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Speech

June 16, 2014

Meeting the Energy Challenges of the Future: The Role of Industry and Government

Rex W Tillerson

Rex W. Tillerson Chairman and Chief Executive Officer

21st World Petroleum Congress
Moscow, Russian Federation

Your Excellencies … distinguished guests … honored friends … and valued colleagues.

It is a pleasure to once again address the World Petroleum Congress.

The World Petroleum Congress has established itself as one of our industry’s premier gatherings.

The WPC provides us with the opportunity to look to the future and discuss how government, industry, and society can work together to deliver the energy the world needs to grow and advance. And as the theme of this Congress suggests, we seek not just to deliver the energy the world needs, but to do so in a way that is safe and environmentally responsible.

It is especially fitting that the 21st meeting of the World Petroleum Congress is being convened in Russia – the No. 1 crude oil producer in the world, and a leading supplier of natural gas.

On behalf of delegates from all over the world, I want to thank our Russian hosts and the people of Moscow for their warm welcome.

Energy: The Humanitarian Dimension

The purpose of this panel is to discuss “energy strategies for a growing world.” Building these sound energy strategies begins with understanding the sources and magnitude of the challenges we must meet.

First and foremost, we must recognize that the global need for energy is projected to grow – and grow significantly.

ExxonMobil projects that increases in population, along with growing trade and development, will increase global energy demand by about 30 percent between now and the year 2040. To put this number in perspective: It will be like adding more than the combined current energy demand of Russia and India, all of Africa, Latin America, and the Middle East.

We must also recognize that the vast majority of this growth in population and energy demand will take place in developing economies.

These fundamental facts mean that every discussion of energy and energy policy has a humanitarian dimension.

According to the latest figures on global energy poverty, about one in five human beings still has no access to electricity. And two out of five people must rely on biomass such as wood, charcoal, or animal waste for their basic cooking and heating needs, which has far-reaching consequences for their health and quality of life.

The key to lifting people out of this poverty – and to increasing hope and opportunity for billions, including those yet to be born – is to expand the supplies and availability of modern sources of energy.

Simply put, the global need for energy we see today – and the growth in demand we anticipate in the decades ahead – will require the world to pursue all sources of energy, wherever and whenever they are economically competitive.

In addition, there is a second element to every discussion of energy and energy policy: We must pursue strategies that reflect wise environmental stewardship.

This means we must invest, innovate, and relentlessly advance the technologies and techniques that promote energy efficiency, improve environmental performance, and reduce the greenhouse gas and air pollution emissions associated with increased energy use.

Reasons for Optimism

The good news is that our industry has proven, throughout our history, that we can expand supplies in safe, secure, and environmentally responsible ways.

Because of our investments, innovations, and cooperation, we can point to extraordinary successes.

Over the last three decades alone, we have taken on deepwater and ultra-deepwater challenges, we have developed new techniques to unlock unconventional oil and natural gas, and we continue to expand on our historic achievements in the Arctic and sub-Arctic to provide the energy the world needs.

These new sources of energy – and our technological advances and performance – have, in turn, powered the global economy, helped nations progress, and improved the individual lives and futures of hundreds of millions of people. And as the world has advanced, every sector has become more energy efficient. At ExxonMobil, we believe that this trend will hold in the decades ahead, making the No. 1 “source” for new energy, energy efficiency itself.

This morning, I will briefly discuss each of these successes – and the policy lessons we can learn from them for taking on the energy challenges of the future.

Deepwater Advances

One of our industry’s most extraordinary advances has been in the deepwater. Advanced technologies have enabled unprecedented offshore exploration and production. A generation ago, my generation of engineers worked at drafting tables with hand drawings of design specs for drilling rigs, while geoscientists were hand-interpreting seismic shoots.

Today, of course, we use high-speed, sophisticated computers to find resources and design rigs that can operate in water depths of more than 10,000 feet, drilling wells that extend five miles below the ocean floor.

With each passing year, our industry continues to advance the technologies and processes we employ – enabling us to go deeper, more quickly, more accurately, and more safely than ever before.

As a result, we project that in the period from 2010 to 2040, deepwater oil production worldwide will grow 150 percent. And deepwater contributions to global liquids supply will rise from 6 to 12 percent.

Our offshore capabilities now represent some of the greatest engineering marvels in human history. But these technological achievements do not stand alone. They have been accompanied by striking advancements in other parts of our industry.

Unconventional Oil and Natural Gas

In less than a decade, the modern energy map has been rewritten by technological breakthroughs in North America.

Our industry’s integration of hydraulic fracturing and horizontal drilling has made it possible to develop North America’s shale gas and tight oil – bountiful resources found in dense rock formations.

Consider that between 2005 and 2014 alone, U.S. production of crude oil and natural gas has risen by close to 70 percent and 45 percent, respectively, which reflects growing tight oil and shale gas production.

With this newfound abundance, North America is reminding the world of the fundamental importance of energy and the extraordinary contributions our industry can make in individual nations – and individual lives.

Thanks to vast new supplies of unconventional natural gas, for instance, we are helping deliver economic growth as well as environmental benefits in the United States.

New sources of oil and natural gas are driving U.S. economic growth, supporting millions of jobs, and spurring significant gains – and expansions – in manufacturing.

In addition to these economic benefits, abundant and reliable natural gas has helped reduce U.S. carbon-dioxide emissions to levels not seen since the 1990s. Even more remarkably – it has been achieved in an economy that is 50 percent larger than in the 1990s with 50 million more energy consumers.

This progress reflects the substantial benefits of a free-market approach to energy development and use.

As many in this room already know, our industry is still in the exploratory stages of applying our recent breakthrough technologies and risk-management techniques to regions outside North America.

Government and industry continue to assess the size of the global endowment of unconventional natural gas. At ExxonMobil we are optimistic about areas for potential development in Asia, Latin America, Northern Africa, parts of Europe – and here in Russia, in Western Siberia.

For the world, new supplies of oil and natural gas in North America will provide diversity and flexibility to the global energy portfolio – and demonstrate that our industry has taken a leadership position in environmental stewardship.

The Arctic and Sub-Arctic

As our industry works to meet the energy challenges of the future, there is another area of promise and potential: the Arctic.

The Arctic is one of the world’s largest remaining regions of undiscovered conventional oil and natural gas resources.

And, contrary to some claims, it is not unfamiliar territory for our industry. The Arctic has been a major oil and natural gas producer for decades.

Ninety years ago, our company first entered the Arctic. Since then, our industry has proven, time and time again, that we can develop these resources safely and responsibly, managing the region’s unique challenges.

For example, ExxonMobil has partnered with Rosneft and other international co-venturers, to produce oil and natural gas offshore Sakhalin Island for more than a decade. The Sakhalin-1 fields continue to produce at a current rate of approximately 7.3 million metric tons of oil and approximately 2.4 billion standard cubic meters of gas a year. To date, more than 61 million tons of oil has been produced and 13 billion cubic meters of natural gas have been delivered since the start of operations in 2005.

We have produced these new supplies of energy in harsh, arctic conditions, setting horizontal-drilling records while upholding a world-class safety and environmental record.

In the years ahead, we look forward to taking advances achieved in these cutting-edge successes in Far East Russia and building upon them to unlock new supplies of oil and natural gas in the Kara Sea and beyond.

Our industry has the ability to build on these achievements by continuing to pioneer new technologies, deploy best practices, and ensure safer operations across the entire energy supply and value chain. And by applying extensive scientific research and making operational accommodations, our industry has shown we can expand supplies of energy from the Arctic and sub-Arctic as well as protect wildlife and biodiversity.

The Need for Sound Policy

All three of these industry achievements – deepwater, unconventionals, and the Arctic – provide lessons on how to construct and maintain “energy strategies for a growing world.” The strategies of the future must reward long-term planning, sustained investment, and constant innovation.

No matter where our industry goes in the world, we will need new technologies to expand supplies and enhance environmental performance and protection.

Whether we seek to expand global supplies of energy in North America, South America, Africa, Asia, Europe, or Australia, the most effective path to investment and innovation is for government and industry to understand their specific roles and responsibilities.

Our industry respects the role of government. We recognize that government is uniquely suited to promote the rule of law, provide a clear regulatory pathway, and hold companies accountable. In addition, government is critical to establishing the level playing field that enables companies to compete – and consumers to win.

In short, government leaders are responsible for putting in place the sound and stable regulatory and tax policies that enable investment, cooperation, and risk management to flourish. And only that foundation can ensure there is incentive for industry to invest in the research, development, and deployment of evolutionary and revolutionary technologies.

To meet the energy challenges of the future, our industry must maintain its positive role in public dialogue.

We must communicate with the public and policymakers about how we can achieve our shared aspirations to expand opportunity for all peoples and to promote environmental stewardship in every nation.

We must also communicate the consequences that follow when governments fail to establish or maintain sound policies. We know from experience that heavy-handed market interventions by government, burdensome regulations, or taxpayer subsidies that favor companies or industries can undermine the technological advancements that enable us to meet the world’s energy needs safely, efficiently, and responsibly.

The U.S. unconventional revolution has shown that we can expand supplies and reduce air pollution and carbon emissions. With sound policies, our industry can apply new technologies and techniques to unlock cleaner-burning natural gas all around the world. As we do so, we can meet growing energy needs, while reducing emissions levels. And with sound policies industry can continue to develop technologies to produce and use oil more efficiently – especially in the transportation sector where growing energy needs are so critical to trade, work, and advancement.

It is clear the world will need to pursue all economic sources of energy – including deepwater, shale gas and tight oil, and conventional sources in the Arctic. And by relentlessly improving our technologies, we can improve our environmental performance at every link in the energy chain, increase energy efficiency in every economic sector, and promote environmental care and progress in every nation.

The oil and natural gas industry will continue to play an essential – and pivotal – role in shaping the world’s future. And indeed, even at a time when challenges have befallen some important producing areas, the industry at large – both non-OPEC and OPEC players – has contributed in the reliable supplies to consumers the world over.

With government and industry fulfilling our respective roles and responsibilities, we can help alleviate poverty, raise living standards, and create economic opportunity for billions of people. And by continuing our industry’s dialogue with the public and policymakers, we can put in place energy policies that enable investments and technological advancements on every frontier and in every sector. Such long-term strategies will help government, industry, and society each play its part in building a brighter future for all in a growing world.

I thank you for your kind attention.

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