©Getty

Speaking to analysts in New York in March, John Watson promised a change of strategic direction for Chevron.

Since before he took over as chairman and chief executive in 2010, the company had been working through a wave of large projects such as Gorgon, the liquefied natural gas plant in Australia that lived up to its monstrous name by coming into production two years late and $17bn over its original $37bn budget.

Chevron’s capital spending had soared to a peak of just under $42bn in 2013, and its return on capital was falling steadily even before the oil price collapse of 2014. 

Mr Watson said that from now on that would change. Chevron would spend less of its money on those grandiose plans, he said, and more on smaller, more humdrum projects that would be quicker to bring into production.

There was one big exception to that new policy: the costly expansion of the Tengiz oilfield in Kazakhstan, run by a consortium in which Chevron has a 50 per cent stake.

This week the consortium confirmed that it was going ahead with a $36.8bn investment to raise production at the field by 260,000 barrels of crude per day. It is the largest oil and gas project to be given the go-ahead by private sector companies this decade.

Tengiz is a particularly valuable asset, however, and Chevron’s overall strategy of focusing on improving shorter-term returns remains in place.

At a time when Chevron, like the rest of the industry, is under financial strain, Mr Watson is taking the unsentimental approach to improving its performance that you would expect from his background.

Tall, silver-haired and bespectacled, the 59-year-old Mr Watson looks more like a doctor or a lawyer than an oilman, and he rose up through the company on the finance rather than the engineering side.

Unlike some of his peers, he was never an engineer or geologist out in the field, and he is not prone to waxing lyrically about the romance of the industry.

As one former colleague puts it: “John is a very smart analytical data-driven type of guy who doesn’t flap.”

The words “very smart” come up often when you ask about Mr Watson. Raised in California, he studied agricultural economics at the University of California, Davis, and then quickly went on to an MBA at the University of Chicago. When he graduated there in 1980 he immediately joined Chevron as a financial analyst.

From a long way back he was groomed to be the chief executive, according to Robin West of the Center for Strategic and International Studies.

The key moment in Mr Watson’s career came in 1998, when he was appointed vice-president with strategic responsibility for mergers and acquisitions, just as the mega-merger wave was hitting the oil industry. 

As Exxon paired with Mobil, Chevron failed to agree a merger with Texaco in 1999, but succeeded in its second attempt a year later, and Mr Watson was put in charge of the integration effort. He then became chief financial officer, and was successful in achieving cost savings from the merger.

That deal and the subsequent $17bn Unocal acquisition in 2005 “turned out to be much better than most people understood at the time”, says Mr West.

Today, with Chevron’s credit rating deteriorating as it borrows to pay its dividends, there is a greater challenge ahead in terms of cutting costs and raising profitability. But Mr Watson’s record suggests he is exactly the type of executive investors would want to take on that task.