I had the pleasure recently of zooming with Tony Bazzini. In addition to being a high school classmate, Tony is the Chief Project Management Engineer for ExxonMobil’s Global Projects Company, which is in Spring, Texas. Now in his 39th year with ExxonMobil, Tony relocated to the Lone Star State when XOM’s Global Projects Company was incorporated in May of 2019.
The predicate for the conversation was to discuss how a traditional oil & gas company integrates the development and production of alternative energy with the metrics and management styles that are successfully used to turn hydrocarbons into ROI. The short answer is that they don’t. These projects are at a stage of primary research, you identify an opportunity, and work it with the resources you can apply until it becomes viable or determine it won’t.
This led us to a discussion on the energy landscape over the next decades as these primary research activities evolve to bear fruit. We talked about the increasing import of natural gas to emerging economies. Tony suggested I look up Robert Bryce, an author and former Manhattan Institute participant, in particular his commentary on the relationship between the availability of electricity and quality of life. I’ve written a bit about energy poverty, the rapidity with which cultures modernize, and long arc of energy demand as it relates to strategic development.
Tony also discussed Global Thermostat, a company ExxonMobil has been working with and which inked an agreement with last month to scale up its commercially viable carbon capture technology to a scale that can help reduce climate change.
Years ago, Tony expressed that the thing that makes his company different is that it’s run by engineers, not accountants. ExxonMobil has invested over $16B in R&D in the last 20 years. In addition to carbon capture/storage and energy efficient processes, XOM is researching how to efficiently use plant waste and manipulate algae to produce oil in a way that reduces consumption and pollution, and improves land use, as compared the practices of creating ethanol from corn and sugar cane. It’s an elegant ecosystem cycle that uses photosynthesis to recapture carbon (caused in part by burning hydrocarbons) from greenhouse gasses and turning it back into oil. That’s a net zero carbon policy everyone can get behind.
The issue of capturing, storing, and, transmitting energy from alternative sources is tied to energy density and availability. Oil and gas are a form of stored energy, but wind and solar aren’t. If my math is right, enough solar energy from the sun reaches the earth, to power humanity at current rates for a year, every 15-20 minutes. The problem is not whether we have enough raw juice, but that it has to be accessed, captured, stored, and transmitted. You have to capture solar energy where the sun shines, and wind energy where it blows. And each of those phases has an efficiency factor. These technologies are improving, wind turbines, today, require half the wind speed to be cost effective as they did 20 years ago. Solar panels are very efficient, battery and capacitor technologies have improved dramatically, but all require mining and costly waste disposal processes. Transmission still has a high energy loss cost, 20-30% in some cases.
After discussing the character of energy density and how that impacts development and production, I asked if ExxonMobil was investing in developing storage. Tony reminded me that ExxonMobil invented the lithium battery (In the 1970s Dr. M. Stanley Whittingham (Nobel Prize in Chemistry, 2019) was working at ExxonMobil’s Clinton, New Jersey, corporate research lab when he created the very first examples of a radical new technology: the rechargeable lithium-ion battery. (https://energyfactor.exxonmobil.com/science-technology/battery-changed-world/)
The bulk of our conversation, and one of Tony’s passions, was about how to be more effective in executing capital projects. Tony interfaces with, and represents ExxonMobil to, many industry groups. One of those is the Construction Industry Institute, CII, based in The University of Texas at Austin (https://www.construction-institute.org), a group of over 140 organizations focused on enhancing the business effectiveness and sustainability of the capital facility life cycle.
Tony highlighted a number of points on capital project management. While cost effectiveness in many industries has seen continual improvement, that hasn’t happened in construction, where cost effectiveness is flat. This is astounding given that Admiral Hyman Rickover developed one of the first project management schemas, the PERT method, at the time a radical engineering type methodology, in order to improve the practice of constructing a vessel. Tony stated that the problems are only 20% labor, and 80% delivery systems, the very kinds of systems which should benefit from a disciplined approach to problem solving.
At CII, with OS2 (Operating System 2.o) they are going beyond “Plan the work, work the plan.”, beyond even engineering. The issues our conversation focused on were two: transparency in risk, and lack of goal congruence. Risk is a thorny issue, much of negotiation revolves around shucking risk. Everybody wants fixed costs in a world of unknowable future circumstances and insufficiently scope-able evolving requirements. 2020 has been black swans all the way down. We need a way of standardizing risk valuation, and agreement on how we share it. Agreement on how we share it applies to goal congruence too. Every project has a value proposition. As a team, all the participants in the supply chain need to have congruent goals, to the degree the project succeeds, we all benefit.
It seems likely, as companies like XOM innovate to create a better powered mousetrap, these new meta strategies will work to bring the future of energy to the market faster.
Thanks to Tony for the time.
#ExxonMobil #CII #Tony Bazzini