Tuesday, August 2, 2016

Majority of Americans Want College to Be Free

But they don’t want to pay more in federal taxes to fund it.
Image result for College funds

Few things are as universally beloved as getting something for nothing. Everyone supports free samples at the grocery store, soda refills, and, perhaps one day soon, college tuition. 

Once an idealistic pipe dream of the far left, free higher education is now largely supported by a majority of Americans. Sixty-two percent say they support debt-free university tuition, according to a July survey of 1,000 American adults conducted by Princeton Survey Research Associates International for consumer financial company Bankrate Inc. Among those who are opposed to the initiative, 26 percent said they would support making college debt free for students coming from families that earn less than $50,000 annually. Another 5 percent are willing allow it for those whose families earn less than $85,000 a year. 

But when it comes to putting their money where their mouth is, Americans are more reluctant. Among those surveyed, 48 percent they would not be willing to pay more in federal taxes to fund free college.

Making college tuition free is most heavily supported by those in the millennial generation, the survey found. This is unsurprising, given that millennials face a staggering amount of student loan debt. Undergraduate borrowers who finished college in 2014 are burdened with an average $28,950 in loans, and the delinquency rate on such loans is increasing. A July survey by the Federal Reserve found 29.2 percent of those polled did not attend college because it was too expensive. Among those who started their degree, 28 percent said they could not complete it because of the cost. 

While 79 percent of millennials support free college, only 64 percent of Gen Xers and 49 percent of boomers feel similarly. Support is also split along political lines. Democrats overwhelmingly support the idea, while just 33 percent of Republicans are in favor. 

Debt forgiveness is not as attractive as free college, the survey found. About a third of those surveyed said student loans should be forgiven after the debtor makes payments for 10 years, but 40 percent said the loan should never be forgiven. So while the future might be student loan-free, Americans don't expect to cut a break for those who are already laden with debt. 

Monday, August 1, 2016

The Number of Black C-Suite Executives Has Shrunk Under Obama (BW)

  • The peak was in 2007, the year before first White House win
  • African Americans must still work ‘twice as hard to be equal’

Pamela Carlton, a former executive at JPMorgan Chase & Co. and Morgan Stanley, was as hopeful as any black American when Barack Obama was elected. She believed in the post-racial society and could imagine the next generation not facing the obstacles and isolation she did.
“There was an expectation things would get better,” says Carlton, who went to Wall Street after earning an MBA and law degree from Yale University and since 2003 has headed the consultant Springboard.
Instead, in many ways, they got worse. Just five companies in the S&P 500 -- American Express Co., Merck & Co., Carnival Corp., Eaton Corp. and Xerox Corp. -- are headed by African Americans, and that will drop to four when Ursula Burns steps down as chief of Xerox in the next few months. In 2007, the year before Obama first won the White House, there were seven. That was the peak.
The pipeline into the biggest corner office is also thin. Most executives in posts within striking distance of CEO last year were white, 7.8 percent were Asian American and 4.2 percent were Latino. Blacks made up 2.6 percent, according to statistics compiled by Richard Zweigenhaft, a professor at Guilford College.

‘Guarded Behavior’

Boards, which would seem to be relatively easier to diversify, are less black, too. The proportion of African Americans directors was 8.6 percent last year, down from 9.6 percent in 2010, data from recruiter Spencer Stuart show.
“Blacks are still mostly being channeled into staff jobs rather than line jobs running business divisions that lead to the CEO office,” says Ronald Parker, chief executive officer of the Executive Leadership Council, an advocacy group for African Americans. “There’s still this guarded behavior around who gets to sit in that seat.”
Parker calls it “unconscious bias,” judging people based on how they look, a “common denominator” with what’s behind much of the racial strife in the country. The ugly point the U.S. has reached in race relations -- fueled by a spate of deaths of black men at the hands of police officers and the recent killings by black snipers of cops in Dallas and Baton Rouge, Louisiana -- is spurring some corporate reassessments, says Katherine Giscombe, a vice president at Catalyst, an advocacy group for female executives.

‘Deep-Seated Problems’

“The violence is bringing race more strongly into the diversity conversation,” she says. “For several years now, when companies have discussed diversity, they’ve often talked about their need for diversity of thought and ignored the elephant in the room -- which is race.”
Obama has been an inspiration and role model to African Americans, and there were hopes his being in the White House would radically change race relations for the better.
“The expectations of what he could do were far too inflated, because the problems are too deep seated,” says Michele Mayes, vice president and general counsel of the New York Public Library and former general counsel of Allstate Insurance Co. “Some people still think blacks are ‘less’ than others, so then they say Obama or other successful blacks are ‘special,’ which just relieves them of having to examine their biases. I tell people I don’t want to be seen as special.”

Rare Junction

The first black to lead a Standard & Poor’s 500 Index corporation was John Thompson, at Symantec Corp., in 1999. Kenneth Chenault, CEO of Amex since 2001, was the second. Merck’s Kenneth Frazier was appointed in 2011, Carnival’s Arnold Donald in 2013 and Eaton’s Craig Arnold in 2016. JC Penney Co., which was dropped from the index three years ago, named Marvin Ellison CEO last August. (Burns, the only black woman who’s led an S&P 500 company, will remain chairman of Xerox after it divides into two publicly traded entities by the end of the year; Jeff Jacobson will become Xerox CEO and Ashok Vemuri will head the other post-split company, Conduent.)
There’s no question many companies have made strides. In some cases, the Leadership Council’s Parker says, they realize having African Americans in top jobs is in their business interests. Blacks, after all, had purchasing power of $1.2 trillion last year, according to the University of Georgia’s Selig Center for Economic Growth.
At Sodexo SA, a French food-services and facilities-management company with about 120,000 employees in the U.S., 13 percent of managers are African American, according to Rohini Anand, the global chief diversity officer. That’s the same percentage of the U.S. population that’s black -- a rare junction in America. “Attracting and keeping diverse talent is central to our growth strategy,” Anand says. CEO Michel Landel sets hiring targets, making sure minorities get experience “so they can move up.”
Companies have to take risks and look for talent outside traditional networks if they want to bust up the status quo. “At the end of the day, you have to break some rules,” Mayes says.
The highest-ranking black employee at New York Life Insurance, Senior Vice President for Government Affairs George Nichols, says he was lucky to have been mentored by white chief executives. Now he does his bit by coaching young black colleagues -- and tells them they’ll have to work “twice as hard to be equal.”
At Guilford College in Greensboro, North Carolina, Zweigenhaft, who researches minorities in senior management, has a theory: A black president, and a few high-profile blacks in business positions, took the pressure off. Suddenly, “it wasn’t so embarrassing” that corporate America was largely colorless. “Sometimes having a small number who’ve broken out works against change.”
Clifton Wharton Jr. TIAA-CREF 1987-1993
Franklin Raines Fannie Mae 1999-2004
John Thompson Symantec Corp. 1999-2009
Kenneth Chenault American Express Co. 2001-present
Richard Parsons Time Warner Inc. 2002-2007
Clarence Otis         Darden Restaurants Inc. 2004-2014
Stan O’Neal         Merrill Lynch 2002-2007
Aylwin Lewis         Sears Holding Corp. 2005-2008
Ronald Williams Aetna Inc. 2006-2010
Roger Ferguson TIAA-CREF 2008-present
Rodney O’Neal Delphi Automotive Plc 2009-2015
Ursula Burns         Xerox Corp. 2009-present
Kenneth Frazier Merck & Co. 2011-present
Don Thompson McDonald’s Corp. 2012-2015
Arnold Donald Carnival Corp. 2013-present
Marvin Ellison JC Penney Co. 2015-present
Craig Arnold         Eaton Corp. 2016-present

Friday, July 29, 2016

Why an eye scan could soon unlock Samsung and Apple phones

Leaked images and rumors surrounding the Galaxy Note 7 and 2018 iPhone suggest that users can unlock phones and potentially make purchases with an iris scanning camera. Here's how it would work.


Iris scanning may be coming to a smartphone near you as early as next month. Samsung's Galaxy Note 7 phone—to be released August 2—will very likely include iris recognition technology to unlock your phone. Apple may also roll out new iPhones with iris sensors in 2018, according to DigiTimes—delivering on user demand for biometric security checks over numeric passwords, but raising new practical and privacy concerns.

Iris scanning works by recognizing the flat, colored, ring-shaped membrane of the user's eye. Like a fingerprint, each person's iris is unique. While a retinal scan requires close proximity to an eyepiece, iris capture is more like taking a photograph.

"Smartphones have been improving camera quality, so it's natural and easy to add the iris scan," said Avivah Litan, an analyst at Gartner Research. "There is a lot of interest in iris scans and other biometrics among both consumers and employers, because the other security methods are being circumvented."

While Samsung and Apple would certainly be large deployments, they would not be the first to venture into eye-scanning security. Fujitsu launched the Arrows NX F-04G smartphone in Japan in 2015, and Microsoft's Lumia 950 XL followed later that year. Both phones feature built-in iris scanning user authentication.

Other companies offer similar security for mobile devices via an iris recognition software and camera hardware. And Windows 10's Hello feature lets you log into the OS using your face, iris or fingerprint.

Following the trail to iris scanning

Neither Samsung nor Apple has confirmed the rumors about their own iris tech, but it seems highly likely that the speculation is true. Samsung applied to trademark the "Galaxy Iris" and "Galaxy Eyeprint" monikers in the US, Europe, and South Korea in May.

Apple sources reported that the company was investigating iris scanning as early as 2014, and KGI security analyst Ming-Chi Kuo predicted in March that Apple's 2017 iPhone model might incorporate facial recognition technology (though the DigiTimes story released this week said it would be the 2018 model). The company owns a number of patents that include such technology, including a facial recognition system that relies on 3D rendering for increased accuracy.

Apple also acquired facial recognition specialist Emotient and real-time, 3D-rendering firm Faceshift. In January 2015, it was granted a patent for advanced eye-tracking technology that follows a user's gaze and relays the information to an on-screen graphical user interface.

Most smartphones will not require additional hardware to add this feature; rather, they can likely use existing front-facing cameras and build in an algorithm for the iris scan, said Alan McCabe, biometrics researcher and CEO of the startup My Software Prototype. "It's a bit surprising that Apple couldn't bring it out as an update to their standard OS," McCabe said. "Perhaps they're waiting for that next generation camera to come out."

According to the Samsung Galaxy Note 7 patent, the iris recognition system uses three lenses to capture the image signal, and then checks the iris of the user based on the image generated.

Rising popularity of biometric security practices

Apple brought biometric identification to the mass market with the iPhone's home button fingerprint sensor in 2013, a feature called Touch ID. This high-profile rollout helped drive wider adoption, according to a report from Juniper Research. More than 770 million biometric authentication applications will be downloaded each year by 2019, up from just six million in 2015, the report states—which will dramatically reduce dependence on alphanumeric passwords for smartphones.

By 2019, biometrics are expected to be a $25 billion industry, with more than 500 million biometric scanners in use around the world, according to Marc Goodman, an advisor to Interpol and the FBI. Eighty percent of consumers who expressed a preference said they think biometric authentication is more secure than traditional passwords, a OnePoll/Gigya survey found.

"Biometrics are growing in popularity because we cannot trust people based on their credentials, namely their ID cards and passwords," said Anil K. Jain, a Michigan State University professor who researchers biometrics. "Because of the lack of solid proof of identity, there is a growing need and requirement for using biometrics for homeland security, international travel, and financial transactions."

Millions of customers at Bank of America, JPMorgan Chase, and Wells Fargo banks now use fingerprints to log into their accounts via their phone. Wells Fargo also lets some customers scan their eyes with their phone camera to log into corporate accounts.

Iris recognition in particular is gaining popularity, as it is more accurate than fingerprinting, Jain said. However, existing tech that uses iris scans for authentication typically encounters problems with people wearing contacts or glasses, with changing lighting conditions, and with positioning the camera correctly. But these issues would likely be worked out over time, Litan says.

Avoiding system breaches
Biometric systems are not foolproof: Hackers can create a biometric spoof, or an artificial object (like a fingerprint mold made of silicon) that can fool a system into granting access. Vendors can use different techniques to check for liveness, such as asking a person to blink, measuring blood flow in the eye, or using voice authentication to read the date and time. Still, it will be difficult to prove how accurate these measures are until the tech rolls out on a mass scale, Litan said.

And while these systems make it more difficult to impersonate someone, they need to have strong enrollment processes, lest a criminal register their own iris or fingerprint under someone else's name. This was a major problem with Apple Pay—while the security systems were strong, criminals could enroll as another person.

Litan predicts a rocky rollout of iris scanning smartphones, but said she believes the technology will improve greatly in the next few years. It could have implications in the future once we see more rollouts of the Internet of Things, she added—for example, you might soon be able to open doors by looking at a camera that scans your iris.

"Iris scans are coming, and you can start relying on them for authentication," Litan says. "Tech leaders should start evaluating what it could do for your organization—keep an eye on it, so to speak."

Thursday, July 28, 2016

Democrats Ignored Cybersecurity Warnings Before Theft (BW)

  • ‘Breach assessment’ might have exposed hackers on network
  • WikiLeaks release of 20,000 e-mails disrupts party convention

The Democratic National Committee was warned last fall that its computer network was susceptible to attacks but didn’t follow the security advice it was given, according to three people familiar with the matter.

The missed opportunity is another blow to party officials already embarrassed by the theft and public disclosure of e-mails that have disrupted their presidential nominating convention in Philadelphia and led their chairwoman to resign.

Computer security consultants hired by the DNC made dozens of recommendations after a two-month review, the people said. Following the advice, which would typically include having specialists hunt for intruders on the network, might have alerted party officials that hackers had been lurking in their network for weeks -- hackers who would stay for nearly a year. 

Instead, officials didn’t discover the breach until April. The theft ultimately led to the release of almost 20,000 internal e-mails through WikiLeaks last week on the eve of the convention.

Debbie Wasserman Schultz
The e-mails have devastated party leaders. Representative Debbie Wasserman Schultz, the DNC chairwoman, has agreed to resign at the end of this week’s convention. She was booed off the stage on opening day after the leaked e-mails showed that party officials tried to undermine the presidential campaign of Senator Bernie Sanders in favor of Hillary Clinton, who was formally nominated on Tuesday evening. Party officials are supposed to remain neutral on presidential nominations.

Russia Suspected

The Federal Bureau of Investigation is examining the attack, which law enforcement officials and private security experts say may be linked to the Russian government. President Barack Obama suggested on Tuesday that Russia might be trying to interfere with the presidential race. Russian officials deny any involvement in the hacking and say they’re not trying to influence the election.

Donald Trump, the Republican presidential nominee, said Wednesday that he didn’t think Russia was behind the attack. But he also said he hoped the Russians would get their hands on e-mails that Clinton exchanged using a private server while she was secretary of state, to expose any e-mails she might have deleted.

The consultants briefed senior DNC leaders on the security problems they found, the people familiar with the matter said. It’s unclear whether Wasserman Schultz was present. Now, she is likely to face criticism over not only the content of the e-mails -- including one in which a party official proposes pushing stories in the news media questioning Sanders’s Jewish faith -- but also the failure to take steps to stop the theft in the first place.

“Shame on them. It looks like they just did the review to check a box but didn’t do anything with it,” said Ann Barron-DiCamillo, who was director of US-Cert, the primary agency protecting U.S. government networks, until last February. “If they had acted last fall, instead of those thousands of e-mails exposed it might have been much less.”

The assessment by Good Harbor Security Risk Management, headed by the former Clinton and Bush administration official Richard Clarke, occurred over two months beginning in September 2015, the people said. It included interviews with key staff members and a detailed review of the security measures in place on the organization’s network, they said.

Security Flaws

The review found problems ranging from an out-of-date firewall to a lack of advanced malware detection technology on individual computers, according to two of the people familiar with the matter. The firm recommended taking special precautions to protect any financial information related to donors and internal communications including e-mails, these people said.

The DNC paid $60,000 for the assessment, according to federal filings.

Mark Paustenbach, a spokesman for the DNC, declined to comment on the Good Harbor report. Emilian Papadopoulos, president of Washington-based Good Harbor, said he couldn’t comment on work done for a specific client.

Missed Warnings

The security review commissioned by the DNC was perhaps the most detailed of a series of missed warnings. Officials at both the Republican National Committee and the DNC received government briefings on espionage and hacking threats beginning last year, and then received a more specific briefing this spring, according to another person familiar with the matter.

Cyber-security assessments can be a mixed blessing. Legal experts say some general counsels advise organizations against doing such assessments if they don’t have the ability to quickly fix any problems the auditors find, because customers and shareholders could have cause to sue if an organization knowingly disregards such warnings.

Papadopoulos said a risk analysis by his firm is designed to “help an organization’s senior leadership answer the questions, ‘What are our unique and most significant cyber security risks, how are we doing managing them, and what should we improve?’ ”

The firm typically recommends that clients conduct a so-called breach assessment to determine whether hackers are already lurking in the network, Papadopoulos said. He wouldn’t confirm whether such a recommendation was among those delivered to the DNC.

“We give recommendations on governance, policies, technologies and crisis management,” he said. “For organizations that have not had a compromise assessment done, that is one of the things we often recommend.”

It isn’t certain a breach assessment would have spotted the hackers, according to Barron-DiCamillo, but it would have increased the chances. “Why spend the money to have Good Harbor come in and do the recommendations and then not act on them?,” she asked.

Sanity Check: Apple CarPlay / Android Auto ?

Apple CarPlay

Apple CarPlay lets your car display a familiar, iOS-like interface. So too with Android Auto and its Google Now-ish display. But your new car has a built-in set of similar features that are ergonomically and technologically integrated. Should you plug your smartphone into the Apple CarPlay or Android Auto USB port and connect it to your car’s infotainment system, or just car-mount your smartphone, plug it into a charger and use it separately?

I recently picked up my new car, which features a very high-tech, dual-screen multimedia interface. I was forced to purchase the top-of-the-line “navigation system” in order to get the factory-installed sound system I wanted. (I’ll save my comments about that bitter pill for another column.) So, against my will, I am now the proud driver of a 2017 automobile with every bell and whistle the automaker sells.

Aside from some incredible semiautonomous driving features, the car has a natural language processing interface that lets you control a long list of features. It has a pretty impressive navigation system integrated with Google Earth that offers real-time traffic and weather and has full search, points of interest, a gas station finder, a national monument locater, and a way to store favorite destinations. It has a Bluetooth phone interface with visibility into your contacts, favorites, media, and more. It also has a multimedia entertainment/Internet package that includes Sirius XM, AM/FM radio, SD card readers, Bluetooth, Wi-Fi, aux inputs, an AT&T 6GB/month LTE data package, and two USB ports: one that just charges your device and one for Apple CarPlay. It also has a dedicated app (although it is not very good) that can unlock the car, find the car, geofence the car, alert you if the car goes over the speed limit, and enable you to send navigation information to the car.

Sounds Great, Right?

It sounds great because it is great. It’s the best and latest version of everything this particular automaker knows how to include in the vehicle. But …

My iPhone 6s has every entertainment and navigation feature mentioned above and much, much more. When combined with Apple CarPlay, which you get to by plugging your iPhone into the CarPlay-enabled USB port, it is more than competitive with the car’s built-in navigation and entertainment tools. And, most important, it will be continuously improved over the life of my car. The car’s internal system is what it is; it’s built-in and is unlikely to improve.

Apple CarPlay does not put your iPhone interface up on the car’s display screen. It puts familiar iOS icons on the display in a manner that gives you easy access to Apple maps, messages, music and your iPhone. The phone integration is exceptional. Your favorites, contacts, recent calls and voicemail are just a knob twist away. And while CarPlay integrates only a few entertainment apps – Spotify, iHeartRadio, NPR, At Bat, a podcast player and some others – its future is clear. You are only a software update (iOS 10) away from “a little piece of heaven.” CarPlay gives you access to Siri and has a very nice speech-to-text system for safe messaging while driving.

If I plugged my Samsung Galaxy s7 into an Android Auto–compatible car, I would have access to similar features, plus Google Now and Google Maps. If you’re an Android person, it’s as useful as CarPlay – actually more useful when you consider the quality of both Google Now and Google Maps. Wait until Google adds Waze to Android Auto – you will shop for a car based on its Googleyness.

Sanity Check

Which brings me to a harsh, cold, horrible, unfortunate, evil reality. Even with Apple CarPlay or Android Auto, I still need to car-mount my smartphone.

Back to Apple CarPlay: like many people who need to get from place to place, I am not fond of Apple Maps. I love Google Maps and I truly love Waze. I use Waze every time I get in any car (not just my own). If my iPhone is plugged into CarPlay, I can use Waze, but I can’t see it through the car’s infotainment display; I have to put my iPhone on a car-mount to see the map and visual reference cues, enter or confirm hazards and use other functions.

Did the car manufacturer give me a convenient place to mount my smartphone? Of course not. Do I want to stick my iPhone into the air vent and block the air conditioning, or do I want to stick it to my windshield and block my view? Neither option makes any sense.

Yep, I’m Still Insane

I need to car-mount my iPhone to use Waze and other non-CarPlay-compatible, non-built-in apps. So if I still need to car-mount my iPhone, do I really need to plug it into the CarPlay port? Why not just connect the phone via Bluetooth (to access the car’s built-in speaker phone, assuming that the iPhone’s speaker phone option isn’t loud enough) or Wi-Fi (for audio) and use my apps on the phone?

Perhaps, in the not-too-distant future, Google, Apple and the auto manufacturers will get this worked out. Until then, I’ll be driving around with an air vent iPhone mount and a cable running down the dashboard, tucked under the floor mat, up the center console and into one of the USB ports. Which one? I’ll keep plugging it into the one I always plug it into and hope for a different result – as you know, that’s the definition of insanity.

Monday, July 25, 2016

A Look at the Weird, Wild World of Death Fraud (BW)

Author Elizabeth Greenwood tells you everything you need to know about faking your own demise (don’t).

A few years ago, as she delicately puts it, Elizabeth Greenwood decided that she had “screwed herself financially.” Saddled with more than $100,000 in college debt, she joked to a friend over dinner that her plan was to become a “highly sought-after public intellectual” who would pay it off by giving TED Talks. If that failed, her friend said, Greenwood could always fake her own death and disappear to a tropical island. She was intrigued by the notion.

In her book, Playing Dead: A Journey Through the World of Death Fraud (Simon & Schuster; $26), Greenwood peels the lid off a cottage industry devoted to helping people vanish. She tracks down Frank Ahearn, a foulmouthed New Yorker who claims to have helped more than 50 people disappear, charging them about $30,000 apiece. She swills Coronas with Steve Rambam, a cynical investigator who chases death fakers in the Philippines, where you can rent a corpse and hire locals to stage a mock funeral as evidence of your untimely expiration. She travels to England to meet John Darwin, who faked a canoeing accident in 2002 and collected more than £280,000 (about $371,000 today) in insurance benefits; and to Los Angeles, where she visits a woman who goes by the name Pearl Jr. who’s convinced that Michael Jackson faked his death and is now living secretly among us, waiting for the right moment to reveal himself. Greenwood also introduces us to people—and there are many—who pretended to die at the World Trade Center on Sept. 11 to scam charitable organizations.

The writer is generous with her subjects, letting them tell their stories and reveal their inner selves, however odious they turn out to be. By her own admission, she has something in common with them: She’s running from her past, too. Greenwood grew up in Worcester, Mass., a working-class town she abandoned for California. “I knew I wanted to get as far away as possible from binge drinking, the cult of the Red Sox, and North Face fleeces,” she writes. After acquiring a Valley girl accent, bleaching her hair blond, and purchasing cocktail dresses at Forever 21, she admits that she blends in with the con artists, braggarts, and other sketchy souls she encounters in the world of death fraud. She even goes shopping with one of her subjects, a California woman who was devastated to read a 2007 interview with her father, a crony of Andy Warhol’s. As far as the woman had known, her dad had been dead since the early 1970s. He’d faked a heroin overdose, in part, to escape her.

The questions animating Playing Dead are ghoulishly existential. “How do you occupy your days in your second life?” Greenwood asks. “And can you even disappear in the twenty-first century, when every move is monitored, if not by the U.S. National Security Agency, then by closed-circuit TVs and drones, phones transmitting our coordinates, and obnoxious friends tagging us on Facebook?” This makes her wit that much more welcome. Toward the end of the book, however, she undergoes a tearful catharsis and decides that normal life isn’t so bad after all. It’s a bit maudlin and unconvincing for a writer who seems otherwise to take such pleasure in her quest. Maybe she’s just exhausted after all the flights taken, beers quaffed, and cigarettes puffed along the way.

Writing a book as good as Playing Dead isn’t easy, but perhaps it’s less difficult than committing pseudocide. Few people seem to get away with it. After what must have been their umpteenth Corona together, Rambam, the investigator, shares this insight with the author: “Everybody I’ve caught on life insurance fraud, I tell them, ‘If you put this type of effort, money, and dedication into your life as a law-abiding citizen, you would’ve made just as much money.’ ”

Friday, July 22, 2016

The Future of Big Oil?

 At Shell, It’s Not Oil...
At Australia’s Curtis Island, you can see Big Oil morphing into Big Gas. Just off the continent’s rugged northeastern coast lies a 667-acre liquefied natural gas (LNG) terminal owned by Royal Dutch Shell, an engineering feat of staggering complexity. Gas from more than 2,500 wells travels hundreds of miles by pipeline to the island, where it’s chilled and pumped into 10-story-high tanks before being loaded onto massive ships. “We’re more a gas company than an oil company,” says Ben van Beurden, Shell’s chief executive officer. “If you have to place bets, which we have to, I’d rather place them there.”

Van Beurden
Van Beurden

Van Beurden is betting on gas projects such as Curtis Island to address the central challenge facing all oil giants: how to survive in a world moving ever faster toward new ways of producing and consuming energy. A crucial element of Shell’s pivot toward gas was its $54 billion takeover of BG Group. The deal, which closed in February, gave the company Curtis Island, other massive LNG plants, and gas fields from the U.S. to Kazakhstan. It now has a 20 percent share of the global LNG market, scores of giant gas tankers prowling the seas, and double the production capacity of its closest competitor, ExxonMobil.

For Shell, grappling with increasingly ambitious government commitments to slow climate change, gas has much to recommend it. It’s considered a crucial “bridge fuel” in the transition to a low-carbon future, because gas-fired power plants are far cleaner than those that burn coal. They’re also relatively cheap to build and easy to switch on and off, making them a natural complement to solar and wind generation. Shell is also working to create a market for gas-fueled vehicles, especially ships and heavy trucks that, unlike cars, won’t go electric soon. If Shell gets it right, gas is “not just going to be a bridge” but a lucrative part of the energy mix indefinitely, Van Beurden says.

He faces substantial obstacles in his quest, including the high cost of production and the continued abundance of cheap coal. Investors such as Jim Chanos, president of investment firm Kynikos Associates, argue there’s a global glut of LNG, and in June the International Energy Agency downgraded gas growth forecasts, saying “markets will struggle to absorb” new supplies. The price of LNG for delivery to Northeast Asia, home to the biggest importers, is down 30 percent in the past year.

The most important long-term challenge may be the rise of renewables. In Mexico and Morocco, producers of solar and wind power have promised to supply electricity at some of the lowest rates from any source, according to Bloomberg New Energy Finance. Global investment in renewables is outpacing that in fossil fuels 2 to 1, and batteries to store power when the sun doesn’t shine or the wind doesn’t blow are getting cheaper and improving in capacity—which also bolsters the case for electric cars. “The transformation to a world led by renewables is going to be faster” than oil executives think, says Mark Moody-Stuart, a former Shell chairman who now serves on the board of Saudi Aramco.

Shell prides itself on taking a longer and more clear-eyed view of the future than its rivals. In the 1970s it began drafting “Shell Scenarios,” detailed analyses of global politics and economics, and their implications for energy demand. It’s been less hesitant than competitors such as ExxonMobil—the only private oil company that’s larger—to acknowledge the need to cut carbon emissions and invest in greener energy as a hedge. This year it created a unit for renewables, and Van Beurden in June told investors that Shell “strongly supports” global agreements to limit climate change.

As Shell plots a course through the new business environment, Van Beurden is pushing to deliver on the promise of the BG deal. That means discovering ways to drive down the cost of LNG facilities, by, for example, accepting a little less reliability in exchange for simpler designs, says gas business head Maarten Wetselaar. It will also require finding new customers to make up for lower-than-expected gas demand in countries such as China. Shell last year became Jordan’s first LNG supplier, making deliveries to a brand-new import terminal on the Gulf of Aqaba. Yet the company is postponing some projects: On July 11 it delayed building an export terminal on Canada’s Pacific coast, citing “global industry challenges.”

Those worries haven’t slowed the pace at Curtis Island, where a supertanker loaded with fuel departs every three days. Next to its two production units, the mangroves have been cleared for a third that could increase capacity by 40 percent. For such a sprawling operation, the facility is relatively quiet, with only 300 employees. Most of the time, the only noise is a muffled, high-pitched whir—the sound of miles of metal turning gas into cash, at least for now.

The bottom line: Shell’s purchase of BG Group increased its lead in LNG production, but the rapid rise of renewables makes that a risky bet.