The global energy outlook and industry outreach

Sixth OPEC International Seminar 
Vienna, Austria

rex tillerson
Rex W. Tillerson

Chairman and Chief Executive Officer

Speech June 3, 2015

The global energy outlook and industry outreach

Your Excellencies …

Ladies and gentlemen …

It is a pleasure to address the Sixth OPEC International Seminar and to provide ExxonMobil’s view of the global energy outlook.

No industry and no sector of the global economy works on time horizons as lengthy or far-reaching as the energy industry. So for those of us in this room, understanding the forces shaping the future is not a luxury. It is a necessity.

In times of dramatic shifts in the commodity cycle, which we all know with certainty will occur from time to time, it is crucial that traditional, reliable suppliers of energy not lose sight of their roles and responsibility in meeting the world’s needs. It is also crucial not to lose sight of the important roles of other suppliers – whether they be government-owned entities or private-sector participants. Thus, it is valuable to hear, during this opening session, the analyses of such distinguished speakers, representing such different perspectives.

From the outset, what is most noteworthy about the global energy outlook is that – whether projections come from government, industry, or NGOs – there is a remarkable consensus among the most credible forecasts.

This morning, I will briefly discuss this consensus on the major trends, referencing ExxonMobil’s own projections; I will explore why the intersection of our analyses should transform our views of our mission; and I will close by outlining the policies the world will need to meet our shared aspirations to expand and use energy in ways that are safe, secure, and responsible.

Outlook for Energy

The ExxonMobil Outlook for Energy sees energy demand being shaped by three major forces: economic advancement; population growth; and energy efficiency.

Taken together, we see economic output doubling by the year 2040. The world population will grow, adding about 2 billion additional consumers of energy, and, during that period of absolute population growth, 3 billion people around the world will move up economically to achieve middle-class status. With these changes and after factoring in increasing energy efficiency, we project global energy demand will grow about 35 percent when measured over the period 2010 to 2040, slightly less than the OPEC projection.

These “high level” numbers are, in many ways, the most instructive data points for our industry’s engagement with the public and policymakers.

These large-scale trends remind us all that energy demand is directly related to economic growth and opportunity. They help emphasize the critical importance of society finding ways to increase energy efficiency and reduce emissions. And they are a reminder that there is a humanitarian dimension and a moral imperative to expanding energy supplies for the sake of future generations.

In fact, our mission to expand supplies safely, securely, and responsibly is even more pressing when we consider the facts of “energy poverty” today.

According to the latest figures, about one in seven human beings still has no access to electricity. And about two out of five people must rely on biomass such as wood, charcoal, or animal waste for basic cooking and heating needs.

The costs of this “energy poverty” are steep – especially in terms of lives lost. The World Health Organization estimated that in 2012 alone about 4 million people around the world died from household air pollution, living in their homes.

In light of this extraordinary need for modern energy sources and technologies, it is clear that new supplies will be required – not just to sustain progress in developed economies, but to fuel the advancement of hundreds of millions of people living in developing economies.

The Outlook for Energy and Industry’s Role

This humanitarian dimension to our work should influence our industry’s outreach and communication.

Leaders of businesses and governments of large oil-producing countries, like those represented at this Sixth International Seminar, understand the relationship between our industry and the economic advancement that it brings.

Unfortunately, in many consuming countries, this relationship is sometimes forgotten – to the detriment of policy discussions on energy and environmental challenges. It is therefore a shared responsibility for all of us in the energy industry to confidently engage the public and policymakers about the benefits that our industry can bring. Our industry has a two-pronged challenge – to produce the energy necessary to sustain economic and social progress, while taking responsible steps to reduce the environmental impact of our operations.

Energy is essential for modern life.

For this reason, the oil and natural gas industry will be instrumental to meeting a fundamental and universal human need. This also means that our investments and innovations will be vital in the decades ahead – especially as the world seeks to manage the risks of climate change.

At ExxonMobil, we believe that the world needs to pursue all energy sources, wherever they are economically competitive.

The world will need wind, solar, and other renewables. We will need increased use of nuclear power. And, importantly, we will need coal, oil, and natural gas.

Like the analyses of the IEA and other authorities, we project that carbon-based fuels will continue to meet about three-quarters of global energy needs through the year 2040.

Oil will continue to be the No. 1 source of energy in the decades ahead because of its flexibility, reliability, and availability.

And while renewables will continue to grow at the fastest rates, the most consequential change we see is in the global demand for energy , is the demand for natural gas, which is set to rise by 65 percent from 2010 to 2040. This will be the largest volume growth of any energy source.

Around the year 2025, we expect natural gas to overtake coal as the second most significant contributor to meeting global energy needs.

The good news is that over the past decades, the oil and gas industry has pioneered a host of new technologies and techniques which have enabled us to unlock new conventional and unconventional sources of energy – from oil sands; ultra-deepwater; shale and tight rock; the arctic and sub-arctic.

Our innovations have brought new supplies to the market; increased energy diversity; and, thereby, improved energy security and stability around the world.

But in order for the various important suppliers of energy to continue to fulfill their respective roles in meeting global energy demand, we will need policies that recognize the need for sustained investment, innovation, and cooperation.

It will be also be up to our industry to continue to pioneer the technologies that offer the best hope to expand supplies while achieving our shared goals for increasing efficiency; reducing emissions; and mitigating the risks associated with greenhouse gases.

Policies for the Future

Both government and industry will have a role to play in this cooperative effort.

Industry must continue to operate with safety and integrity. By fulfilling this fundamental responsibility, the public and policymakers see what we can do and they are more receptive to our engagement and efforts.

Government also has a special role to play.

Only governments can provide access to resources.

Our advanced technologies and techniques have been proven in some of the most delicate ecosystems and harshest conditions around the world. With access and appropriate oversight, our industry can invest; expand supplies; and simultaneously contribute to economic growth and environmental stewardship.

Government also works best when it maintains a level playing field; opens the doors for competition; and refrains from picking winners and losers. This is particularly important in the energy sector where arbitrary mandates or subsidies distort incentives and promote inefficiencies, which can adversely influence the evolution of promising technologies. With a future dependent on innovation, the world will be best served by efficient, market-led solutions.

Governments around the world must also put in place sound tax, legal, and regulatory frameworks. With such policies enacted and maintained, governments can enable investment, innovation, and cooperation.

Finally, as we look to the challenges of the future, we will also need both oil-consumer and oil-producer nations to recognize that our industry’s high-technology solutions and capital-intensive projects require significant human and financial resources to succeed.

When our industry can invest and innovate over the long term, we are best able to leverage the respective strengths of national and international energy companies to minimize risk and maximize value.

By supporting increased trade and allowing the free flow of goods and services, governments can help industry bring our capabilities to bear to find increasingly innovative and efficient ways to bring energy to market.

Our Outlook for Energy provides an insight into a future of far-reaching change – a future with many challenges. But we have reason for optimism. The tremendous growth in global energy demand reflects a dynamic, more-hopeful, more-interconnected world.

With an appreciation of the universal need for energy and the value of innovation and cooperation, we can put in place policies that enable us to build the technologies and ventures that can transform the future for the betterment of all.

I thank you for your kind attention.

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