Presentation on the Future World Energy Scene, given by
Robert C. Olsen, chairman, ExxonMobil International Limited,
at International Petroleum Week

London
12 February 2007

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. I am delighted to be with you this morning at the 93rd International Petroleum Week.

IP Week is a longstanding and unique opportunity for energy professionals from around the globe to come together to share views on the critical energy issues facing our world. I am honoured to be able to provide some thoughts from ExxonMobil's perspective this morning.

I was asked to speak today about “The future world energy scene”. The future of energy is important not just to our industry, but of all sectors of our economy. Reliable and affordable energy supplies are vital to the continued prosperity of the world. Judging by an average day's headlines the need for affordable and reliable energy supplies is very much in the forefront of the minds of governments and indeed energy consumers, many of whom take a very pessimistic view of the future.

As an industry, we need to encourage others to look beyond and through today’s headlines -- to recognise and understand the long-term supply outlook and demand forces that will shape tomorrow’s energy security.

Today, I’m going to talk about what can be done to help meet the world’s growing demand for energy. Up front there needs to be a clear understanding of the challenges involved in securing the type of energy future that we all want – a future that supports economic progress, enhances social development and protects our natural environment for future generations.

Future energy supply is something we all play a role in shaping – not only through the business community’s traditional support for innovation, efficiency, free trade and investment, but also through the promotion of education and development of people, a subject I will return to.

At ExxonMobil, we believe there is cause for optimism about the world’s energy future – an optimism grounded in the earth’s enormous resource endowment, our industry’s historical success in meeting growing demand, and our belief that it is possible to get the fundamentals in place to enable the industry to continue doing so in the future. We acknowledge that this will be challenging and will require effective collaboration between producing and consuming governments, and continued development of technology.

Claude Mandil of the IEA will be speaking next -- his organisation plays an invaluable role in forecasting future energy supply and demand. Given the levels of economic growth forecast for developing countries, no doubt he will outline growing worldwide demand for supplies of reliable, affordable energy.

The good news is that our industry has a proven track record of rising up to meet the challenge of growing demand. Some say the era of 'easy oil' is over, but unfortunately there has never been a period of “easy oil”. Finding, producing and delivering energy has always been a challenge.

Global Energy Demand

The importance of energy to economic development and prosperity cannot be overstated. Energy powers the businesses and industries that create jobs and enables trade around the world.

In developed nations, access to reliable supplies of energy means stable and growing economies.

In developing countries, access to energy leads to new economic development, which means improved living conditions and an enhanced way of life for quite literally millions and millions of human beings who lack even the most basic of modern necessities such as access to electricity and sanitation.

Yet as energy fuels development, this development in turn results in new energy demand. In the years to come, growing populations and increasing prosperity in nations such as India and China will drive energy usage to ever greater heights. As a result by the year 2030 – less than twenty-five years from now – the world’s energy needs will be almost 40 per cent greater than they were last year.

Over the next 25 years, some renewable energy options, such as wind and solar energy, are expected to experience strong growth. But most experts agree that even so, emerging renewables like wind, solar and biofuels will still only contribute about 2 per cent of the world’s total energy needs in 2030. This reflects the massive and growing scale and scope of the energy industry.

So it will be conventional energy sources – oil, natural gas and coal – that we will depend upon to meet 75 to 80 per cent of the world’s energy needs through 2030.

The resources are available. According to the U.S. Geological Survey, the Earth was endowed with more than three trillion barrels of conventional recoverable oil resources. When we take into account non-conventional forms of oil, such as heavy oil and shale oil, we estimate that the resource base rises to over four trillion barrels of oil.

Consider that in the entire history of the oil industry, we have collectively produced just one trillion barrels and you can see that resources are adequate for the foreseeable future.

The challenge for us lies in accessing and developing those resources safely, economically and in an environmentally responsible manner. An additional challenge is to ensure that the pace of developments is able to meet the rapid increase that is forecast in demand. Both companies and governments have roles to play in ensuring that this happens.

The Role of Governments

What impact do governments have on the world’s ability to maintain a flow of affordable and reliable energy to those who need it? They are, of course, significant.

There are some who believe that energy independence is a practical and realistic goal – somehow insulating nations from the international energy market. While they may be well-intentioned, that analysis of what constitutes energy security is misguided.

The fact is we live in a connected world, and it is becoming more so every day. When it comes to energy, what happens in China impacts the United States and Europe; what happens in Europe impacts the Middle East; what happens in the Middle East impacts the rest of the world, and so on. When prices are high and supplies tight, passions can run high. Oil importing nations can feel the pressure to assert their independence, as can oil exporting nations. On both sides, economic nationalism may gain in popularity, at the expense of international market progress.

The path to energy security lies in open international trade, diversity of supply and the strengthening of partnerships between producing and consuming nations. The value of such an interconnected marketplace is that energy security is enhanced when there are more partners, more relationships and more diverse sources of supply.

The IEA in their latest outlook have indicated that over the period 2005 to 2030 cumulative investments of $8 trillion will be required for oil and gas projects, to help meet the energy requirements of the world; that is, $300 billion per year. These extraordinary levels of capital requirements underline the key role that policymakers play in helping establish the business environment which will deliver future energy security.

The projects our industry undertakes span decades, require massive investments, and utilise cutting-edge technologies that evolve throughout project lifecycles. Under these circumstances, long-term planning is critical – planning which looks beyond the current business cycle and which relies on stable frameworks.

The role that governments play, in maintaining stable fiscal and regulatory environments and in allowing access to energy resources, is therefore crucial to future energy security. They are vital ingredients in an industry which is highly capital-intensive and which operates over such long time horizons.

Our industry has proven time and again that it will accept risk – even for projects that require massive investment – if the host environment is supportive and measures are in place that allow us to operate effectively and to resolve issues fairly. The massive energy infrastructure that successfully moves oil and gas around the world is tangible proof that the industry is not afraid of making prudent investments when there is long-term value and a level of stability.

Timely development and delivery of new oil and gas projects requires a framework of regulatory and fiscal stability. Our business is long term. The time from first exploration to development and first production can take up to 10 years with a production stream lasting 20 years or more. Stability through these timeframes is essential to allowing projects to be economically successful and to maintain investor confidence in the future.

Today in Europe indigenous oil supplies meet over 40per cent of total liquids demand. However, this is a figure the IEA forecasts will fall to about 20per cent by 2030, with a rising dependence on imports. If we are to continue to enjoy significant levels of locally produced supplies we have to ensure that all remaining opportunities are pursued. Here in the UK, whilst it is true that the North Sea is mature, there are many opportunities remaining. The North Sea industry has produced around 34 billion oil equivalent barrels, many in industry and government estimate that we have only exhausted just over half of its potential and that there could be another 25 billion barrels to be commercialised.

ExxonMobil continues to be involved in the North Sea where we continue to invest heavily. In the 23rd Licence Round we were granted the largest acreage award ever made in UK waters.

Developing this remaining potential in the North Sea will be more difficult and more expensive on a unit cost basis. Leveraging the value of the existing infrastructure will be particularly important, given that the North Sea is a high-cost place to operate. To remain competitive in the North Sea, our companies will need to keep their operations financially disciplined and cost-effective.

However, the two significant recent tax increases in the UK North Sea have increased uncertainty for investors and will make future investment decisions in this already high cost area more uncertain. Stable and predictable fiscal regimes are important to maximising production in all the world's producing areas.

Addressing Greenhouse Gas Emissions

No discussion about the future world energy scene would be complete with addressing the issue of climate change. And ExxonMobil’s position on this issue is often misunderstood.

Climate remains a complex area of scientific study. But the risks to society and ecosystems could prove to be significant. So it is prudent to develop and implement strategies that address these risks. Improving energy efficiency and developing new, emissions-reducing technologies are two such strategies.

ExxonMobil continues to pursue both -- in our worldwide operations, in our partnerships with automakers, and through our support of such research initiatives as the Global Climate and Energy Project, based at Stanford University.

Our efforts are making a difference. For example, steps taken since 1999 to improve energy efficiency at our facilities around the world resulted in CO2 emissions savings of 11 million metric tons in 2005. That’s equivalent to taking two million cars off the road.

And we are actively partnering with other organisations in the search for technologies that can help address the emissions challenge. One example is carbon capture and storage. This technology has the potential to reduce greenhouse gas emissions by separating carbon dioxide from a gas stream, compressing it to reduce volume, and transporting it by pipeline to a storage site.

In November last year, we announced our financial and technical support for the CO2ReMoVe project, which is studying carbon capture and storage at the Sleipner field and several other locations in Europe and in Algeria. This project, undertaken under the sponsorship of the European Union, stands to make a significant contribution towards advancing carbon capture technology, by monitoring and verifying storage of CO2 at the sites involved in the study.

The strategies policymakers adopt to address climate risks are also important. A global approach is needed that promotes energy efficiency, ensures wider deployment of existing emissions-reducing technologies and supports research and development of new technologies. It is also critical to maintain support for fundamental climate research to inform policy and the pace of response.

Specific policy approaches should be assessed for their likely effectiveness, scale, and costs… weighed against the implications for economic growth and quality of life... and weighed against the demands to address other well-known and well-defined global health and poverty challenges.

Addressing the issue of climate change is a shared global challenge – policymakers, industry and consumers all have a role to play.

Delivering New Supplies

At the heart of the challenge of meeting ever-growing global demand in a responsible manner is the need to advance innovation in our industry. Technology has long been the answer to our most difficult energy questions, and that will not change.

Many people perhaps do not consider our industry to be particularly high-tech. Yet in 2005 alone, ExxonMobil invested more than $1 billion in technology applications and research and development. And we currently employ more than 14,000 scientists and engineers.

Through the years, innovation has enabled us to overcome incredible obstacles in finding, producing and delivering a product that so many people consider just another commodity. As we seek out new production opportunities in our mature European operations, we need to be more innovative in our approach.

In Germany, EM operates around 75per cent of the nation's indigenous gas production. The broad application of technologies such as horizontal drilling and 3D seismic has enabled us to maintain production at levels comparable to the 1970s. In order to continue producing at this level we are now pursuing gas that is contained in very tight geologic formations. Again, technology is the key, with multiple vertical fracs in long horizontal wells opening up more reservoir. In Germany, this will enable us to commercialise gas resources that were previously unattainable.

Technology has also played a major role in allowing us to reach reserves previously thought off limits. For example, in our Sakhalin operations, we have been using leading-edge extended reach drilling technology to reach reserves that are 10 kilometres laterally from the shore - about the distance from this room to the Millennium Dome in Greenwich - with pinpoint accuracy.

Continuing growth in demand for natural gas in Europe with declining local supplies will require us to seek additional supplies from other more distant locations - imports via liquefied natural gas are proving to be a way of improving supply diversity. Advances in LNG technologies are enabling natural gas to be delivered safely and efficiently anywhere in the world. For example, new liquefaction trains, developed by ExxonMobil in partnership with Qatar Petroleum, are 60 per cent larger than the previous generation. These developments, combined with significant increases in LNG ocean tanker capacities, enable us to achieve unit cost reductions of more than 25 per cent, making imported LNG globally competitive.

Europe will be one of the primary beneficiaries of these efforts, with a terminal in Rovigo, Italy and the South Hook LNG regasification terminal at Milford Haven, Wales. The South Hook terminal has the capacity to receive as much as 15.8 million tons of LNG annually, roughly 20per cent of today's UK demand. In combination with the new pipeline being developed by National Grid, South Hook in Milford Haven will be a major long-term addition to the UK’s energy infrastructure and supply diversity. We anticipate shipments will begin in 2008.

These are just a few examples from my company – innovations that have gone from concept to reality over the past few years. There are many others at ExxonMobil and also among the other energy companies represented here today. Together, these innovations are changing what is considered possible in our industry – enabling us to produce energy more effectively, more efficiently, and with less environmental impact than ever before.

The human factor: creativity and skill

The technology challenge could not be met, however, without the human factor – the creativity and skill of our industry’s engineers, geologists and scientists.

No technology ever invented itself; no advancement was achieved without someone envisioning it first. Thus, it is critical that we continue to invest in the people who make it possible for our companies to be successful. We must provide them with the tools and the training that enables our industry to continue operating safely and responsibly, and which enables innovation to flourish. And we must reward those who innovate, encouraging the development of new ideas and new ways of working.

Just as new projects need funding to be successful, so do training and development. Investing in our people and our corporate environments is as critical as any research and development activity. In addition to supporting our current workforces, we must encourage and support young people who want to work in our industry. Developing the next generation of engineers and geoscientists is critical, and all of us must help promote the study of mathematics and science and share the excitement and challenge of a career in energy with young people.

Around the world, wherever we do business, ExxonMobil is investing in educational initiatives designed to enhance opportunities for students interested in science, technology, engineering and maths, or what we call STEM. Last year alone, we donated more than $42 million to these types of efforts. And we will continue to seek out and support those programmes that can make a difference in improving STEM opportunities for students.

Our support for education extends beyond the need to ensure we have a new generation of engineers and geoscientists entering our industry. We are also committed to improving general educational and social opportunities in areas where we operate, with a particular focus on improving opportunities for women and girls. In 2005, ExxonMobil Foundation launched its Educating Women and Girls Initiative. We have focused this grant-making programme directly on helping communities improve opportunities for women and girls in developing countries. Our partners in these initiatives are working hard to improve opportunities through projects in Africa, Latin America, the Middle East and Asia.

In the past two years, ExxonMobil Foundation has given $6.5M in grants through the Educating Women and Girls Initiative. We recently announced an additional $5M in grants available in 2007 to promote the education of women and girls. Programmes such as these – and many other companies support similar initiatives – are important elements in our industry’s broader responsibility to be good corporate citizens wherever we operate.

History’s lesson: technology makes a difference

If history has taught us anything about the energy industry, it is that each generation has faced challenges that seemed insurmountable at the time, yet were ultimately overcome by technology, ingenuity and hard work. Our industry historically operates at the edge of technical possibility, constantly developing and applying new technologies to make those possibilities a reality.

In light of what we know about the earth’s resource base and the historical success of the industry in meeting continually growing demand, we have every reason to be optimistic about the world’s energy future. Our point of view is borne of experience, practicality and the realisation that there has never been a time when mankind has needed less energy than before. The desire of people to improve their standard of living, particularly in the developing nations, will continue to drive energy demand higher.

With a continued focus on innovation and technology – and significant investments in the people who make it all work – we can be successful in developing energy in an environmentally responsible manner that the world will need to power growth and prosperity into the future.

Thank you.