Event Recap: Marvin Odum, President of Shell Oil Company, Discusses Energy For Today and Tomorrow
March 03, 2016
Shell Oil is one of the largest oil companies in the world, based in Houston, TX and operating in more than 70 countries worldwide. Shell is one of America’s biggest oil and natural gas producers, natural gas marketers, gasoline marketers and petrochemical manufacturers.
Marvin E. Odum was appointed to the Executive Committee of Royal Dutch Shell in 2009. Since January 1, 2016, he has been the Unconventional Resources Director, responsible for Shell’s portfolio interests in the Americas for shale oil, heavy oil and the Arctic. Marvin earned a bachelor’s degree in mechanical engineering from The University of Texas at Austin and a master’s degree in business administration from the University of Houston. He began his Shell career as an engineer in 1982, and has since served in a number of management positions of increasing responsibility in both technical and commercial aspects of energy.
In addition to leading the Unconventional Resources lines of business, his current role involves engaging with public, private, media and non-governmental leaders on a wide range of energy policy issues. He is charged with establishing and advocating innovative, industry-leading solutions to the challenge of securing safe, secure and sustainable energy sources.
Hosted by Penn Wharton PPI Faculty Affiliate Arthur van Benthem, Odum gave a brief overview of Shell’s role in the current global debate over climate change and what to do about renewable energy sources. Contrary to common belief, Shell is much in the middle of this global dialogue and Odum is regularly involved in advocating for cap and trade systems or a global carbon tax.
When asked about how the energy transition will happen in the coming decades given the turbulent economic environment in the US and the fluctuating oil prices, Odum responded by putting the issue into perspective. “The world is adding the equivalent of a city of over a million people per week for the next 30 years. How much energy use is associated with that type of growth?” Additionally, given that many people have no access to modern energy, this creates an “enormous equation across the globe demanding more energy, running head on into the conflict from an environmental perspective.”
Odum emphasized that Shell believes we are in the midst of an energy transition from the current fossil fuel base to something that has more renewables, hydrogen and other components. This transition, however, is much more difficult than many think because of the scale of the energy system across the world. Many economic and policy decisions must be made and the physical constraints paired with a need for more understanding of the complexity of the energy system over all make the transition time consuming and complex.
When asked about how Shell chooses which projects to invest in, Odum said the company takes a long-term perspective while maintaining a strong balance sheet in order to move through business cycles while still having enough money to invest. Many of the choices made consider one, two, three or even four decade long projects. Other than cash constraints, investment decisions are rarely driven by the specifics of the price environment but rather by the macroeconomic picture over time. Ultimately, financial predictions are secondary to “absolute clarity of what you are trying to accomplish: can this project survive better than the competitors? [It] comes down to what is the world like: what policy decisions will come soon? When will there be a price on carbon?” Geopolitical and country risk factors also must be considered.
Odum also commented on the recent Paris Climate Summit. When asked whether or not he was disappointed by the outcome, Odum reiterated his need for clarity of goals. When 200 countries are coming to some degree of consensus, making commitments are significant and this will build momentum to impact the broader system. The summit was a very important and meaningful step. “The only way you can shift the energy system to change is to use market forces and that means putting a price on carbon,” Odum continued.
In light of the recent movement among undergraduate students for the University to divest from fossil fuels, van Benthem asked Odum quite bluntly “Do we keep Shell’s shares?” After a good natured chuckle, Odum seriously asked “If you want to do this: what is it you want to accomplish?” He elaborated, saying that if the action was purely symbolic, fine, however from the perspective of an investor the opportunity for collaboration should be considered. He emphasized “co-creating” a solution to better understand what the transition is like and to work together for the future. “This is not just just a conversation for the environmental community or politicians, but also for the investors. [We need] a meeting of the minds” in order to further a better tomorrow.