AFPM Q&A '12: Cabrera looks to redefine sustainability

SALT LAKE CITY -- Carlos Cabrera knows the downstream industry from many sides, from his former role as President of UOP to his current position as Executive Chairman of heavy oil development group Ivanhoe Energy and several other stops along the way.

“I come today as independent,” he said in Monday morning’s keynote address. “I hope to some degree I can insult all of you, but also find some balance.”

He did note, however, that one particular theme should unite all downstream businesses: the need to redefine sustainability.

“This is a business, and it’s all about having a sustainable business,” said Mr. Cabrera, speaking to a diverse audience at the AFPM Q&A and Technology Forum. “I’m offended by environmental groups that think anything sustainable has to be environmental or ‘green’.

“You, as the industry, have to recapture that term that has been hijacked by environmentalists.”

Mr. Cabrera said the hydrocarbon processing industry (HPI) faces many regulatory hurdles to reach this goal, starting with government-subsidized sectors such as several within renewables.

“Sustainable means you have to be profitable in the absence of government subsidies,” he said. “At the end of the day, if you have a business, you have to have a good and novel idea. You can’t rely on them to give it to you.”

Other priorities for companies to reach true sustainability, Mr. Cabrera said, include having the capability to grow, the flexibility to adapt to changing environmental and regulatory frameworks, and giving an acceptable return to all stakeholders.

Those stakeholders are not just direct shareholders, he warned, but also the communities served and employees, among several others.

“I have become very distressed in the last 10 to 15 years that some mega-companies in the US have taken to only being concerned with shareholders and forgetting the other players,” Mr. Cabrera said.

“That’s not a sustainable business.”

Part of focusing on the communities served means understanding new markets. In a world where OECD product demand is flat or declining and non-OECD countries are seeing rapid demand increases, access to growing markets is critical, Mr. Cabrera explained.

“Our drivers in the industry were from a perspective of affluence, but now it’s moving to poverty,” he said. “Efficiencies are important, but it’s really a low-cost world. We face a world where competitors are very cheap just because of underlying economic conditions.

“The key is low-cost, affordable energy.”

For companies to meet those goals and become sustainable, they need technology breakthroughs, according to Mr. Cabrera. However, he cautioned that his experience tells him that it can be “very difficult” to get new technology in the oil industry.

“There’s a natural risk aversion within the industry, plus policy uncertainty can influence investment decisions,” Mr. Cabrera said.

To overcome those factors, developers should focus as directly as possible on the most-needed areas. In the modern HPI, Mr. Cabrera said those areas are in hydrocracking, hydrotreating and desulfurization.

“In the short-term, it keeps looking like a middle distillate world,” he said.

Technology breakthroughs are most needed in three specific areas, according to Mr. Cabrera. Those are heavy oil processing development, finding out how to efficiently and economically handle cellulose, and determining new ways to activate methane and convert abundant gas reserves to liquids.

“Those are the potential game changers,” he said.

For leadership personnel, Mr. Cabrera said those most effective at creating and operating sustainable enterprises will share several common traits. Those include the capability to simplify and process complex government and market signals.

“They must be willing to take risk and act,” he said.

Other needed traits include a willingness to change, understand and accept responsibility to the public and consumers; have a keen sense of who true competitors are, both now, emerging and future; embracing and investing in technology and appreciating the game-changing role it can play; and integrating multiple sources of knowledge to motivate and influence all stakeholders.

“Like any business, the HPI is complex and challenging,” Mr. Cabrera said. “Threats and opportunities are interrelated.”

Mr. Cabrera closed his remarks by thanking AFPM for the opportunity to speak, noting that it was his first time to attend the conference in a few years.

“I’m proud to be back,” he said.

“When AFPM called me up, I didn’t respond at first because I didn’t recognize [the new name],” he quipped.

“But I’m so glad to be here. I see a lot of friends and a lot of familiar faces. I’ve spent a lot of time with this group and am delighted to see that it’s vibrant again under good leadership.

“I see AFPM as a catalyst to deliver very, very good things for the industry.”

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