energy innovation through energy interdependence

Remarks by Stephen D. Pryor
President, ExxonMobil Refining & Supply Company
Washington, D.C.
October 30, 2006

 

Thank you, Dr. Schlesinger. It is a pleasure to join this distinguished panel, particularly Khalid al-Falih.

In my brief remarks today, I would like to offer ExxonMobil’s perspective on key energy challenges and energy choices Arab and American policymakers face in the years ahead. And I would like to focus on the crucial role of technology and the policy environment needed to apply technology.

In the past, when leaders in the United States and the Middle East have chosen policies that promote innovation and strengthen interdependence, we have risen to the challenge we have faced. 

Strong relations between the United States and Saudi Arabia over the last half century, for example, have built one of the world’s most important and reliable energy, technology and trading partnerships.

The same holds for the future. If policymakers promote greater international trade and investment, industry can continue to develop new energy technologies, and together we can meet the energy challenges on our horizon.

The single greatest of these challenges is meeting the expected increase in world energy demand, essential to enabling progress for people everywhere. 

Our analysis, like those conducted by the International Energy Agency and similar organizations, suggests that global demand for all energy will increase by 60 percent over 2000 levels by the year 2030. 

Predictions of future demand are not an exact science, and our Saudi partners are right to call for better data collection in this area. But there is little doubt that world energy demand will remain on a steep upward trajectory for the foreseeable future.

This increase will be driven mostly by non-OECD countries, including  China and India.  Energy demand in a number of Arab countries is also expected to increase rapidly as their economies diversify and their citizens achieve greater levels of prosperity. 

Meeting this global demand challenge will require much of industry, governments, and consumers.

It will require a call on OPEC approaching 50 million barrels of oil a day by the year 2030 - an increase of over 50 percent above OPEC’s current levels.  Saudi Arabia and other Arab exporting nations in particular are destined to continue to play a pivotal role in the world’s future energy needs, far into the future.

It will require ongoing gains in energy efficiency on all fronts, including significant improvements in the fuel economy of the world’s light duty vehicle fleet. This extends the life of the resource base and reduces the environmental impact of its use.

But, most importantly, the global demand challenge will require continued advances in energy technology, in the upstream and the downstream.

Lack of resources is not the problem, as some suggest. Abundant oil and natural gas exist. The U.S. Geological Survey estimates that more than twice the amount of conventional oil produced in all of human history to date still remains to be recovered. 

Alternatives such as nuclear power and renewables will play an important role in meeting future demand. But given their abundance, versatility and affordability, fossil fuels will remain the world’s predominant energy sources for the foreseeable future.

The test is producing, refining and delivering these resources in an economically-sound and environmentally-sensitive way amid challenging conditions and rising expectations.

In today’s world – and tomorrow’s – our industry must operate in arctic ice packs, under water thousands of feet deep, and near fragile ecosystems. We must also meet changing fuel and environmental standards in multiple markets. 

Technology enables us to meet these challenges. From four dimensional seismic imaging technology used to detect oil and gas movements deep below the Earth’s surface… to directional drilling that can extend one mile deep and six miles horizontally… to cryogenic plants that liquefy natural gas so that it can be shipped safely and efficiently around the globe… international oil companies and some national oil companies are bringing cutting-edge technologies to bear.

Important innovations in the downstream have also helped to meet these challenges by contributing to our ability to efficiently increase our refining capacity and develop cleaner fuels. 

Nanotechnology has enabled us to tailor our refining catalysts to accelerate reactions, increase product volumes, and remove impurities.  Such “nanocatalysis” is an important part of ExxonMobil’s molecule management program. 

Under this program, we have developed a suite of technologies in both molecular fingerprinting and process modeling which we combine with real-time unit optimization to maximize value of each hydrocarbon molecule.

These enhancements have enabled ExxonMobil to increase refining capacity at a rate equivalent to building a new, average-sized refinery every three years worldwide.

New technologies also promise to improve fuel and engine system performance.  Working with Toyota and Caterpillar, we are progressing towards development of homogeneous charge compression ignition systems and other advanced powertrain systems that have the potential to improve fuel economy by approximately 30 percent while significantly reducing emissions levels.

ExxonMobil prides itself in our technological strength, currently employing over 14,000 scientists and engineers, and investing over $3 billion in R&D over the last five years. 

And we are proud to leverage this strength in partnership with Arab national oil companies in progressing a number of key investments worldwide, including with Qatar Petroleum on major LNG projects, with the Abu Dhabi National Oil Company in developing the Upper Zakum oil field, and with Saudi Aramco at the Fujian Refining and Ethylene Joint Venture Project in China.

Such innovation does not occur in an instant, or in a vacuum. Public policies that promote competition, support research and development, encourage investment, and enable access to resources are vital to continued technological progress. Stable regulatory frameworks, transparency, and respect for the sanctity of contracts are also important.

Energy innovation also flourishes through energy interdependence. Through the free international exchange of ideas, new technologies are born. And through free trade and investment, new energy technologies are applied on a worldwide scale. To develop the next generation of energy breakthroughs, we need the best intellectual and financial capital the world can offer.

Saudi Arabia’s membership in the World Trade Organization is extremely important in this regard, and ExxonMobil strongly supports the Kingdom’s accession.

Policymakers who promote such international cooperation not only benefit their citizens and those of their trade partners, but the entire world energy system. Policymakers who pursue the false promise of energy “independence” risk undermining the path toward technological progress.

In closing, to meet our future energy challenges, we need to make the right choices. If policymakers show the willpower to pursue greater energy interdependence, industry can marshal the brainpower to pursue further energy innovation. And, as shown throughout our industry’s history, such innovation holds the potential – and the promise – for a brighter energy future. Thank you.