On March 12, Secretary of State Michael R. Pompeo recognized PESA during his keynote address at CERAWeek. As a former PESA Member, Secretary Pompeo recognizes the importance of the oilfield services and equipment sector to national security.
PESA was also recognized by Secretary Pompeo in August 2018 on the 25th Anniversary of the FSO Oil & Gas Training Program congratulating PESA and the energy industry on a quarter century of partnership. “The State Department’s partnerships with American businesses are vital to our foreign policy,” Pompeo said. “For our part, we will keep creating environments around the world in which American businesses can thrive.”
Michael R. Pompeo
Secretary of State
Hilton Americas-Houston Hotel
March 12, 2019
SECRETARY POMPEO: Thank you, Dan. Thank you all for joining me. I see you standing in the back. It’s like church, there’s empty pews in the front if you want to come up and grab a seat. I do think – is there anyone from the Petroleum Equipment Suppliers Association here? I’m pretty sure I’m the only former member to ever serve as Secretary of State, so you should put that right on the front of your web page. I think that’s legal.
Good evening, everyone, and thanks to you all for being here. I heard CERAWeek has been just spectacular. It’s quite a crowd. I’ve seen many of you here. I’ve had the chance to get to know many of you as well. People call Washington “the swamp,” and they call Houston “the bayou.” Now, I will tell you that they’re both the same in August in a suit and a tie, but there is – there’s one really big difference. One of the two works desperately to seek rents from its citizens, and the other works desperately to create wealth for the people who live there. I will leave to you which is which, but suffice to say, I’m glad to be in Houston.
It’s great to join so many foreign dignitaries and business leaders as well that operate all around the world. I’ll certainly spend a great deal of time tonight focused on the United States and the things I’m doing as America’s most senior diplomat, but it’s wonderful to see folks from all around the world who are involved in this important endeavor. Dan, thanks for your kind remarks. I’ve read Dan’s work for an awfully long time. You all are familiar with The Prize, but your ideas have informed me more broadly than that, more than just about energy. I’ll talk about The Commanding Heights. That’s a book that was written now 20-odd years ago, which I read in hardback. I paid full price, Dan.
MR YERGIN: Thank you.
SECRETARY POMPEO: But I think it’s important for what it is that I’m doing as Secretary of State. As Dan said, I spent a fair amount of time in the oil and gas industry. I ran a small company; it was called Sentry International. We made and sold mud pumps and swivels and hook blocks and downhole equipment, and we distributed sucker rod, so I know the industry well, the whole nine yards in oil and gas. I spent a lot of time in Midland, Odessa, Longview, and all kinds of – Oklahoma and Canada. Is there anybody from Lufkin here tonight? So my partners and I swore that we would listen to the quarterly conference call for Lufkin every quarter until they mentioned Sentry as destroying their business. We were small enough it never happened, but we continued to live in hope that we could compete and grow and prosper in the way that so many of you have.
My time as Secretary of State isn’t that far from – removed from what I did running that small company headquartered in Wichita, Kansas. The reason why is something you know; it’s obvious for all of you in the audience. Because we are now in the new age of discovery that history will remember as society changing in scale, and global changing. Instead of sailing off to new lands the way it was done old-school by Columbus and Magellan, we’re making discoveries right here in the United States of America right under our feet. And you all know that here in America we have the free enterprise system to thank for this modern-day miracle. And I want to talk about why that matters. Things like horizontal drilling and fracturing, the Shale Revolution, the oil derricks that dot the landscape all throughout the Permian Basin matters. New drilling technology and greater energy output are transforming American life and lives all around the world in the same way that the changes did when Spindletop first took place back in 1901. It was a game-changer, and what this industry is doing today is game-changing as well.
I travel the world some, and when I do and meet with my foreign minister counterparts or presidents or prime ministers, they’ll ask me how did America come to do this. How did you literally blow out American energy production to go from a place of scarcity to a place of massive exports. And I tell them that they should simply look at places like Midland, Texas, people that are willing to work their tails off, often without a college education, earn six-figure salaries and they run businesses themselves that have ‘Now Hiring’ signs hanging on their front doorstep. Look at places, too, like Kaktovik, Alaska, the polar bear capital of the United States of America. Their small native community is now working diligently to tap into the resources that they have under their feet. And you see this – you see this in towns like Wichita, Kansas, all across America, that the economic struggles, the lack of jobs that took place for a decade no longer have to be. We can continue to be the engine – and the energy – and as we can continue to be the engine that succeeds in building out the United States of America.
Now, recent history should remind us all that we’re not just producing energy for Americans. It’s never truly been the case, but less so now than ever before. Today, you all know we’re exporting crude oil at levels that were previously unimaginable. It took two partners to achieve that. It took our shale producers and risk-takers, and it took Congress lifting the oil export ban in 2015, which I voted for. You should all see me as I walk out and say thanks. (Laughter and applause.)
In August of last year, the United States surpassed Russia as the world’s top producer. When it comes to global supply, U.S. oil production rose at the fastest pace in history, the largest one-year increase in oil production that the world has ever seen. That’s awesome and it’s important.
After all, only about a decade ago, we did live in a world where we imported 60 percent of our oil, and now we’ve shrugged off that oak of energy dependence, not just thanks to oil, but we’re doing the same in natural gas today as well, and I know there’s more and even a brighter future there. We shouldn’t forget, too, about the incredible growth in renewable energy. I’m confident that the American system – leaving the commanding heights in the hands of private risk-takers – will allow that industry to continue to grow and export as well.
I had the chance to meet with Secretary Kissinger about two months ago, and I was asking about a handful of things, and he, 45 years ago, brought foreign ministers to his office to figure out how the world was going to deal with energy scarcity. A couple weeks back, I brought Dan into my office to talk about how the heck we were going to make sure we could get it from the American interior to the coast so that we could deliver this to foreign partners who are demanding this.
And there, I want to turn to the real focus, the main topic, what our newfound energy abundance means for American foreign policy, what you all can help me and President Trump deliver to the world.
It’s really – it’s very simple: Our plentiful oil supplies allow us to help our friends secure diversity for their energy resources. We don’t want our European allies hooked on Russian gas through the NordStream II project any more than we ourselves want to depend on Venezuela for our oil supplies.
This need, this desperate need for diversification is why we exported more crude oil last year to countries all across the globe. Places as diverse as India, Japan, China, the Republic of Korea, Italy, Ireland, the United Arab Emirates. The list is long. It’s why, shortly before the United States made its first LNG shipment to Europe, it made it to a place that people don’t think about, the country of Portugal that now has access to American energy resources.
You should all know – and I hope you have seen this. I’ve been doing this now all of 11 months, so I’ve got it all figured out. I hope you all have seen that my team at the State Department is working hard to expand these relationships. Last April, we formalized a commitment to bolster Vietnam’s energy security. In October, the State Department hosted its first dialogue with Australia on energy security. And these operations, these opportunities will just be the beginning.
But truth is, here’s my point: We’re not just exporting American energy, we’re exporting our commercial value system to our friends and to our partners. The more we can spread the United States model of free enterprise, of the rule of law, of diversity and stability, of transparency and transactions, the more successful the United States will be and the more successful and secure the American people will be.
Our model matters now, frankly, more than ever in an era of great power rivalry and competition where some nations are using their energy for malign ends, and not to promote prosperity in the way we do here in the West. They don’t have the values of freedom and liberty, of the rule of law that we do, and they’re using their energy to destroy ours.
Take China, just for starters. China’s illegal island-building in international waterways isn’t simply a security matter.
By blocking development in the South China Sea through coercive means, China prevents ASEAN members from accessing more than $2.5 trillion in recoverable energy reserves. To contrast, the United States Government promotes energy security for those Southeast Asian nations. We want countries in the region to have access to their own energy. We want to help them. We want to create partnerships. We want transparent transactions, not debt traps. We explore responsibly.
China doesn’t play by that same set of rules. Its values are simply different. You see that in places as diverse as Africa, where they often ship in their own labor, creating jobs for Chinese workers rather than for those in the local economy. It’s using the debt trap which I referred to just a moment ago to put these countries in a place where it isn’t a commercial transaction, it’s a political transaction designed to bring harm and political influence in the country in which they’re operating.
Many of you may not know this: China’s largest creditor today – excuse me, Latin America’s largest creditor today is China.
And we all know the story in Russia. It invaded Ukraine to gain access to oil and gas reserves. It in turn deprived Ukraine of the possibility of developing those resources for itself and using its pipelines and its networks to bring energy to its own people. Rather, it uses those pipelines to put pressure – political pressure – on the people of Ukraine.
The story isn’t too terribly different in Syria. Assad covets the oil fields to the east of the Euphrates River in the eastern part of the country. He wants those resources, he wants those wealth to continue to impoverish the people of Syria, and use those resources for himself and the cronies who are around him.
Perhaps there’s no clearer example than in Iran. Iran uses its energy exports to exert undue influence all across the Middle East, most particularly today on Iraq. While the United States is working to develop an independent, sovereign Iraq, Iran is using its energy to create a vassal state. We have worked hard over the past months to reduce the flow of Iranian crude oil around the world, to convince the Iranian leadership to protect its citizens and deliver to its citizens what it is they’re asking for, and to reduce the risk of terror and instability throughout the Middle East.
There could not be more of a contrast about how America uses its energy resources than how the leaders of the Islamic Republic of Iran use their.
And finally, as we see in the headlines today, Cuba props up Venezuela’s Maduro regime. That’s because Venezuela ships 50,000-some-odd barrels of oil today at a subsidized price to Cuba, providing roughly 30 percent of its overall energy needs.
You all, the wealth that you’re creating here in the United States, can change that. Look, this is the world we live in. The good news is that we know how our model is superior. And as Daniel Yergin wrote in that book back in 1998, it is markets, not governments, that have proven more adept from the commanding heights. But our way of life, our business model, and our future aren’t things that we can take for granted. There is no certainty that this model will continue.
The Trump administration is working strongly, based on its firmly held conviction that we must further America’s interests by widening the tools we have available to our diplomats, especially the tool of American energy abundance. You all know this: It’s a complex, interconnected world. You have partnerships with companies all across the globe, and the United States has to compete. We have to create energy security for those all around the world. And we can do this. We can do this by partnership, by American diplomats working to ensure that markets are open for American businesses all around the world.
There are three ways. First, we can do this through facilitating investment. We do that by creating the engine for capital formation here in the United States. Foreign firms have invested more than 100 billion in the U.S. shale sector just since 2008. Twenty percent of these investments were joint investments between foreign companies and American companies. We can continue to promote that.
You won’t see this in many other places, but there are places. In Southeast Asia, the United States is the single largest source of cumulative foreign investment. And the State Department has played an important role in helping investors make good decisions and getting access. An example is our program about the Indo-Pacific being open. We call it the Asia Edge Initiative. It helps Indo-Pacific partners import, produce, and deploy their own energy resources.
The second way, other than investment, is we can promote energy security by encouraging countries to partner with the United States all around the world. And I’ve seen this at work. We’re reminding them that we’re simply better to do business with than Russia, China, or Iran. Our deals come with no hidden strings attached, our contracts are clear, our motives unambiguous.
On recent trips, my State Department colleagues and I have been touting the high standards of transparency, responsible financing, and adherence to the rule of law that American companies bring along with them. It’s what you all are known for, what American businesses are known for.
I’ll give you a good example. I was in Warsaw now – oh, goodness, it must have been three or four weeks ago. I was with Foreign Minister Czaputowicz. He and I were discussing how we can diversify the Polish energy supply, not only with energy but with routes and with the types of fuels that we can deliver to them. We’re making progress. We’re accomplishing parts of that mission. We’re doing it with the help of countries like Sempra Energy, like Cheniere and Venture Global LNG. They’re helping destroy the Russian monopoly on Polish energy.
And although it’s certainly the case that our firms will benefit financially, this isn’t just about dollars and cents for American companies. It’s about America’s national security. It’s about Russian influence peddling and the need to stop it. We must bring this to an end, and you all can be an important part of that.
It was Winston Churchill who once said when it comes to energy security, quote, “safety and certainty … lie in variety and in variety alone.”
That may not be quite true, but it’s certainly an important thing for each of us to think about and American diplomats to help you deliver on. We commend countries like Croatia for what they’re doing with the LNG terminal on Krk Island, as well as Lithuania for taking similar steps to diversify and acquire energy away from the Russian footprint.
That brings me to the third and final way that the State Department can help achieve this national security through energy abundance. We’re pushing bad actors – those who use their energy towards malign ends – off the target.
I talked about Iran. You know its role in global energy markets. We know that role is diminishing. Its exports have tanked due to our pressure campaign, and we have every intention of driving Iranian oil exports to zero just as quickly as we can.
We’ll continue with sanctions until Iran behaves in the way normal nations do, without threatening assassination campaigns in Europe, conducting terror campaigns throughout Syria and Iraq, without underwriting Hizballah. These are the ways that energy can keep Americans, Europeans, and Western countries all more secure.
And we’re committed to doing this. We’re committed to using all of the economic tools at our disposal in Venezuela, where our sanctions to date on Venezuela kicked in back in January. We are hoping and working towards a good outcome there.
We need to continue to build our energy security in the ways I’ve described. We need to roll up our sleeves and compete by facilitating investment all across the world and encouraging partners to buy from us and by punishing bad actors.
The State Department wants to work with each and every one in this room tonight, American companies and foreign companies alike. We want to achieve these goals because we think we have the model that will make not only America but the world more secure.
In the days ahead, you should know, America will continue to be asked to meet the world’s energy demand, especially in places like the Indo-Pacific. Our private partners are essential to that. The private sector will be absolutely instrumental. It certainly can’t be done if the commanding heights are handed to the government. But neither private enterprise nor the federal government can do it alone. We need each other. It is American producers, working in tandem with American diplomats, who can create this stability and prosperity all around the world.
As I close and prepare to take questions from Dan, I want to encourage the rest of the world to get on board with this project. Come follow America’s energy blueprint, which is to innovate, not subjugate; to contribute, not to coerce; to allow markets to command the heights.
At least for the rest of my lifetime, the world will need oil and gas and petrochemicals to produce gasoline, to produce jet fuel, fertilizers, and pharmaceuticals.
We should consider ourselves pretty darn lucky here in the United States. We’ve worked hard. But in the age of the new discovery, our shared ability to provide these things is now greater than at any other point of history, and we need to keep it that way. I know that you’ll work alongside, as you should know that America’s State Department will continue to work alongside you.
Thank you for being here. May God bless you and may God bless the United States of America. (Applause.)
MR YERGIN: Thank you, Mr. Secretary. That was great.
SECRETARY POMPEO: Thank you.
MR YERGIN: Thank you, Mr. Secretary (inaudible) heights. (Laughter.)
SECRETARY POMPEO: Available in the lobby.
MR YERGIN: Or online.
SECRETARY POMPEO: Or online, yes.
MR YERGIN: Yes. As – you described this massive growth in abundance, and I guess when you met Secretary Kissinger, your predecessor, he must’ve been a little envious of the position, given what —
SECRETARY POMPEO: Yes.
MR YERGIN: Yes.
SECRETARY POMPEO: I think so.
MR YERGIN: Yeah. So you’ve described the objectives. How is this abundance affecting the role of the State Department itself?
SECRETARY POMPEO: So this has always been – I mean, the State Department has 1,700-plus economic officers whose mission it is around the world – we’re in 180-plus embassies – whose mission is to ensure that American companies get a fair shake, a real opportunity. Our task now is to make sure we understand what it is you do, that we have the context for what it is you’re trying to achieve. These diplomats haven’t, for the most part, lived their life in the energy sector, so these are fields with which they may well not be familiar. But we’re determined, and President Trump and I have both made clear that one of our missions is to make sure that our team knows that, that our team is on the field, that we’re in every corner of the world working to make sure that American companies have access without tariffs, without non-tariff barriers, all the things that you see in the news. And you should, if you haven’t – if you operate in a country and you haven’t reached out to your embassy, America’s embassy, you must do that. If you’re in Washington, stop in, meet with Assistant Secretary Fannon and our team. We’re determined to work alongside to understand and be able to help you all deliver the energy security that I described in my remarks.
MR YERGIN: This evening you’ve mentioned, and in other important speeches, the Indo-Pacific concept. And how do you see the role of the U.S. position itself in terms of the overall growing competition in the region?
SECRETARY POMPEO: So the challenge that’s presented to America and to the world by China is different than one that we’ve confronted before. Our National Security Strategy defines how we think about China in the Trump administration. There are many differences, but one of the most fundamental is we’ve never had another country of the scale of China, with the military of the scale of China’s, that has now expanded into space and property that they do not have a lawful claim to, but with which America has such a deep, intertwined economic and commercial set of relationships. It was often the case, as it is with certain countries today, that we don’t have those commercial relationships, so we move away and try and drive them out of the marketplace. China is more complicated and more difficult, but no less challenging to ensuring that America’s wealth creation engine is around 10 and 20 and 30 years from now.
In the Indo-Pacific proper, I don’t travel to any country in Asia, South Asia, Southeast Asia where energy isn’t a topic. I will be honest; where – depending on where I am, they mention it either in public or in private. Many of them don’t have the capacity on their own to stand up to the coercive behavior of China, where China moves in and attempts to use its economic clout to influence and control their government. They all welcome companies from the United States. They welcome American capacity for the rule of law. They may not always say this, they may not always speak their mind publicly, but know that I have literally not met a single one of those countries or leaders from one of those countries that didn’t want a more American opportunity, more American resources, more American technology and innovation as part of the mix.
MR YERGIN: You spoke about the Middle East. And of course, the Middle East is always a central question, but your Middle East Strategic Alliance is a unique approach. How does energy fit into that and how do you see the Middle East Strategic Alliance working with the other organizations in the group, like the Gulf Cooperation Council?
SECRETARY POMPEO: So the Middle East Strategic Alliance is still in its very formative stages. There’s still a lot of work to do. We have multiple pillars that we’re trying to build an alliance around – the Gulf states, Egypt, Jordan – to create a stability in the Middle East that has been something that the world has longed for for decades, you might argue centuries; for an awfully long time. A set of countries that are largely likeminded; we all know they have their challenges and their conflicts, they think about parts of their portfolio differently, but there’s an enormous amount of overlap as well.
And so one of the pillars is the economic pillar, where they’ll compete, right. They’ll sell their product, their gas from Qatar, the oil from Saudi Arabia. Wherever it may be, they’ll go compete. But there are lots of places where they can work together. And so if you combine economic understandings, diplomatic understandings, military understandings, each of these pillars, we think there’s a way to build an alliance that we have not seen there before. It’ll take us a bit, it won’t be straightforward, it’ll be bumpy. But we think there are a set of common threats that are different than at any time in recent history that provides an opportunity to get these folks to come together.
It will work alongside other institutions in the Gulf – OPEC, the GCC, all of these other institutions that exist and predate what we’re trying to do with MESA. We don’t think this drives them out, but we think it provides another forum, another place for these countries to work together, most importantly on pure national security issues.
MR YERGIN: Right, so this is something that will evolve over the next months or —
SECRETARY POMPEO: So we – fits and starts along the different pillars, but we do hope over the next several months we make a big step and get pieces of this reduced to paper, where countries can provide their input, respond, and we can be thoughtful about how to approach it so that perhaps by the end of the year, we’ve made substantial progress.
MR YERGIN: Well, you do bring unique perspective to energy questions having been in the industry, and at the same time now, where you sit in your responsibilities. And if you think broadly about the role of private sector, government working together, each of them contributing to energy security, prosperity, how do you see that balance?
SECRETARY POMPEO: Tell me what you’re thinking, Dan. What do you mean?
MR YERGIN: Well, the role of each, what do you expect from the private sector in terms of – and the nature of the cooperation.
SECRETARY POMPEO: So for those of you out there that need a lathe operator, I’m the first Secretary of State that can actually run a lathe, so if this whole diplomatic thing falls through, I’m ready to get back at it. The truth of the matter is the most stable places in the world are ones that have deep economic relationships with the United States of America. What – my expectation for you is that you will go out and try and crush it every day, and create wealth for your shareholders, great opportunities for your employees, that you’ll go build your business successfully not only here in the United States, but you’ll do it all across the world as well. Our task is here, domestically, not my portfolio, but to create a set of rules for capital formation, and a regulatory environment in which you can grow and prosper. And then my task is to make sure you’ve got every opportunity to go compete.
I – of all the challenges – I laid out half a dozen maybe there, Dan, in the remarks. I could have gone on to another half a dozen pretty readily. I don’t think anyone should ever bet against the United States of America. I am convinced that if diplomatically and through using the American force for good in the world, if we get you out there and get you a chance to compete, you’ll do fantastic, you’ll excel. I remind my team – and this is a bit of a discourse, but I think it’s – when I remind my team all the time, our presence matters. People not only see what we’re doing diplomatically, the things we’re asking of these countries to do, sometimes for themselves, sometimes for our mutual interests, but they watch how we behave. We treat each other with respect. We understand the rule of law. We have court systems that are functional and work. We work hard; we tell the truth. These fundamental things that happen when American companies show up, other countries see. And so whatever the value proposition that they’re evaluating, you should know that the fact that this traditional set of liberty, freedom, and a willingness to work hard matters in a lot of these places as well, and I think America will benefit from that a long time. And so if I were betting, I’d bet on us.
MR YERGIN: Right. Well, Mr. Secretary, your message is not only to the Americans in the audience but there are about 75 other countries here, and I think it’s an important message to both sets of people about the nature of the partnership and the division that you’ve outlined. So we thank you very much for coming to join us this evening and sharing this view of energy and U.S. foreign policy and what’s ahead. So thank you very much.
SECRETARY POMPEO: Thank you, Dan. Thank you all very much. Thank you. (Applause.)