<v Speaker 1>Will you go right for Landman?

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<v Speaker 2>Just three seconds left? Do you think that in ten

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<v Speaker 2>years gas or oil is going to be more valuable?

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<v Speaker 3>Well on an energy content basis, you know oil's got

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<v Speaker 3>about six times more energy content per unit of volume

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<v Speaker 3>than gas to us, and so you know they trade

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<v Speaker 3>in sympathy with one another because energy is somewhat fungible.

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<v Speaker 3>I think both of those commodities are going to be

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<v Speaker 3>essential to the global economy. I think demand for both

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<v Speaker 3>of those will be much higher than it is today.

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<v Speaker 3>And I think you're going to see good companies in

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<v Speaker 3>our industry still producing more of that and doing it

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<v Speaker 3>in a way that keeps costs very affordable for the economy.

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<v Speaker 2>My fourth wonderful to see you. Thank you so much

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<v Speaker 2>for being with us here this morning. Mike Worth, the

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<v Speaker 2>CEO of Chevron