Navigating Energy Challenges: Insights from Rick Westerdale

Machine-generated transcript of “Navigating Energy Challenges: Insights from Rick Westerdale”. Paragraph breaks mark a change of speaker. Click a timestamp to play from that point.

0:00 Good afternoon. This is David Abshire with Under Pressure Podcast. Today I have Rick Westerdale. Rick, thanks for joining us today. Pleasure's mine. Thanks so much, Dave. Absolutely. Well, you've had one of the more unusual careers we've seen on the podcast from ExxonMobil to the U.S. State Department to consulting to think tanks. Looking back, what kept pulling you towards the new challenges instead of staying in one lane?

0:24 Well, first of all, Dave, I appreciate you having me on your podcast today. I want to say thank you for that. Absolutely. You know, I feel like I've been very fortunate in my life and my career. I often describe myself as just a simple country boy from Kentucky. And to be able to see and do some of the things I've gotten to do in my career has just been amazing. And I will tell you, the driving force behind the changes and the opportunities that I've been blessed to take advantage of has been a natural curiosity and a desire to continue to learn and grow in my career. And so each opportunity has created challenges, but also at the same time growth for myself. And that really is what has fostered me to go from, if you will, corporate America to the government back to more of an entrepreneurial track, um, you know, from startup to having my own companies and even to doing what I'm doing today.

1:23 Yeah, no, absolutely. Well, I know you've had a very successful career. And one of the biggest turning points in your career was moving to Australia and helping take the Gorgon L and G project from a stranded gas asset to a final investment decision. What made that experience so memorable in your career?

1:41 You know, that, David, was probably one of the biggest transitions in my career. I was with Exxon at the time Exxon and Mobil merged. And I was actually in the downstream refining and supply. At the time of the merger, I was running the New England business unit. After the merger, I was given the opportunity to join the upstream. And I was given an assignment out in Australia. So I was the first one to parachute into Perth, Australia, in a, you know, kind of the new company, newly formed ExxonMobil. But what was really interesting is there were a number of assets out there. And I can remember our president of the exploration department, Bill Throfel, he said to me, He said, Rick, don't get too comfortable. We're going to sell all these assets off. But the reality was Gorgon had been a stranded asset, hadn't been monetized, it was discovered in the 70s. We had joint three joint venture partners, and uh we were trying to figure out what to do. We were thinking we might sell it, but ultimately we were able to do some really neat things. We were able to actually gain access for our facilities on a Class A nature reserve, Barrow Island. We negotiated that with the federal and state government out there in Australia. We were able to actually equity level, meaning we monetized two resources, Gorgon and Jance, even though the title of the project is Gorgon L and G. It was actually the Gorgon field and the Jance Field, which was a later discovery than Gorgon, that we brought together for this huge resource and what is ultimately a mega project. And then we were able to gain traction in the marketplace. And so we were able to independently, which was something Exxon had ExxonMobil had never done, we developed an equity marketing strategy for our LNG. Historically, those projects marketed their product as a team, as one group. This was the first one Exxon had ever done individually. So there were a number of things. And I was fortunate to stay in Australia for six years to take that project through the phases of development to the final investment decision. I didn't get to stay quite long enough to see first gas, but it was it was an exciting time in my life.

3:57 So it was a lot of fun. Absolutely. When you get to work on projects that like that from start to finish and you know get to see it all the way through the stages and be involved in it from day one, that's that's really exciting. Those are the things, like you said, that you'll remember the rest of your life. So you've worked at the highest levels of both government and industry. A lot of people assume those worlds couldn't be more different, but you said they've actually become more alike over time. What's changed in your opinion?

4:25 Well, you know, you always had this, or at least I did, from the outside looking in on government. You have this idea of the civil servant that uh, you know, goes to work at nine o'clock, takes their first break at 10 o'clock, a two-hour lunch, and you know, maybe looks at their email and uh maybe Facebook and then clocks out about three and goes home. And I'm being facetious, please. We've got a lot of very dedicated federal civil servants as well as Foreign Service officers that are out there that have committed their life to serving our country. And what I saw was I saw people who truly wanted to enact the best interest of our country. Now, why I say they became more similar is because, you know, the the working for the federal government has changed. The benefits, it used to be a job for life. It was really hard to discipline or have anyone, you know, actually leave the service. But uh, even this administration focused on trimming the fat, if you will, with the Doge initiative. And so what you have is you have a more competitive pool. You have highly trained, highly capable individuals that are working hard for our country. And I do think that the one key difference is the pay scale. You know, when I left corporate America, I made about a third of what I was making in corporate America by going to the State Department. So you have to have a real desire. And I went to a more expensive cost of living area, not a career path I recommend to anyone, but it is uh it's really interesting because you have to have a real desire to serve your country. And these people are patriots. They really do care fundamentally about what they're doing. And that I saw over and over again. And that's similar to an industry. If you own your own business, you care about it. You want to see it advance. And I uh I've gotten to see a lot of the modernization that has occurred too, using current tools that uh, you know, that are helping to move the ball down the field, so to speak, David.

6:35 Yep, absolutely. So during your time at the State Department, you worked on the international energy policy and sanctions. Most people only hear about sanctions in the headlines, but very few understand what actually goes into making them effective. What happens behind the scenes that people never see?

6:51 So, you know, I'll I'll tell a story because I think it's pretty common knowledge now, uh, the sanctions we have in place today with Russia. But when the original incursion into Crimea occurred, I'm talking back in kind of the 2014 time frame, we looked at what had happened what was happening and how do we contain Russia from an energy perspective. Now, energy sanctions, the the uh global flow of oil and natural gas, the trade of fossil fuels is the primary rev or was the primary revenue source, external revenue source for Russia. And at the time, we also had to recognize our friends and allies in Europe were wholly dependent, I say wholly, were primarily dependent on Russia for their energy needs, whether it was refined products like diesel, jet fuel, or whether it was actually uh crude oil or even natural gas. And you hear a lot about the natural gas that was coming into, say, Germany or other places, and in this case through Ukraine. We had to develop a set of sanctions that took into consideration the current realities of the marketplace, the ability to replace those energy sources without, you know, disrupting commerce or without significantly impacting the economy. And ultimately, the strategy we came up with was one of more or less containment. Okay, they are a part of the energy system, but we're not gonna let it grow beyond where it is today, and we're gonna reduce slowly over time the influence that they have in Europe. Now, subsequently with the full-scale invasion of Ukraine and the war there, the conflict, we have enhanced those sanctions to all-out sanctions for Russia, and Europe did the same. But those initial sanctions were designed to be a tool and a measure to keep and send a signal that we don't agree with the fact that they had uh annexed Crimea. We didn't agree with the fact that they had taken control of some of those assets. The ironic part of this, a little history footnote, David, is that it actually was Ukraine who wasn't paying their bills to Russia. So Russia was transiting its natural gas to Europe through Ukraine. Ukraine wasn't paying the price or the full price and got behind in their payments to Russia. Russia kept asking them to make up that difference, and ultimately they stopped paying. And so Russia stopped sending them gas. And so what did what did Ukraine do initially? They took Europe's gas because they didn't want to go cold or dark in the winter. And that's what started this. And a lot of people don't realize energy can be a tremendous source of cooperation between two countries, or it can be a source of conflict. And uh, you know, that's an interesting historical footnote to what we see, what has expanded and grown to what is today. Yeah, absolutely.

10:00 And that's the stuff that you don't see advertised on the news, right? So those are the things that are not the bullet points that they're talking about. And anytime it comes to do with any type of energy between conflicts with countries like that, we all know how powerful and how much everybody's livelihood focuses on the energy that you know they utilize. So you're you're exactly right. That's a great story. I love that story. I'd never heard that, and I love that story. So one story really stood out was your team's assessment of the ISIS oil production. You built an open source analysis that initially contradicted the intelligence community, but ultimately turned out to be remarkably accurate. How did that happen on your side?

10:41 Well, you know, it's interesting. And I tell folks, Washington is run on 20-something folks. A lot of staffers, a lot of the best and brightest, I'm gonna call them kids. I'm getting old, I can say that. A lot of young adults that this is their initial job after university. So their experience is limited, but their education is phenomenal, and they have some really great ideas. But at the same time, you know, uh there's there's a benefit to having experience and knowledge and having worked in the sector. So I remember I was sitting in my office when President Obama at the time gave that speech, and he said, we're gonna stop the flow of oil. Now, the original speech, which we got to contribute to, said they're gonna stop the flow of revenues, money to ISIL. He had libbed the other part, and that actually set forth in motion a number of things. And so we looked at the caliphate, the ISIL, what they controlled to see what they could produce, how they produced it, and how they consumed it. And we really did a simple industry standard supply-demand balance, looking at that. And we took open source information and working with some of the oil companies that had previously had operations in those fields in Syria. And uh, we were able to take that along with what would be normal decline rates, how much capital invested, how much maintenance we observed had been done, to come up with an estimate of what these fields could produce, both oil and natural gas, but mainly oil we were focused on. And uh then ultimately looked at kind of the standard of living, what the demand for that energy, that oil was within those areas that ISIL controlled. And based on that balance, we could determine what excess they were selling off, where it was going, and kind of what the black market looked like. Our assessment, you know, we brought to the interagency and ultimately the intelligence community for comment and consideration. And as I mentioned previously, it was actually thought to be a very low probability assessment because it was built purely off of open source information. There was no secret data that was used. It was all open source information. However, you may recall there was a raid on Abu Saif that was the ISIL oil minister at the time, and we actually captured somewhere around three or four terabytes of data. And you know, in that data, they had all the receipts from every truck that had been loaded and every bit of deposit that had gone into the bank from the sales. And so we actually were able to validate our assessment, and it was spot on. I'm I'm saying spot on, it was within a very narrow margin of error of what was actually being produced. And what that goes to show you is the information and uh what's available today out there. But while I'll go back to is the point I started to make at the beginning of this particular example, is that it really is not just the data, because the data's there. It's being able to understand that data, being able to analyze it and know what to do with it. And, you know, in this case, we used what I call industry standards, and that's how we came up with our assessments. I remember sitting around our conference room table and laying out step by step how we were going to assess this and uh, you know, the rigor with which we were going to it.

14:20 Nice. That's that's a great story. I love that. That is so cool. And to know, of course, too, like you said, it's all open source data that's out there that, you know, of course, we you can look at and evaluate. And being so, you know, close to almost accurate, you know, like you mentioned, once you've seen the receipts and stuff, it all added up, which is just confirmation, which is so cool.

14:41 Dave, I'd I'd like to add one thing, and it really applies to today. There's a huge debate that's going on around AI. As a matter of fact, one of my colleagues here in the office today, we had that debate. Everybody talks about Chat GPT or some of the other open, you know, source models, and you know, is that going to make us all dumb? And does it really give you accurate information? But, you know, my dad used to say, Rick, you don't use a sledgehammer to drive in a finishing nail, meaning that it is a tool, but the experience you gather and the knowledge you have and how you discern what you're being told is what's important. And it's hard, especially for folks who are in the education system, getting their degree right now, or starting their career, to understand that. Those building blocks give you a uh a discretion in terms of understanding what is being presented to you. And you apply that judgment over time to get the best outcome. So it's, you know, it's really not the AI, it's what you do with it and how you use it. And you can't, no, you cannot rely on any one source, I don't care if it's AI or other, for all the information or to be perfectly accurate. And that's where you have to have some common sense and judgment to go with it. But I think AI today is a tremendous tool that's very topical. Absolutely.

16:07 I agree 100%. I use AI all day as a tool, right? Not as the the, I don't run my business off of AI or I don't live my life off of AI, but I definitely utilize the tool. And when you need certain information about certain regions, certain areas you're looking into and research, you know, it's at your fingertips. And, you know, my youngest daughter just graduated college back in.

16:31 Congratulations.

16:32 That's great. Thank you. Yeah. And she, you know, one of the things was is, you know, in school, they was teaching them how to use AI and lots of her classes, which was great because just like you said, they use it as a tool. It's not the determining factor most of the time, but it just gives you a starting point and kind of sets you up for success and propels it to the next level. So I yeah, I encourage everybody to utilize it. But like you said, you know, you still have to use your common sense and and use everything with a grain of salt and you know, just use your best judgment. But it definitely, it definitely is a good tool. Just like I always say, it's kind of I kind of think of it like a spell check tool, right? Where when you type an email and you want to make sure you didn't misspell anything, you can just hit spell check and everything's great. So that's a that's another good way to look at it.

17:21 There you go.

17:22 So so you've worked on everything from refinery operations and LNG projects to Middle East energy policy and corporate turnarounds. After seeing so many different parts of the industry, what do you think people consistently underestimate about the energy business?

17:37 Well, I, you know, I have to divide the energy business into various segments. But I think people forget how much of our life is truly touched by the energy that we use. And it's everything from what we're talking on right now, the computer, the the use of the internet to the lights, to the heat or cooling, depending on where you live, to the transportation, to the clothes on our back, the manufacturing. I mean, it permeates everything. And we've just become so accustomed to that. The second part that I think people constantly underestimate is just how efficient that fossil fuel molecule is as an energy carrier. I've looked at a number of alternatives, including hydrogen as an example, including ammonia, including solar wind. But that hydrogen or excuse me, that hydrocarbon molecule actually is pretty doggone good and durable. And we keep finding better, more efficient, more environmentally friendly ways to produce it and consume it. And I think, you know, you hear different stories about peak oil or about peak demand. You know, I've seen both of those during my career debated hotly. But at the end of the day, you know, I'm a firm believer in open markets and competition and letting the cleanest molecule at the lowest cost win. And I think, you know, the last thing I'll say about the energy markets, while global energy markets are interconnected, and there's no better example of international commerce than the oil markets, they're also the most distorted. They're most distorted from subsidies, energy subsidies, from taxation. And it's, you know, at the end of the day, I'm just a simple country boy, as I said, from Kentucky. And I want an apples to apples comparison. And I want to be able to know, you know, truly on a on a like-for-like basis, what is the best, you know, most cost-effective, most efficient, most clean form of energy. And in today's environment, that takes a lot of work to get to that point. And I think that's something people constant absolutely, I completely agree.

20:04 And I think, you know, I'm one of those that I've learned over my career that any kind of energy is a good thing. And of course, you have to be open-minded on where your energy is going to be able to come from to be reliable. And just in from being in the oil and gas for the years that I have been, I've always been open-minded to all the different forms of energy because I feel like just like we all know, you don't always want to put all your eggs in one basket. And you you want to be able to be open-minded to the sources of energy that are, especially the new, new types. And you know, we we hear a lot uh today about all the different types of energy that's came across, you know, over the last 20 years. And it's really like you said, whichever one is the clean, most efficient, most cheapest, cheapest, effective, you know, energy, that's what we want to use because, you know, at the end of the day, it's about, you know, our future and our kids' futures and you know the longevity of that. So I I completely agree. So you said one of the biggest lessons in your career that is failure can be one of your greatest teachers. Was there a moment that really drove that lesson home for you?

21:10 Absolutely. I can think there have been several, Dave. I, you know, my life, my career has again, I've I've been able to do and see many different things. But at one point, I uh was engaging or embracing my entrepreneurial spirit and had uh joined and and uh started a company that did government contracting. And our CEO had actually started the company and I brought some contracts to it, and we were getting ready to start up a new contract down at Fort Polk, Louisiana. And this was a simple grounds maintenance contract, okay? And I'm down there with the kickoff with the staff and the team, and we got all brand new, you know, Kabodo lawnmowers and trucks, and I'm feeling good, everybody's in uniform. Looking sharp, and our CEO doesn't show up. And I'm looking around, and you know, I go on and get the guy started, and we're moving forward. And the next morning, I still can't get a hold of them. And lo and behold, later that week was our bi-weekly payroll. But our capital account was empty, our working capital. And he managed to take about $350,000 at the time he invested in Bitcoin and disappeared. And yours truly was left as the number two for the company and a part owner holding the bag. And, you know, that was a real test of both my own personal integrity and uh doing the right things and making sure people were taken care of and properly paid, but also uh some of the lessons learned, the the due diligence and things that should be done as you go into a business. And even with people you've known. And oh, by the way, my wife just happened to have gone to school with his wife. And so these were people that we knew and were familiar with. And, you know, just to feel betrayed in that fashion was a real lesson. I had had another lesson. I was doing some oil trading right after I had left Exxon and before I joined the State Department. There was a period of about one year in between where uh where I actually was waiting on my security clearances and my cool-off period from industry, you know, my non-compete and all that. And so I'm waiting for that to come through. And I was doing some oil trades, and I had structured six different contracts with this one supplier for refined products. And, you know, two of those contracts were five-year contracts, long-term contracts. Four of those contracts were uh were actually one-year contracts. They were all set up, everything was in place, everything was signed. They were different buyers, but one supplier. I was the middleman, if you will, an intermediary or a broker, as, you know, which kind of has a bad connotation in in our industry, but I was the middleman and the market changed. And this happened to be at a time when the price of products went from a low, which is what we had locked into, to a significantly higher. And that's the nature of the oil industry and refined products. And we're seeing that right now. Everybody's paying more at the pump. But what wound up happening is we had an allocation that was due to start in a month or two, and all of a sudden I get force majeure notices from the supplier. And I'm like, what's going on? This is BS, if you will. This this can't be happening, you know, because and granted, I had a small commission on each of these sales, but it was it was a part of what I had built the business model out for what I was doing. And, you know, I uh I went back to them and they said, no, we had this or that operationally, just hear me out on it from this one particular refinery, and which is where I was getting the supply from. And uh, I went to the buyers and I said, Hey, you know, this is what I'm being told. And, you know, I thought for sure they'd be up in arms. And, you know, oh, this is part of the nature of the business. But more than that, uh, you find out competitors are joint venture partners in other places of the world, or if you have supply from one area, sometimes that affects supply or other relationships in others. And my buyers, I had lined up, were not interested in challenging the force majeure because it was really somewhat subjective. And what I found out, the big lesson learned there is I was the tail trying to wag the dog. Now, when I had been in corporate America, I had the big strong backing of that double X, the uh, you know, ExxonMobil. And, you know, I knew contract sanctity was everything. You signed up for it, you live by it. And that wasn't the way some of these independents played in the market. And that was a really tough, it was a tough financial lesson, but it was also a tough life lesson. And, you know, again, these are things you can call them failures, you know, but these are learning opportunities too. And you get some of your business judgment from those very things. And, you know, there's everybody talks about their gut feel, but the all that intuition and all that stuff just simply comes from life experience, having seen it. When you walk into a room, your mind is immediately going to what you can relate to and what you know. And uh, you know, that's where experience comes in and that's where the judgment comes in. So yeah, you can say it was a failure, but uh in the end, you know, I I can't complain because, you know, you've had those ups and downs. You just pick yourself up, dust yourself off, and keep going. And that's the key.

27:05 Yep, absolutely. I completely agree. And always tell everybody, you know, your success is really determined on how you deal with failure. And anybody that I know that's ever been successful in any career path, they've dealt with failure one way or another throughout their career and always love to hear the stories just like this you mentioned, the the last two stories about, you know, how you dealt with failure and kept persevering and you know, the persistence and the grit and the things that it teach you and gives you that wisdom that, you know, you're gonna be able to carry on for the rest of your life. Hopefully, you know, one day pass it on to someone else that's listening to this podcast and they go, hey, this is how this works, right? And somebody gets to hear it and learn from you know mistakes that we all make. So you've you've also had the chance to mentor people throughout your career, and your advice for your students wasn't about chasing titles. It was about finding something you genuinely was passionate about. Why does passion matter so much in building a successful career?

28:03 You know, to me, it is the motivation. It gives you the additional drive to work a little harder, to try a little more, to give it the 110, 120%. And if you truly love something, you're gonna enjoy doing it and you're gonna get pleasure out of it, and you're gonna want to do it more. If you hate it, and you know, when I came out of school, I've got a civil engineering degree. And I was fortunate enough. I worked for an engineering firm, a small regional engineering firm back in Kentucky, while I was in school. And uh, you know, I didn't grow up with a silver spoon in my mouth like a lot of folks. I had to pay for it myself. And uh, they were kind enough to offer me a position when I graduated from college. This was rather than going into industry or corporate America. But the one thing it taught me, I did not want to sit in a fluorescent lighted office. And nowadays it's in front of a computer. Back then it was in front of a drafting board, you know, doing design work all day with very limited interaction. I found out about me, what I like and what I don't like. That's where internships, that's where the things you're doing, like podcasts and so forth, are so helpful to talk about those experiences. But, you know, I would have been miserable. We've all had those jobs, whether it was a summer job while we were in school or, you know, what it wherever it might have been that in an assignment, you hate it and you just dreaded getting up in the morning and going to work. I don't want to spend my life like that. When I enjoy what I'm doing, I'm passionate. I put a hundred and you know, 150%. I said 110 earlier, but you do what you love. And it's interesting when you find those things, you actually you achieve more. And you're actually, you're able to, you see people get ahead. And I've seen it time and again, chapter and verse in my career with folks. And so when I I do mentor folks, follow your passions, find the things that interest you. Always take advantage of the training and the opportunities given to you, because those are things that are an investment in you and help you grow, help you have the experience and knowledge to be able to do more, earn more, and succeed in your own way, whatever that measure of success is for you. And it's a very per success is a personal decision. You know, people ask me, well, what makes you happy, or how do you define set success? And I said, for everybody, it's different. You know, society has those, you know, the standard it's X's and O's in your bank account. It's, you know, you know, it used to be, uh, you know, for baby boomers, it was 2.5 kids in a house in the bourb with two new cars. That's all changing, but each person has to define what is that success and what is it that makes you happy. And I think it's all kind of tied together.

31:06 Yeah, absolutely. And it's funny you say that. When I talk to some of the high school kids at different trade organizations, that's one of the things that I like to ask them is what success is to them and what it looks like. And it kind of gets their brains turning and, you know, heading in the right direct direction. And one of the things that I always share with them when I was a kid that to be successful, I thought it was somebody that had a brick home. And so that was just a little, you know, little thing in the back of my mind, and that defined success. And as I've asked these kids throughout, you know, the times I get to speak with them on different leadership topics. And one of the things it's always funny to hear what it is, because every, like you said, it's different for everybody, and everybody has a different opinion of what success looks like, whether it's a nice house, a nice car, you know, two kids and a beautiful wife, you know, a garage, whatever it may be. And I actually heard somebody say one day to have an ice maker on the refrigerator was, you know, and I was I thought, well, that's that's an interesting take, but you know, just little things like that that you hear, which is which is super fun. So when you look back over your career that has taken you from ExxonMobil to Baghdad to Washington, D.C. and back into the private industry, what's the biggest lesson you hope the next generation of energy professionals carries forward?

32:25 You know, this is somewhat a tough one, but I think what transcends that and transcends the generations. I don't know if I don't care if you're a baby boomer or you're a Gen Z, it's that intellectual curiosity I spoke about a moment ago. It's being hungry and wanting to see and learn more. You know, there are a lot of stereotypes with the various generations. I think the workforce that we have today, having coming into the workforce, having gone through COVID, having seen some of the automation changes, including wondering what AI is going to do in the workforce. But I also see that as a generation or a group of folks that is curious, has and can use a new set of tools differently than any that I ever grew up with, and can contribute in ways that we haven't even thought of yet. And it's that curiosity and that desire to personally grow that I think really propels folks and helps them achieve their vision of success in a career.

33:39 Absolutely. Well, Rick, I I definitely loved having you on the show today and getting your perspective and getting to listen to all the great experiences that you've got to share with us today. And it's definitely an honor to meet you and be able to spend this time and share it with the youth that are coming up in the industry today. And look forward to, of course, hopefully having you again soon on the show. And definitely appreciate all your all your contributions to the industry. And that's one thing that, you know, I'm super proud to work in oil and gas and be in energy. And this is one thing that I've definitely learned throughout my career is that anytime we can shine a positive light on our industry to be able to do it and pass it on to the next generation. So thank you again for being on today. One of the one of the things, Rick, we like to do for all the guests, just whenever you get a chance, just shoot me an email with your mailing address. Uh, we'll send out a care package. I have the girls in the office send it out to all our guests just to say thank you for coming on. It's just a little thank you gift and definitely to show our appreciation for you taking time out of your busy schedule to jump on today.

34:45 So Well, that's very kind, Dave. And I've I've enjoyed it. It's been a good conversation. And I hope I get a chance to catch up with you again in the near future. Absolutely. Well, Rick, you have a great rest of your week. Thank you for joining on, buddy. Wish you the best. Take care. You too. Bye for now.