Keynote address by Mark Albers
president, ExxonMobil Development Company
at the 27th Oil & Money Conference, London

September 18, 2006

Thank you for that introduction. I am delighted to be here with you this morning.

As an industry, we find ourselves in a challenging position – working to explain the realities of today’s energy business in a climate in which governments and consumers are questioning the cost of energy – and the availability of future supplies.

While we often talk about rising global demand and the technological challenges of finding and producing energy in today’s world … we must also share our knowledge that the global resource base gives us optimism about future energy security.

Indeed, all of us who have made energy our life’s work understand that the industry moves in cycles – long-term trends that occur over periods of years and decades, not days or weeks.

Yet many outside the industry base their sentiments on the price they paid for petrol this morning.

So while we’re planning our business for the years 2010, 2020 or even 2030, we must be aware of – and participate in – the broader public debate that is taking place today.

It is a debate about the future of energy, about energy security, and about the role that oil and gas will play in the decades to come. Conferences such as Oil & Money play an important role in helping to foster that debate.

As an industry, we need to encourage others to look beyond and through today’s headlines -- to recognise and understand the long-term supply and demand outlook that will shape tomorrow’s energy security.

Today I’m going to talk about what can be done to help deliver the affordable, reliable supplies of energy the world will need to sustain future growth and development. It is a task that will require actions on both the supply side and the demand side of the energy equation.

But before we discuss these issues, let’s first look at the outlook for world energy demand, the composition of the future energy mix, and the investment requirement that lies before us.

The Real Energy Challenge
Access to affordable energy makes economic growth possible, as it powers the businesses and industries that create jobs and drive trade. In other words, energy is the prerequisite of progress.

For the industrialised nations of the world, access to affordable energy is critical to maintaining stable economies.

And for developing countries, economic growth means improved living conditions and an enhanced way of life for quite literally millions and millions of human beings who lack even the most basic of modern necessities.

Yet as energy fuels development, development fuels demand. Growing populations and increasing prosperity in developing nations will drive energy usage to ever greater heights. Total energy demand is expected to be about 50 per cent higher by the year 2030 than it is today.

And, due to their scale and flexibility, it will be conventional energy sources such as oil, natural gas and coal that will continue to provide the vast majority of the world’s energy needs over the next 25 years and beyond.

Renewables such as wind and solar will experience double-digit growth over this timeframe due in large part to government subsidies and mandates. However, even with this growth they will only contribute about one per cent of total needs, due to the overall size of the energy industry.

So yes, there is a challenge ahead of us. But it’s a different challenge than some predict.

The challenge isn’t the adequacy of the resources available to us.

The resources are there. No, the real test – and the real opportunity – lies in developing those resources safely, economically and in an environmentally responsible manner.

According to the U.S. Geological Survey, the Earth was endowed with more than three trillion barrels of conventional recoverable oil resources. When we take into account non-conventional forms of oil, such as heavy oil and shale oil, we estimate that the resource base rises to over four trillion barrels of oil.

Consider that in the entire history of the oil industry, we have collectively produced just one trillion barrels … and you can see that resources are plentiful for the foreseeable future.

But at the same time, these resources will be found in locations that will require new thinking and new technology in order to access them – whether because of their remoteness or because they lie in locations that have been off-limits to production for other reasons.

The development of these new supplies will require substantial investments of both financial capital and human resources.

The International Energy Agency estimates that our industry needs to invest more than 200 billion dollars annually between now and 2030 to meet future oil and gas needs.

In the overall discussion of our future energy security, it is vital that we communicate this important point to those who question the cost of energy today.

Our task, then … our challenge …is to combine investment, technology and public policy in a way that enables us to successfully explore for and produce those supplies, and deliver them to market as efficiently as possible.

This is an effort that requires the participation of industry, government and consumers, and which has both supply-side and demand-side dimensions. I would like to cover now how those two dimensions impact both the technological and public policy challenges we face.

The Technology Challenge – Supply Side
First, let us consider technology.

Although not everyone may recognise this, the oil and gas industry is a high-end technology business.

While our end product is a commodity, the business of producing it is as heavily dependent on technology – if not more so – than many so-called technology firms.

This is certainly true at ExxonMobil.

Yet despite the fact that ExxonMobil topped the Fortune 500 list of U.S. companies and invested over $1.1 billion in technology applications and R&D last year, the magazine does not categorise us as a technology company as it does many computer, medical device and aircraft manufacturers.

Regardless, you and I understand the technology-rich nature of our business. We see every day the benefits that technology has given us – the ability to supply energy from sources once considered impossible to access, for example, or to capture more of the resource from already producing areas.

I am sure you are all aware of many major projects under development throughout the energy industry, but let me share some brief examples of the different ways in which technology is being applied in the energy supply chain at ExxonMobil:

• Technology is being used to develop new ways of accessing energy and getting it to market. On Sakhalin Island in Russia, for example, crude is flowing through wells extending laterally 9 kilometers offshore – something not considered possible just a few years ago.
  
  And on September 7 this year, ExxonMobil announced the commissioning of the crude oil export system for the Sakhalin-1 project, allowing new oil supplies to be provided from Sakhalin to international markets via ocean tanker or pipeline.
  
  
• Technology is increasing the global reach of clean-burning natural gas. For example in Qatar, with our partner Qatar Petroleum, we have greatly increased LNG liquefaction and shipping capacities, enabling this natural gas to now reach just about any market, anywhere in the world.
  
  Work is continuing on the development of new receiving facilities in locations such as South Hook in Wales, the Adriatic LNG Terminal in Italy and on the Golden Pass LNG project in Texas. These facilities will open new supplies of natural gas to meet growing demand in Europe and the United States.
  
  
• Technology is also contributing to improved environmental performance. A recent example is in Nigeria, where started up the East Area Additional Oil Recovery project that will add 120 thousand barrels per day gross production, and at the same time deliver an important environmental benefit – reduced flaring and greenhouse gas emissions.

The Technology Challenge – Demand Side
So, technology is without a doubt critical to the flow of new energy supplies. But it also has a key role to play on the demand side.

Pursuing new, more efficient ways to use energy has an important role to play in helping to reduce the rate of future demand growth.

In the transportation sector, innovations such as hybrid vehicles and advanced engines and fuels will mitigate future demand growth and reduce global greenhouse gas emissions.

ExxonMobil is working with companies such as Toyota and Caterpillar to develop high-efficiency, low-emission fuel and engine systems which can help contribute to improved efficiencies in transportation.

We also pursue energy efficiency in our own operations. An example is our investment in cogeneration - the simultaneous production of electricity and heat or steam. Our cogeneration facilities, in 30 locations worldwide, have enough capacity to power close to seven million European households.

Continued scientific research is also an important component of efforts to achieve efficiency breakthroughs. For example, the Global Climate and Energy Project at Stanford University, which is supported by ExxonMobil and other major companies, is conducting research into a wide range of new techniques that may reduce the demand for energy as well as help reduce greenhouse gas emissions.

The combination of technological advancements on the supply side, coupled with new developments to help make global usage of energy more efficient, can be powerful in coming years.

That is why we consider technology to be an enabler of energy security – a critical ally in helping us meet tomorrow’s energy challenges by increasing recovery, unlocking new resources, lowering costs, promoting energy efficiency, improving environmental performance, and diversifying our supply options.

That’s a lot to expect, but I believe the industry is up to the challenge.

The Public Policy Challenge – Supply Side
I’d like to turn now to the role that policymakers can play in helping deliver future energy security.

We can again use the concepts of the demand-side and the supply-side to talk about public policy and the critical need for informed, long-term decision making.

Let us talk first about the supply side.

The role that governments play in maintaining stable fiscal and regulatory environments and in allowing access to energy resources is crucial to future energy security. These are vital ingredients in an industry which is highly capital-intensive and which operates over such long time horizons.

Our industry has proven time and again that it will accept risk – even for projects that require massive investment – if the host environment is supportive and measures are in place that allow us operate effectively and to resolve issues fairly and amicably.. The massive energy infrastructure that successfully moves oil and gas around the world is living proof that the industry is not afraid of making prudent investments when there is long-term value and a level of stability.

And as we look to the future, the contribution that international oil companies can make to the development of national energy resources will be critical.

Our task is to bring new developments online safely and in an environmentally responsible manner - on time and on budget. I am proud to say this is a task that ExxonMobil has proven time and again that it can deliver on.

As President of ExxonMobil Development Company, I see every day the talented people in our organisation who are working with host governments, national oil companies and joint venture partners to bring online new developments around the world – whether they be in West Africa, Europe, Asia Pacific or elsewhere.

The contribution that international oil companies make to the development of national energy resources is a demonstration of how interconnected the global energy sector really is.

If we are to realise the goal of supplying global requirements in the years and decades to come, it is vital that governments recognise that we live in an energy-interdependent world, in which both suppliers and consumers benefit from a well-functioning global marketplace.

In order for an open global market to best facilitate the new investments needed to help meet the world’s energy needs, both sides of the equation – producing countries and consuming countries – must be open to participation to ensure the efficient function of the energy supply chain.

The Public Policy Challenge – Demand Side
Now, what about the demand side? What impact do governments have on the world’s ability to maintain a flow of affordable and reliable energy to those who need it ?

There are some who believe that energy independence is a practical and realistic goal – somehow insulating nations from the international energy market. While they may be well-intentioned, their analysis of what constitutes energy security is misguided.

As I just mentioned, the fact is we live in an energy interdependent world, and it is becoming more so every day. What happens in China impacts the United States; what happens in the United States impacts Europe; what happens in Europe impacts the Middle East; what happens in the Middle East impacts the rest of the world, and so on. From a practical standpoint, there is no such thing as energy independence.

Indeed, the path to energy security lies in open international trade, diversity of supply and the strengthening of partnerships between producing and consuming nations.

Consider what happened in my country one year ago this month – the devastating hurricanes that severely damaged refineries and displaced hundreds of thousands of citizens.

Within days, ExxonMobil and other companies were able to begin importing refined products from Europe, so while we were repairing our facilities, fuel was readily available.

That is a perfect example of the benefits of energy interdependence, and the value that it can bring in the event of a natural disaster, or in the case of simple increases in demand.

In other words, when nations pursue policies that foster competition and free trade, it allows the private sector to continue to innovate and develop the technologies or partnerships required to bring new supplies to market at lower cost.

In conclusion
All of you are here at this conference to consider questions of availability and affordability of future energy supplies. It is a worthwhile endeavour and one I am glad to have the opportunity to participate in.

But if I could leave you with one message, it would be this: We must avoid falling victim to unnecessarily gloomy projections based on current events and headlines.

If history has taught us anything about the energy industry, it is that each generation has faced challenges that seemed insurmountable at the time, yet in retrospect were nothing more than routine obstacles overcome by technology, ingenuity and hard work.

Our industry historically operates at the edge of technical possibility, constantly developing and applying new technologies to make those possibilities a reality. There has never been “easy oil.” It is only “easy” after you’ve done it.

In light of what we know about the earth’s resource base and the historical success of the industry in meeting continually growing demand, we have reason to be optimistic about the world’s energy future.

With the right combination of technology, investment and public policy support of free trade and open markets, the energy challenges of the future are within our collective power to resolve. It is up to each of us to work toward making that happen.

Thank you for your time and attention today. It was a pleasure to be with you.