Taking on the global challenges of oil industry

Business has become a lot more difficult for the head of Chevron, the world's fifth-largest integrated oil and gas company, writes Sheila McNulty.

At first, Dave O'Reilly, Chevron's chief executive, cannot remember the last movie he saw. Then it comes to him - Syriana. "I had to go and see that," he says of the Oscar-nominated, continent-hopping drama about oil, politics and the "war on terror".

But afterwards, he smiles, his wife said: "Well, the real thing is a lot more fun."

O'Reilly runs the world's fifth largest integrated oil and gas company by market capitalisation, and fourth biggest by worldwide reserves. Now that oil companies must explore for new reserves in deeper water, under salt, or in dense rock and clotted sand, his business has become a lot more difficult.

It not only requires innovative technology - in a business that involves so much investment and in which projects run for a decade or more, the economics are always key.

The big finds are usually in politically sensitive areas that need high-level diplomacy, such as Venezuela. Add in protests from Washington about the recent record profits prompted by a public struggling with high energy prices, and it is clear why O'Reilly has little time for movie-going.

How does he manage a difficult business at a difficult time? He sets aside time to think about the business while working out in the morning, but also during the many hours spent on aircraft. "It's pretty hard to think when you are sitting here in the office because there is always somebody at the door."

He also makes good use of technology for staying in touch. "I have a laptop. I confess to having a BlackBerry and mobile phone," he says.

Speaking in his office in San Ramon, California, O'Reilly is relaxed and affable, even joshing. He is known for the relationships he can establish in even the most politically challenging countries.

He travels extensively, willingly hopping on an aircraft to sort out high-level issues. "The interesting thing for me is trying to understand what are the priorities in the places in which we do business and how can we help fulfil those priorities while conducting our business in a way that creates value for the company."

He gains that understanding while doing the main negotiating himself, noting: "It's the way you get things done. I don't think you can delegate some things."

That is how he won Unocal in last year's bidding war with CNOOC, the Chinese oil company, and how he reached the biggest decision he has made at Chevron - to undertake the $36 billion (€29.3 billion) merger with Texaco in 2000, the same year he became chairman and chief executive. "If we wanted to compete on a global basis, my view - and our team all agreed with this - was that we needed to have the scale and the breadth and the geographic balance to do that," O'Reilly says.

Since 1998, Chevron's capital employed has nearly tripled to $71.1 billion and expanded outside the US. In 1998, 62 per cent of those funds were spent in North America, compared with 33 per cent in 2005.

Chevron's net production has grown from 1.6 million barrels per day to 2.7 million, with the North American share dwindling from 44 per cent to 29 per cent. Chevron has refocused its portfolio to be a top player in its core areas of the Gulf of Mexico, west Africa, Asia, Venezuela and the Caspian.

The internationalisation of Chevron was a logical step for the Dublin-born 59-year-old, who earned his bachelor's degree in chemical engineering from University College Dublin, and immediately signed on as a process engineer at Chevron. "I just love the oil industry and the idea that it's a business where you have this great combination of technology, economics and geopolitics."

O'Reilly has read "all the books about leaders", but in the end decided: "You have to be yourself."

But managers can get ideas from others and he relies on his strategy committee to discuss issues such as big investments or new directions for the business. The first stage is discussing whether something is consistent with Chevron's strategy, then comes assessing the economics and risks. "But, ultimately, somebody has to make a decision, and that's my role."

He credits his father, Jack, who was general manager of a large Dublin department store, for preparing him for a role as decision-maker.

"He was the one who pushed me to ensure that I did the tough things in high school, such as mathematics and sciences, and things that are harder to do. And you have to work hard."

O'Reilly's brother, John, who trained as an accountant, recently retired as chief executive of Paddy Power, the listed bookmaker.

With memories of his father in mind, O'Reilly considers it part of his job to push and encourage the younger employees at Chevron. He tries to dine with its "future leaders" weekly, when in town; the previous night's meal included 20 staffers from around the world, he says.

Meeting them enables him to learn about their perceptions while reinforcing Chevron's value system and priorities.

"I consider one of my most important roles is keeper of the value system," he says, leafing through a brochure for employees.

"If I were to sum this up in one sentence, it would be: getting results the right way."

Such values are, post-Enron, preached throughout corporate America, but O'Reilly says Chevron's date back to the 1920s, which in itself proves the system's value: "It enables organisations to be successful for the long term." It is his intention to continue that tradition.

FactFile

Name: Dave O'Reilly

Age: 59

Education: Educated at Blackrock College in Dublin. subsequently tok a degree in chemical engineering at University College Dublin.

Position: Chief executive of Chevron, the fifth-largest oil company in the world since 2000, having joined the company immediately after graduation in 1968.

Why he is in the news: Rising commodity prices have seen oil companies report record profits and have driven explorers to target reserves that would previously have been too costly to make commercially viable.