Meeting global energy supply and demand challenges

So have energy prices, of course. Today, high prices for crude and petroleum products are causing hardship for consumers around the world, and straining energy partnerships, as well.

Such developments are not new to our industry’s history. Today’s prices reflect, in part, the cyclical nature of the global commodities that we produce.

But behind this current cycle is something new – and encouraging. The global economy is expanding at an historic pace. In fact, in less than a generation, the world economy has grown by more than 50 percent. Millions have escaped poverty as a result, and billions more have achieved higher standards of living.

All of us in the oil and gas industry have played an essential role in this historic growth. Energy is fundamental to nearly all economic activity and modern standards of living.

So it is not surprising that as prosperity has spread, energy demand has grown. Today’s high energy prices reflect that rising demand and a need for additional supplies – and, in a sense, they are a symptom of the world’s success.

The challenge we face today is continuing to provide the energy needed to sustain economic growth and lift more people out of poverty, while also minimizing the effects of energy usage on the environment.

By 2030, global demand for energy will likely be about 30 percent higher than it is today – even with substantial gains in efficiency.

To meet this growing energy demand, we must develop all commercially-viable energy sources. No single source can meet the world’s growing energy needs.

In the world’s diverse energy mix, oil and natural gas are expected to account for nearly 60 percent of total energy through 2030. Their relative availability, affordability, efficiency and versatility make them indispensable.

Building upon the previous presentations of my colleagues on this panel, I would like to focus on two important sources of energy, both of which reflect the energy challenge and the capabilities of today’s energy industry. One of these sources comes from the supply side, the other from the demand side.

Beginning with the supply side, I want to illustrate how in a relatively short period for our industry, technology can significantly transform and enlarge new sources of supply to world markets. The development of the global market for liquefied natural gas, or LNG, is a clear demonstration of the power of innovation and partnership to meet growing energy needs.

Thanks to technological breakthroughs in LNG production and transportation, consumers here in Europe and around the world are gaining greater access to safe, reliable and affordable supplies of natural gas.

Today, power-generation accounts for 35 percent of the world’s total energy usage, and is expected to account for more than 40 percent of the increase in global energy needs from 2005 to 2030.

Not only will a global LNG market help meet these needs, it will also strengthen global energy security by helping to diversify supplies. And because it is cleaner-burning than other conventional sources, natural gas has important environmental advantages as well.

Partnerships, such as the one between ExxonMobil and Qatar, are making LNG’s potential a reality.

Technological advances, pioneered with Qatar Petroleum and others, have enabled ExxonMobil to achieve new economies of scale for development of the North Field, the largest non-associated natural-gas field in the world. In particular, our new Q-Max ships, which use ExxonMobil and Qatar Petroleum’s technology, can carry 80 percent more LNG than conventional-size ships.

With new projects starting up over the next two years, ExxonMobil Joint Ventures in Qatar will bring more new LNG capacity to market than any other international oil company.

A key component of this growth will be the Adriatic LNG terminal, a project led by ExxonMobil, Qatar Terminal Limited and Edison. It is the first offshore gravity-based re-gasification terminal in the world, and has the capacity to provide 10 percent of Europe’s LNG supply. Construction is nearing completion in Algeciras, and the journey to the Adriatic offshore Italy is scheduled to occur in August.

A second important energy source comes from the demand side of the global energy challenge. That “source,” if you will, is more efficient use of energy.

For those who might doubt the potential contributions of energy efficiency, consider this: Since 1970, reductions in energy intensity across the U.S. economy helped to effectively meet well over half of Americans’ growing energy demand.

Efficient energy use extends the life of the world’s resource endowment. It reduces greenhouse-gas emissions. It helps drive down energy prices.

And it strengthens energy security. Over the past 25 years, worldwide gains in energy efficiency have helped lower energy intensity by about one percent annually.

As a result, the global economy is growing more resilient to energy demand and supply shocks. Sudden changes in energy prices have less economic impact because energy is a relatively smaller input to the goods and services the world produces than it was a quarter century ago.

Energy efficiency as it relates to economic growth is often misunderstood. It does not mean doing less.

Economies need energy to grow, and to deny this need is to deprive people, especially in developing countries, of the opportunity to achieve higher standards of living.

Energy efficiency means using energy wisely – from employing advanced technologies to exercising common sense in using energy. It means doing the same – or more – with less.

Innovation plays a crucial role. ExxonMobil has systematically worked to improve efficiency and environmental performance throughout our facilities worldwide. Since 2004, ExxonMobil has invested more than $1.5 billion in activities that improve energy efficiency and reduce greenhouse gas emissions, and we will be spending at least half a billion dollars on additional initiatives over the next few years.

Even greater efficiency gains are possible in the transportation sector, through both incremental and breakthrough innovations.

While the quest for transportation replacement fuels that emit low to zero greenhouse-gas emissions continues, we must continue to provide ways for consumers to use the fuels available, gasoline and diesel, in ways that are more efficient, thereby resulting in lower greenhouse-gas emissions.

ExxonMobil is partnering with engine and vehicle manufacturers to develop a number of transportation technologies that can improve fuel economy and reduce emissions – from lightweight plastics … to materials that make tires lighter and keep them properly inflated and more efficient synthetic motor oils.

We are also conducting a multi-year research effort in advanced engine technologies, such as Homogeneous Charge Compression Ignition, or HCCI. Success in these efforts could improve fuel economy of the internal-combustion engine by up to 30 percent.

To contribute to overcoming technical challenges to new vehicle systems, ExxonMobil has developed battery separator films to improve the safety and durability of lithium-ion batteries for use in hybrid and electric vehicles, and continues to refine and advance our on-board hydrogen reformer system that could lead to 80 percent improvement in fuel economy and a 40 percent reduction in greenhouse gases.

The common element to bringing solutions to future supply and future demand challenges is technology: Technology development and technology deployment. International partnerships are essential to fostering technologies that increase supplies, strengthen security and reduce environmental impacts. No single source can meet the world’s growing energy needs – and no single segment of our industry can either.

Such partnerships are forged through the free flow of goods, services, capital and expertise across borders. Free trade and investment propel the energy-innovation cycle forward, bringing the best minds and the latest tools to bear on the toughest challenges.

Resource nationalism and the pursuit of “energy independence” can interrupt this cycle, and slow the spread of economic progress that energy enables. When energy prices are high, the temptation to break partnerships or cut ties can be strong, for both producing and consuming countries. But it is a temptation that we must resist.

Instead, we must strengthen and sustain the global market for energy to meet the energy demand and supply challenges the world faces. Free and fair competition on a worldwide scale is the hallmark of the Olympic Games. It also should be the aim of all members of the World Petroleum Congress.

Thank you for your kind attention.