EVEN IF THE STRAIT OF HORMUZ REOPENED TODAY, IT COULD STILL TAKE UP TO SIX MONTHS FOR OPERATIONS TO RETURN TO NORMAL.

THAT IS THE WARNING FROM THE PRESIDENT OF SHELL U. S. WHO SAYS THE DISRUPTION FROM THE IRAN WAR WILL BE FELT LONG AFTER ANY KIND OF PEACE AGREEMENT HERE IS REACHED.

COLETTE HIRSTIUS JOINS WALTER ISAACSON ON HOW THEY VIEW THE CRISIS AND WHAT SHE BELIEVES LIES AHEAD.

>> THANK YOU PAULA AND COLETTE.

WELCOME DO THE SHOW.

>> THANK YOU WALTER.

IT IS REALLY GREAT TO BE HERE WITH YOU TODAY.

>> ALL SORTS OF THINGS KEEP HAPPENING EACH DAY INVOLVING THE STRAIT OF HORMUZ AS THE PRESIDENT OF SHELL U. S. AND PART OF THAT BIG COMPANY, TELL ME YOUR FEELINGS ABOUT WHAT HAPPENS IF WE DON'T GET THE STRAIT OPENED IN THE NEXT FEW WEEKS OR SO?

>> THANKS FOR THE QUESTION.

THE IMPORTANT ASPECT TO UNDERSTAND ABOUT THE SITUATION WE ARE IN IS THE VOLUME OF ENERGY THAT FLOWS THROUGH THE STRAIT.

WE ARE TALKING 20% OF THE ENERGY BOTH OIL PRODUCTS AS WELL AS NATURAL GAS IN THE FORM OF LNG.

THAT COMES OUT OF THE STRAIT TO FEED THE GLOBAL ECONOMY.

SO WHAT HAS HAPPENED THE PAST 100 DAYS IS WE A A HOLE, A GAP OF PRODUCT THAT IS MISSING OFF OF THE MARKET.

THERE HAVE BEEN MANY THINGS THAT BUFFERED THE IMPACT OF THAT HOLE.

ONE IS THAT WE CAME INTO THIS ENVIRONMENT IN A HEALTHY WAY.

WE HAD A BUFFER BAUDS WE WERE SLIGHTLY OVERSUPPLIED AGAINST THE DEMAND AND WE SAW AN IMPACT IN PRICES.

PRICES WERE SOFTENING AND EXPECTED TO THROUGH THE COURSE OF THIS YEAR WHICH WE HAVE NOT SEEN BECAUSE OF THE IMPACT IN THE STRAIT.

WITHIN THAT, WE HAVE ALSO SEEN SOME OTHER PRODUCT FLOWS COME ONTO THE MARKET THROUGH RELEASE OF THE STRATEGIC PETROLEUM RESERVE, THROUGH ADDITIONAL WEAVERS, THE ADMINISTRATION HAS PULLED THAT HAS HAD A POSITIVE IMPACT.

THINGS LIKE THE JONES ACT WAVER.

AND THAT BRINGS ME TO YOUR QUESTION WHICH IS WHAT HAPPENS IF THE STRAIT DOESN'T GET OPENED?

AND THE REALITY IS THAT WE WILL BE IN AN ENVIRONMENT WHERE WE HAVE LOW PRODUCT SUPPLIES.

THAT WILL RESULT IN EXPECTED INCREASE FROM THE PRODUCT WE SEE TODAY.

WE ANTICIPATE MORE PRESSURE ON CRUDE AND ON PRODUCTS THAT COME FROM THAT CRUDE OVERALL.

AND WE ANTICIPATE THAT WILL CONTINUE UNTIL PRICES GET HIGH ENOUGH THAT DEMAND IS DESTROYED.

THAT PROCESS OF DEMAND DESTRUCTION IS PRETTY ABRUPT.

IT IS A BIT OF A BRUTAL AND BLUNT FORCE.

>> YOU MEAN A RECESSION HAPPENS IS WHAT YOU ARE SAYING?

>> IT CAN BE MUCH MORE SUBTLE AND SOFT THAN THAT.

IT CAN BE FLIGHTS CANCELED.

IT CAN BE.

THEN AS THAT PROGRESSES ON, IT GETS MORE CHALLENGING AND MORE DIFFICULT SO I THINK THAT IS THE ASPECT AND THE FOCUS THAT SHELL HAS IS CONTINUING TO MAKE SURE THAT WE ARE GETTING OUR PRODUCTS TO MARKET AND ABLE TO PROVIDE THE PRODUCTS THAT OUR CUSTOMERS NEED.

>> AND THE INVENTORIES HAVE BEEN DRAWN DOWN.

DOESN'T THAT IMPACT THINGS?

>> IT DOES.

AND THE POSITION THAT WE CAME INTO THIS WAR FROM WAS ONE OF A HEALTHY SITUATION.

INVENTORIES HAVE BEEN DRAWN DOWN.

AND WE CONTINUE TO WORK TO MAKE SURE WE ARE SUPPLYING OUR PRODUCTS TO MARKET AND GETTING THOSE TO CUSTOMERS IN THE BEST WAY THAT WE CAN.

>> LET ME TRY TO PARSE THAT WHICH IS HOW LONG DO YOU THINK IT WILL TAKE FOR US TO GET BACK TO NORMAL IF INDEED THE STRAIT REOPENS SOON?

>> THERE ARE MANY ELEMENTS OF THE PROCESS THAT NEED TO FALL INTO PLACE.

THE FIRST IS WE NEED THE STRAIT OPENED.

THERE NEED TO BE A DEGREE OF SECURITY WHERE WE CAN MOVE THE PRODUCTS OUT OF THE STRAIT AND THEN WE NEED TO RESTART THE UPSTREAM ENGINE.

THAT IS THE WELLS FLOWING.

THERE HAS BEEN SOME DAMAGE ALTHOUGH NOT AS EXTENSIVE.

IT WAS EARLY ON IN THE CONFLICT.

SOME OF THAT DAMAGE WILL TAKE TIME TO FIX.

THEN IT NEEDS TO FLOW INTO NEW TANKERS THAT COME INTO THE STRAIT AND THE PRODUCTS NEED TO GET TO MARKET.

AND I WOULD SAY THAT WE WILL RETURN TO A NORMAL CYCLE BUT IT IS NOT GOING TO BE IN A MATTER OF WEEKS.

IT WILL TAKE MORE LIKE QUARTERS TO HALF A YEAR TO RETURN TO NORMAL OPERATIONS.

>> WHAT ARE YOU TELLING THEM OR WHAT ARE YOU SUGGESTING TO THEM?

>> THERE ARE FEW KEY POINTS TO MAKE AT THIS POINT IN TIME.

ONE IS THE IMPORTANCE OF GETTING THE STRAIT OPENED.

THE SECOND IS THAT SUPPLIES HAVE CONTINUED TO DIMINISH AND A THIRD POINT IS WHILE MANY OF THESE POSITIVE OPTIONS HAVE BEEN EXERCISED SO THE DECISION TO RELEASE VOLUME FROM THE STRATEGIC PETROLEUM RESERVE IS FOR SITUATIONS LIKE THIS AND A WAIVER FROM THE JONES ACT HAS HELPED.

EMPHASIZING THAT THE OPTIONS THAT REMAIN THERE ARE NOT MANY.

WE NEED TO CONTINUE TO SUPPORT DOMESTIC PRODUCTION.

HAD WE BEEN 20 YEARS AGO WHEN WE WERE A NET IMPORTER THE IMPACT WE WOULD HAVE FELT IN THE U. S. WOULD HAVE BEEN SIGNIFICANTLY DIFFERENT.

SO OUR NATURAL RESOURCES THAT WE HAVE IN OUR COUNTRY HAVE BEEN UTILIZED TO PROVIDE SOME OF THE BUFFER AND SECURITY FOR THE ENVIRONMENT WE ARE IN.

>> YOU WERE ACTUALLY VERY INVOLVED IN THAT.

YOU WERE CHARGED IN GULF EXPLORATION AS A GEOLOGIST.

YOU ARE SENIOR VICE PRESIDENT FOR THE DRILLING IN THE GULF.

HAVING SO MUCH OIL FROM THE GULF RIGHT NOW, DOES THAT BUFFER US?

DOES THAT MAKE IT IN SOME WAYS A SILVER LINING TO THIS THAT WE ARE A NET EXPORTER?

>> WITHOUT A DOUBT.

SO THE SITUATION IN THE U. S. THAT WE ARE AN EXPORTER AND SO WE HAVE SECURITY IN OUR RESOURCE SPACE, BUT THAT DOESN'T MEAN WE ARE FULLY INDEPENDENT.

AND I THINK THAT IS AN IMPORTANT ASPECT TO REALIZE.

WHILE WE HAVE ABUNDANCE, WE IMPORT PRODUCTS TO CREATE THE PRODUCTS WE EXPORT.

AND WE WANT TO CREATE THAT FLOW OF PRODUCTS WHERE WE ARE SENDING PRODUCTS OUT OF THE COUNTRY.

ALSO OUT TO OUR ALLIES AND RECEIVING PRODUCTS WE NEED TO CONTINUE TO DELIVER ENERGY TO OUR CUSTOMERS AND TO SOCIETY AS A WHOLE.

>> YO ARE TELLING PEOPLE IN WASHINGTON DON'T PUT A BAN ON THE EXPORT OF LIQUEFIED NATURAL GAS AND OIL.

MANY ARE SAYING WHY ARE WE EXPORTING IT?

>> THAT IS EXACTLY RIGHT.

SO IF WE WERE TO SEE THAT ACTION TAKEN IT WOULD BE DIFFICULT FOR US TO CONTINUE TO TO PRODUCE AT THE VOLUMES WE ARE FOR THE CUSTOMERS WE HAVE IN OUR ALLIED COUNTRIES.

>> ARE YOU WORRIED PEOPLE ON BOTH SIDES OF THE AISLE ARE SAYING THINGS LIKE MAYBE WE NEED PRICE CONTROL, MAYBE WE ARE NEED TO STOP EXPORTS?

>> IF I THINK ABOUT WHERE WE ARE, THERE IS AN IMPORTANT ASPECT OF PREDICTABILITY.

THAT IS HOW WE CAN CONTINUE TO INVEST.

OUR SUPPORT FOR DOMESTIC AND ALLIED POLICIES AS A WHOLE.

THOSE ACTIONS WHICH WOULD BE VERY SHORT TERM FOCUS IN THE LONG RUN WILL BE QUITE DAMAGING.

>> AND WHAT ABOUT, YOU WILL MAKE PROBABLY LARGE PROFIT ESPECIALLY FOR THE SECOND QUARTER BECAUSE PROFITS ARE GOING UP.

>> THE QUESTION OF TAXES AS A WHOLE AND WHAT WE NEED TO DO OR WHAT ACTIONS EXIST, THE MOST IMPORTANT ACTION IS TO OPEN UP THE STRAIT.

IT IS A COMMODETIZED PRICE.

WE DON'T SET THE PRICE AT THE PUMP, WE DON'T SET THE PRICE OF CRUDE.

IT IS A QUESTION OF SUPPLY AND DEMAND.

SO ULTIMATELY, THE ACTION THAT IS MOST HELPFUL IS MAKING SURE THOSE PRODUCING ARE FLOWING AND GETTING TO THE PLACES THAT THEY NEED TO BE.

>> SHELL IS THE BIGGEST DRILLER IN THE GULF.

WITH PRICES THIS HIGH, ARE YOU GOING TO START DRILLING MORE OR IS THAT SOMETHING THAT JUST CAN'T BE DONE NOW?

>> THE CYCLE TIME OF OUR PROJECTS ARE SUCH THAT THE PLAN THAT WE HAVE IN PLACE, THE DRILLING AND THE ACTIVITIES SET FOR THE YEAR, IT IS DIFFICULT TO TURN ON MORE WORK.

WE ARE MAXED OUT IF YOU WILL.

ALL THE WELLS WE HAVE ARE PRODUCEING TO THEIR FULL POTENTIAL BUT THERE ARE SOME THINGS WE CAN DO WHICH IS LOOKING AT THE WAY WE EXECUTE MAINTENANCE.

THE WAY WE TAKE ASSETS OFFLINE THAT WILL ULTIMATELY TAKE MORE PRODUCT OFFLINE.

WE HAVE LOOKED AT ALL OF THOSE ACTIVITY TO MAKE SURE WE ARE LIMITING THE IMPACT AS MUCH AS WE POSSIBLY CAN.

SO THAT WE DON'T TAKE ACTIONS THAT ARE ULTIMATELY GOING TO HURT THE WAY WE CONTINUE TO PRODUCE.

>> WHAT OF THE IMPACTS OF TARIFFS, ESPECIALLY TARIFFS ON STEEL WHICH I ASSUME YOU USE A LOT OF?

>> WE DO.

>> IT IS NO HOW WE DRILL WELLS.

THINK ABOUT A BIG STRAW YOU ARE PUTTING INTO THE EARTH.

AND THE METAL THAT WE USE IS PRETTY SPECIALIZED.

THERE ARE ONLY ONE OR TWO MANUFACTURING LOCATIONS THAT CAN MAKE THOSE.

SO IN THAT WE HAVE TO IMPORT A NUMBER OF DIFFERENT PRODUCTS WE USE.

WHEN WE LOOK AT THE IMPACTS OF TARIFFS, YOU CAN CALCULATE WHAT THE PERCENTS ARE.

WE CONTINUE TO LOOK AT DIFFERENT WAYS WE UTILIZE DOMESTIC OPTIONS AS MUCH AS POSSIBLE.

IT IS SOMETHING THAT WE ARE ORGANIZING OUR BUSINESS AND DELIVERING THE BEST WAY WE CAN.

>> YOU HAVE BEEN AROUND AT LEAST 25 YEARS IN THE ENERGY SECTOR.

TELL ME ABOUT THE TRANSFORMATION OF THE U. S. ENERGY SECTOR.

ESPECIALLY DEEP WATER IS YOUR BIG EXPERTISE IN THE GULF.

>> IF I REFLECT OVER THAT TIME PERIOD AND AGAIN IT IS THIS REALITY WE HAVE GONE FROM BEING A COUNTRY THAT IS A NET IMPORTER TO WHERE WE ARE NOW, WHERE WE ARE A NET EXPORTER, AND THAT THAT HAS COME FROM TECHNOLOGY AND INNOVATION COUPLED WITH GEOLOGY OF COURSE.

AND THE NATURAL RESOURCES THAT EXIST IN OUR COUNTRY.

WE HAVE A REGULATORY ENVIRONMENT OF OVERSIGHT ON HOW THE ENERGY IS PRODUCED AND THAT IS A GREAT BENEFIT WE DERIVE MANY ASPECTS OF.

ONE IS PREDICTABLE RELIABLE ENERGY TO GROW OUR ECONOMY.

IT IS ALSO EMPLOYMENT AND JOBS.

AND ENERGY INDEPENDENCE.

SO THERE ARE MANY ASPECTS THAT HAVE CHANGED AND MATERIALIZED AND THE U. S. LAST YEAR WAS THE LARGEST PRODUCER WITH JUST OVER 13 MILLION-BARRELS OF OIL PRODUCED A DAY IN OUR COUNTRY.

WHICH IS REMARKABLE GIVEN THAT 20 YEARS PRIOR, WE WERE NOT THE FIRST PRODUCER IN THE WORLD AND WE WERE A NET IMPORTER VERSUS EXPORTER SO IT HAS BEEN REMARKABLE AND VERY MUCH SPURRED BY TECHNOLOGY TECHNOLOGY AND INNOVATION AND IT HAS BEEN A RED THREAD FOR OUR COUNTRY AND ECONOMY.

>> BUT WHAT HAS HAPPENED TO THE TRANSITION EVEN AT SHELL, AWAY TO A NEW ENERGY FUTURE, ONE THAT WAS LESS HARMFUL TO THE CLIMATE, BUT ALSO, RELIED LESS ON PETROL CHEMICALS?

>> YEAH.

SO I THINK THAT WE ARE IN A TRANSITION.

AND WHAT THE PACE OF THAT TRANSITION LOOKS LIKE HAS TO DO WITH CUSTOMERS.

IT HAS TO DO WITH THE TYPE OF PRODUCTS THAT CUSTOMERS ARE WILLING TO BUY.

AND IT HAS A BIG PIECE OF AFFORDABILITY.

WHAT CAN CUSTOMERS AFFORD.

WE NEED TO EXIST IN THE ENERGY SYSTEM THAT IS THE REALITY OF TODAY AND NOT ONE THAT WE ARE KIND OF HOPEFUL FOR TOMORROW.

>> WHY NOT?

WHY AREN'T WE PUSHING OURSELVES TO THE MORE HOPEFUL FUTURE?

>> I THINK OUR CUSTOMERS AREN'T WILLING TO PAY MANY OF THE PRICES THAT COME WITH THAT.

BUT THAT DOESN'T MEAN THAT WE DON'T INVEST IN IT.

SO AS SHELL, WE HAVE INVESTED SOMEWHERE BETWEEN 1 AND $3 BILLION A YEAR TO MAKE SURE WE ARE CONTINUING TO PROGRESS WITH LOW CARBON SOLUTIONS AND WHAT THAT CAN BE IN THE FUTURE AND IT IS VERY IMPORTANT THAT WORK CONTINUES TO PROGRESS AND THAT WE FIGURE OUT AGAIN GIVEN THAT WE, SHELL AND THE U. S. HAS BEEN PRODUCING FOR 120 YEARS AND PROVIDING ENERGY, WE KNOW THAT THE NEXT 120 YEARS WILL LOOK DIFFERENT THAN TODAY.

WE WANT TO CONTINUE TO BE ON THE FRONT EDGE.

>> ONE OF THE NEW INVESTMENTS THAT YOU HAD BEEN DOING WAS THE ATLANTIC SHORES OFFSHORE WIND PROJECT.

AND SHELL WAS VERY INVOLVED.

AND THEN, PRESIDENT TRUMP COMES ALONG AND I THINK HE SAID SOMETHING LIKE HOPEFULLY, THE PROJECT IS DEAD AND GONE.

THIS IS SOMETHING HE PUT OUT ON SOCIAL MEDIA.

HOW HAS THE ADVENT OF THE TRUMP ADMINISTRATION AFFECTED YOUR PUSH TOWARD ALTERNATIVE ENERGY AND IS THAT WHY YOU PULLED BACK FROM THINGS LIKE WIND?

>> IT ISN'T WHY WE PULLED BACK FROM THAT PROJECT.

AT THE END OF THE DAY, WE INVEST IN WAYS THAT WE THINK WILL DELIVER VALUE IN RETURN.

PRODUCT THAT'S OUR CUSTOMERS AS WELL AS A RETURN TO THE SHAREHOLDERS SO WE LOOK ACROSS OUR PORTFOLIO AND LOOK AT THE BEST WAY TO ALLOCATE OUR CAPITAL BASED ON THAT.

ONE OF THE ASPECTS WE LOOK AT IN OUR CORE BUSINESS IS WHERE ARE THE AREAS WE CAN INVEST THAT ARE LOWEST CARBON INTENSITY AND THE PRODUCTION WE HAVE IN THE OFFSHORE U. S. GULF IS THE LARGEST LOW CARBON DENSITY BARRELS IN THE WORLD.

ULTIMATELY PROJECTS WE INVEST IN NEED TO RANK ON A NUMBER OF PRIORITIES.

THE RETURN THAT THEY DELIVER IS ONE OF THOSE ASPECTS BUT ALSO THE INTENSITY OF THE CARBON INTENSITY OF THE BARRELS OR THE MOLECULE OR THE ELECTRON WE PRODUCE IS EQUALLY A PART OF THAT DECISION MAKING.

>> YOU ARE IN THE WASHINGTON OFFICE OF SHELL NOW.

YOU ARE FROM LOUISIANA SO I DON'T NEED TO TELL YOU THIS.

BUT POLITICS CAN SWING BACK AND FORTH.

IT CAN BE REALLY VARIABLE.

HOW ARE YOU PREPARING FOR THE POSSIBILITY THAT THE POLITICS SWINGS BACK TOWARD BEING MORE ANTAGONISTIC TO CARBON BASED FUELS?

>> AT SHELL, WE DON'T HAVE A POLITICAL POSITION.

WE ADVOCATE FOR THE POLICIES WE THINK ARE THE BEST FOR THE BUSINESS WE ARE TRYING TO DELIVER.

WHAT THAT MEANS IS WE DO NEED TO FOCUS ON THE HERE AND NOW.

BUT WE ALSO NEED TO FOCUS ON THE MEDIUM TERM AND THE LONG TERM AND WE KNOW WHAT THAT MEANS IS THAT WE NEED TO ADVOCATE ACROSS ALL SPECTRUM OF LAWMAKERS AND LEGISLATURES HERE IN DC AS WELL AS THE STATE LEVEL.

WE HAVE SIMILAR SIMILAR POLITICS AND SITUATIONS AND IT IS IMPORTANT THAT WE ARE NOT CAUGHT UP IN THE POLITICS OF THE MOMENT AND REALLY THINK ABOUT THE LONG TERM AND HOW WE INVEST FOR CONTINUITY AND DELIVERY.

>> COLETTE HIRSTIUS, THANK SO MUCH FOR JOINING US.

>> THANK YOU WALTER.

GREAT TO BE HERE WITH YOU TODAY.