A Brighter Energy Future

Speech by Brad Corson, chairman of ExxonMobil International Limited,
at the IP Week Conference in London

15 February 2010

NOTE: This presentation includes forward-looking statements. Actual future conditions (including economic conditions, energy demand, and energy supply) could differ materially due to changes in technology, the development of new supply sources, political events, demographic changes, and other factors discussed herein (and in Item 1 of ExxonMobil’s latest report on Form 10-K). This material is not to be reproduced without the permission of Exxon Mobil Corporation.


Good morning, ladies and gentlemen. I’d like to thank the Energy Institute for organising such an important event, and for providing us with the opportunity to discuss current issues affecting our industry.

Certainly, there is no shortage of issues facing our industry – these are challenging times. We not only have to continue to plan and invest for the long-term… we also have to continue to provide energy for today… responsibly, reliably and safely.

And when we make those critical decisions about the future, we must do so while constantly balancing the need for both economic and human progress with our desire for environmental protection.

As an industry, we are making tremendous progress in improving efficiency, and mitigating our environmental impact, through investments in technology and innovation. But no single technology – no single company – no single nation – can solve the challenges we face. Collectively, we must bolster our commitment to solutions that address the energy supply, security, efficiency, and environmental goals that we all share. And with this, a brighter energy future can be ours.

Our industry’s history is marked by both its challenges and its successes. We have consistently been able to meet the increased demand for energy over time, and the world’s resource endowment is such that we can and will continue to be successful in this regard as we provide for future generations.

But, undoubtedly, looking forward the task becomes more complex. We face the challenge of meeting the world’s growing energy needs, while at the same time protecting the environment. We not only have to reduce the growth of greenhouse gas emissions, we also have to minimise our land and water use, and harness new technologies that can help reduce everybody’s impact on the planet.

Even though our industry has faced some significant challenges during the recent global economic downturn, we must remember that economic cycles are not new to us. As we plan for the future, one thing is certain: that security of energy supply will remain a cornerstone of economic growth.

At its most basic level, energy security centres around availability, reliability and affordability of supply. For consumers, this translates into safe, reliable access to affordable energy, in order to heat their homes, run appliances and fuel vehicles. For industry, security means ensuring access to the energy required to manufacture, transport and sell goods and services to consumers both locally and around the world.

The best way to achieve the energy security that we all need is through diversification of energy supply – supporting the development of more energy, from more sources and more geographic locations, through open, competitive markets. We must continue to work with governments to help promote such access, and we need to work to build the infrastructure required to bring these supplies to market.

Energy is the foundation for the sustainability and growth of our global, national and local economies. To help us better understand how the world’s energy needs are changing, ExxonMobil prepares an annual Outlook for Energy. We take a comprehensive view of long-term energy demand, supply and technology trends. This Outlook is updated each year and incorporates data from more than 100 countries.

To aid our understanding of where the growth is occurring, we break global energy demand down into the four main end-use sectors. Out of transportation, industrial, domestic/commercial and electric power generation, the biggest demand in 2005 was in power generation.

Moving on to the year 2030, we expect global energy demand to be almost 35 per cent higher than it was in 2005 – even taking into consideration the impact of recent economic conditions and substantial improvements in energy efficiency. This represents an annual growth rate of 1.2 per cent across the period.

The biggest increase through 2030 is in power generation, which represents more than half of the total growth in energy demand during this time. Electricity demand in developing countries more than doubles through 2030, and accounts for nearly 80 per cent of total growth in power demand.

We also project that significant energy savings will occur through 2030. These savings are necessary because, without them, demand growth would almost double over the 25 year period from2005.

Let’s now look at how demand was satisfied in 2005. Oil and gas fulfill over 57per cent of demand, with 24 per cent coming from coal. Renewables like Wind, Solar and Biofuels make relatively minor contributions.

Moving on to 2030, oil and natural gas will continue to be the major sources of energy. There is very strong growth from cleaner-burning natural gas, as it replaces coal as the second largest source of supply. We can attribute this to its favourability for use in power generation: natural gas offers significant advantages in meeting growing electricity demand – it’s cost competitive with other power generation options, and can reduce CO₂ emissions by up to 60 per cent versus coal. The generation of electricity with natural gas can also be easily adapted to fluctuations in demand, making it an essential complement to variable energy sources derived from the wind, sun and tides.

Wind, solar and biofuels grow most rapidly through 2030, at a rate of nearly 10 per cent a year on average. However, because these start from such a small base, their 2030 contribution remains relatively limited.

All the growth in total energy demand will be taking place in the developing world, while demand in developed countries is expected to be slightly lower in 2030 versus 2005. Most of the energy saved through efficiency will be in developed countries. As I pointed out earlier, savings are likely to be about twice the growth in energy demand through 2030.

Having looked at the global demand and supply picture, I would now like to focus on Europe. In Europe, we are fortunate to enjoy a geographic diversity of supply. Beyond indigenous production, supply routes from Russia, Africa and the Caspian region are well-established.

There are steps that our industry can take, given the right regulatory framework, to maintain that all-important diversity of supply. I’d like to talk about some of the actions that ExxonMobil has been taking to help Europe achieve a brighter energy future.

I’ll start with Liquefied Natural Gas. With European resources of natural gas in decline, we have been working to develop infrastructure for new gas imports, and in particular LNG receiving terminals and pipelines.

I can point with pride to ExxonMobil’s Qatargas and Rasgas LNG supplies, which are being delivered to two new receiving terminals in Europe that we commissioned with our respective joint venture partners just last year.

The first, South Hook LNG, is a land-based terminal located in Milford Haven, Wales. Built on the site of a former Esso refinery, the terminal adds to the UK’s LNG import capacity and energy diversity. When fully operational, it will have the ability to deliver up to 20 per cent of the UK’s gas needs.

The second, Adriatic LNG, is located near Porto Levante, Italy, and is the first offshore Gravity Based Structure in the world for the unloading, storage and regasification of LNG. The terminal will be able to deliver approximately 10 per cent of Italy’s current natural gas requirements.

Both of these projects are making significant contributions to Europe’s energy security.

Turning now to mature European fields, the ExxonMobil-operated Beryl Field in the Northern North Sea was originally predicted to come to the end of its producing life around the beginning of the millennium. Exceeding expectations, Beryl produced its one billionth barrel of oil in March of last year, and we continue to develop its resources. We have recently recommenced drilling activities, with an initial drilling programme that will involve three wells drilled from the Beryl Alpha platform, and an additional two wells planned from the Beryl Bravo platform.

Also in the Norwegian North Sea, we are recommencing drilling at Ringhorne, starting with three wells. This follows the successful execution of one of the largest 4-D seismic programmes ever carried out by ExxonMobil.

We also have drilling underway onshore; for example, in Germany, where we are assessing the future potential of conventional and unconventional resources.

And in The Netherlands, at Groningen, there is the largest non-associated gas field in Europe. In 2009, the Groningen field marked the 50th anniversary of the start of its development. A major, phased renovation project, which began in 1997, was completed in 2009, ensuring natural gas supply from the field continues well into the future. The long-term planning and investment that has gone into Groningen, where ExxonMobil is part of a very successful public-private partnership, has extended the life of the field and of domestic Dutch gas production as a whole.

The goal of a secure energy future for Europe is achievable. As an industry, we must continue to maximize recovery from existing developments, diversify the supply portfolio and explore all commercially viable options.

As important as identifying the supply sources that will satisfy global demand is being able to reach and develop them through new technology. Innovations like four-dimensional seismic surveys and Remote Reservoir Resistivity Mapping are enabling us to pinpoint otherwise hard-to-find reserves.

Directional drilling enables us to develop large resource areas from a single location. We recently completed the first two extended-reach wells at Sakhalin, using one of the world's most powerful land-based rigs, where we are developing offshore resources using extended reach drilling from a shore-based location. At Sakhalin, we have drilled horizontally over 9 kilometres offshore. This approach is not only economically attractive, but also has the environmental benefit of minimizing our footprint.

ExxonMobil is also currently applying other new technologies here in Europe to develop large reserves of natural gas contained in tight, hard rocks. These multi-zone stimulation and fracturing technologies allow us to cost-effectively develop unconventional resources that otherwise would not have been produced at all.

And we now have new technology that has transformed the scale on which natural gas can be safely and efficiently liquefied and transported to those new European receiving terminals I was talking about a moment ago. The Q-Max ships carry up to 80 per cent more cargo, yet require approximately 40 per cent less energy per unit of cargo than a conventional LNG carrier.

None of this new technology or infrastructure comes cheap. The International Energy Agency estimates that our industry will need to invest more than $25 trillion by the year 2030 to meet the expected growth in demand. At ExxonMobil, we’re playing our part: we’re on track to invest between $25 and $30 billion each year through 2012, for example.

This unprecedented level of new investment in technology and infrastructure will not only deliver the energy supplies that we need today and into the foreseeable future; it will also enable us to rise to the environmental challenge.

At ExxonMobil, we believe that the risks posed by rising greenhouse gas emissions to society and ecosystems warrant action – by individuals, by businesses and by governments. The challenge is to reduce the risk of serious impacts while continuing to meet the world's increasing energy needs.

At ExxonMobil, we view sustainability as a balancing act – balancing economic growth, social development, and environmental protection, so that future generations are not compromised by actions taken today.

The first key to meeting this tremendous challenge is the development and deployment of technology on a worldwide scale. The second is the adoption of policies and regulations that reduce the risk of serious impacts on society and ecosystems, while considering the importance of energy to global economic development.

Effective public policy should promote innovation, encourage competition, set goals and provide a broad framework for entrepreneurs and innovative thinkers to achieve these goals within a stable fiscal and legal environment.

We can’t control what the policymakers decide, but we can be proactive in our efforts to reduce greenhouse gas emissions in our operations right now. I should like to take a moment to share with you some of the initiatives that ExxonMobil is taking to reduce our emissions.

We believe that energy efficiency is one of the most effective tools we have to reduce greenhouse gas emissions. One of our strategies is to build cogeneration plants, which are significantly more efficient in producing electricity and steam than conventional technology. They significantly reduce greenhouse gas emissions and result in lower operating costs. ExxonMobil has about 100 cogeneration installations around the world.
 
The ability to capture, transport, and store CO₂ safely and efficiently represents another important opportunity for reducing global GHG emissions. For example, at ExxonMobil’s LaBarge Shute Creek facility in the United States, we have been doing just this since 1987, at rates up to 4 million metric tons of CO₂ per year.

In the North Sea, ExxonMobil is a partner in the Sleipner Field, which has injected over 10 million tons of CO₂ for storage over the past decade. And we are continuing to research CCS through our partnership with the Global Climate and Energy Project at Stanford University.

Advances in technology are likely to make carbon capture and storage less expensive over time. ExxonMobil is investing more than $100 million in a test facility to develop one such technology. Controlled Freeze Zone or CFZ is a single-step separation process that freezes out and removes carbon dioxide in a liquid form from sour gas. This process has the potential to reduce the costs involved in carbon dioxide removal and handling.

Technology, which is constantly evolving to meet our industry’s goals, will also help to address the needs and issues of the wider population. One innovative technology that ExxonMobil is developing, together with partners in the transportation industry and the research community, is a fuel cell system that converts traditional hydrocarbon fuels into hydrogen, directly on board a vehicle. This system has the potential to improve fuel economy by 80 per cent and reduce emissions by 45 per cent.

We have already developed a new generation of separator films that help hybrid vehicles to run on lithium-ion batteries. Batteries with separator films produced by our joint venture with Toray Industries are helping to improve the reliability, energy efficiency and affordability of hybrid vehicles. Then there are the whole host of technical innovations that have helped improve the fuel efficiency of today’s vehicles -- from lightweight plastics to improved tyre-liners.

Regardless of the technology, the goal is always to help reduce carbon dioxide emissions in a sustainable way.

There’s a significant amount of discussion about how renewables can help us achieve a more sustainable energy future. As I mentioned earlier, renewable energies like wind, solar, and biofuels are an important and growing part of the energy mix, which will undoubtedly play a role in meeting the world’s growing energy needs. We support this part of the energy industry in such areas as the supply of high-tech synthetic lubricants for wind turbines. For example, most of the gear-driven wind turbines manufactured in recent years are lubricated with Mobil industrial lubes.

But we have to understand that no single renewable energy source is going to solve the problems posed by the challenge of meeting growing demand while also reducing the growth of greenhouse gas emissions – there is no silver bullet. Renewables are a small, yet vital part of the supply and demand puzzle that we must all work to piece together in the most safe and efficient way possible.

At ExxonMobil, we are committed to doing our part to develop all economically viable sources of energy. One new area we’re exploring is algae-based biofuels. Last July, we announced our alliance with a leading biotech company, Synthetic Genomics, Inc. Together, we’ll be researching and developing the next generation of biofuels from photosynthetic algae.

Like plants, algae undergo photosynthesis to grow. Through a combination of sunlight, carbon dioxide and water, the algae grow and produce hydrocarbons and oxygen. And they are highly productive: large quantities can be grown quickly.

There are several potential benefits of using algae for biofuels production:

- Algae could yield greater volumes of biofuel per acre than other biofuel sources;
- The products could be manufactured to be compatible with today’s transportation fuels;
- Importantly, algae can be grown using land and water that is unsuitable for food or plant production, which distinguishes them from other biofuels like ethanol;
- And finally, algae consume carbon dioxide as they grow, thereby providing greenhouse gas mitigation benefits as well.

In short, biofuels from algae have the potential to help in meeting the world’s growing energy demand, and we are excited to be involved in advancing this technology.

Successfully meeting the world’s growing energy demand is critical, and working together is mandatory. By 2030, there will be more than one billion more people on the earth than there were in 2005. That’s close to 8 billion people seeking better living standards, which they cannot attain without the energy our industry can supply. Working together, resource-owning governments, national oil companies and international oil companies can succeed in meeting the world’s growing energy needs.

I am optimistic about the future, but we must remain focused on the challenges ahead. Our industry has taken major steps toward achieving energy security in Europe, but we still have work to do. Continuing to develop the required infrastructure must remain a top priority. Likewise, we need to leverage technology to develop all economically viable sources of energy.

For this to happen, our industry needs governments to create and maintain open markets with stable fiscal regimes. By creating a level playing field in which our industry can compete fairly, governments can encourage investment and promote competition.

Then we as an industry will be better able to put into practice our commitment to balance the energy needs of the world, while also doing our part to protect the environment through facilitating reductions in greenhouse gas emissions, minimising our land and water use, and harnessing new technologies that can help reduce everybody’s impact on the planet.

And consumers have a role too. We need consumers to support industry and governments in their efforts, and make their own efforts to use energy efficiently in their daily lives.

The availability, reliability and affordability of energy across the globe are vitally important to the future well-being and prosperity of everyone in all societies. By working together, we can deliver reliable access to affordable energy and build a brighter energy future for all.

I thank you for your time and attention, and hope you enjoy the rest of the conference.