London
18 February 2008

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, ladies and gentlemen. It is indeed an honour and a privilege to be here with you today, as we kick off the 94^th annual International Petroleum Week. Each year, this event provides a unique opportunity for those of us in the industry to come together and share insights and ideas on the critical issues that we all face. It is an invaluable gathering that underscores our commonalities and emphasizes our shared values as an industry. So before I go any further, I want to thank the Energy Institute for its efforts in planning such a worthwhile conference … and for being such warm and gracious hosts.

Our topic this morning focuses on the critical role that international oil companies – or IOCs – play as partners and collaborators with host countries. I am going to share with you ExxonMobil’s perspective on the importance of developing ‘national content’ in the countries where we do business – through a strategic focus on workforce development, supplier development and strategic community investment.

As an IOC with exploration, development and production operations in dozens of countries around the globe, ExxonMobil and its affiliates have more than a century of experience in partnering with host governments and national oil companies – or NOCs – to help deliver the most value from their hydrocarbon resources while, at the same time, working to develop the capacity of local citizens and businesses, and creating sustainable, long-term benefits to local communities.

IOC-NOC Partnerships

The topic is a timely one. Host nations today have changing expectations and needs, driven in part by our current high-price environment. More than ever before, they seek a deeper relationship with IOCs, one that goes beyond resource development to include technology transfers, skills training, infrastructure support and economic development. At the same time, some energy exporting countries view today’s market environment as an opportunity to push an agenda of resource nationalism, which has manifested itself in unilateral changes to existing contracts or moves to further nationalise their energy industry.

Those nationalistic actions can have lasting detrimental impacts on innovation and development. They also serve as a reminder to all of us in the industry that we must look beyond short-term economic and political expediency and recognise the critical role that IOC-host nation partnerships play in delivering much-needed energy to the world. Securing our shared energy future requires all of us to recognise the changing competitive landscape in which partnerships between international oil companies and host countries take shape.

Indeed, IOCs offer a unique ability to integrate all aspects of a successful development – state of the art technologies, financial strength, access to markets, operating experience and proven project management capabilities for large and complex projects. By bringing together experienced people, technology, standards of excellence in operations and project management, IOCs are able to work collaboratively with NOCs to achieve project success, build local capability while maintaining an unwavering focus on safety and protection of the environment.

But before we discuss that in detail, let us take a moment to look briefly at the long-term global outlook for energy, which is critical for us to understand if we are to put IOC-NOC relationships into the proper context.

Growing Global Energy Demand

Each year, ExxonMobil uses an ongoing assessment process to develop its Energy Outlook, which provides insight into the world’s energy needs and challenges and helps us plan our business. Our most recent analysis shows that by the year 2030, global energy demand is expected to be about 40 per cent higher than it is today – driven in large part by economic growth and population increases in developing countries.

A major percentage of this growth in demand will be the result of ever-increasing transportation needs. In fact, transportation is expected to be the fasting-growing energy sector over the next two decades. Therefore – despite the work being done around the world to develop alternative energy sources – oil will remain a critical component of our energy portfolio for the foreseeable future.

Growing Global Energy Demand - Developing Countries

In developing countries around the world, energy demand for transportation – including light- and heavy-duty vehicles and other transportation modes such as planes and ships – is expected to grow at 3 per cent per year until 2030. In developed countries, transportation demand will grow as well, although the pace will be slower. This continued growth in oil demand will require timely access to resources and significant levels of investment in order to develop the supplies required.

It is a challenge of great importance to our worldwide economy – both to developed countries that currently enjoy a high standard of living, and to those nations that are working to achieve the same for their citizens. After all, affordable energy makes economic growth possible, powering the businesses and industries that create jobs and drive trade.

Co-operation Key to Meeting Liquids Demand

This surge in demand will require industry to increase the overall number of oil and gas development projects worldwide, as well as their scale and complexity. Consider this: Over the past seven years, the IOCs have cumulatively invested about 190 billion dollars in new development projects. Yet that number is expected to more than double over the next seven years, reaching about 400 billion dollars.And the amount of spending on mega-projects – those projects whose total cost exceeds five billion dollars – is expected to triple for startups over that same time frame.

Given the number of ongoing, complex mega-projects around the world – and their ever-increasing cost – it is clear that development efforts often require multiple partners. Developing energy resources today requires resource access, investment, technology and project management and operations experience – a vast array of assets that no single entity can claim. Partnership and collaboration are vital.

Superimposed over this outlook is an evolving industry landscape. The oil and gas industry looks very different today than it did a half century – or even a decade – ago. In 1991, each of the industry’s 20 largest companies by market capitalisation was based in the United States or Europe. Today, seven of the 20 largest companies are based in developing countries. Many of these companies are NOCs, which today own the vast majority of the world’s oil and gas reserves – approximately 77 per cent in 2005.

These industry trends will likely continue, driven by production from OPEC countries in particular. Within the next two decades, crude and condensate production from non-OPEC sources is expected to plateau, while world liquids demand continues to increase. The result will be a call on OPEC of nearly 50 million barrels a day by 2030 – an increase of more than 50 per cent above OPEC’s current levels.

IOC Relationships with Host Nations

As we look forward, then, it is clear that there are numerous market forces acting together that will require our industry to be more interdependent than ever before. It is also clear that as our industry evolves, each of the entities involved in energy development has unique and important roles to play.

Host nations’ governments should provide a stable political and economic environment. NOCs bring a unique understanding of their natural resources. Local suppliers bring a dependable supply chain for goods and services. Universities provide an educated workforce. Social interest groups bring an understanding of linkages to local communities as well as an understanding of cultural and environmental sensitivities.

IOCs complement these roles by bringing together people, proprietary technology and proven operations and project management capabilities. At ExxonMobil, for example, we employ approximately 82,000 professionals worldwide, including more than 2,000 PhDs. We maintain one of the industry’s largest research and development efforts, typically investing more than one billion dollars annually. Our efforts have yielded more than 10,000 U.S. patents over the past decade. The combination of our internal scientific and engineering skill – and this proprietary technology – has enabled us to successfully complete more than 85 major projects in 20 countries since 1999.

That level of expertise – utilising multiple technological solutions while maintaining oversight of project objectives, costs and timelines – is invaluable in ensuring that the economics of today’s massive investments make sense. And it is pivotal to maximising the total value of the resource – a crucial advantage that only fully integrated international oil companies can provide.
Ultimately, strong NOC-IOC partnerships mean greater revenues for resource-owning nations… greater energy supplies for the world’s consumers… and a reasonable rate of return for an IOC’s shareholders. It is a win-win-win partnership across the board.

Sakhalin-1 Case Study

A case study demonstrates this potential. ExxonMobil’s partnership with Rosneft, ONGC and Sodeco at the Sakhalin-1 project in Russia represents one of the largest single foreign direct investments in that country, and one of the most ambitious oil and gas projects ever undertaken. By mid-2007, our investment in Sakhalin-1 – including all aspects of the operation, from exploration through infrastructure development – approached seven billion dollars. Our technology applications have included use of proprietary drilling techniques to drill a well 11.68 kilometres long last month – a new world record. Our management experience has enabled us to reach peak production in early 2007, just five years after the project was declared commercial. The bottom line? Direct revenues to Russia over the life of the project are expected to surpass 50 billion dollars. Sakhalin-1 shows how partnership can deliver great total value.

The host country gains in other important ways as well. The value of contracts awarded to Russian companies has exceeded 4.4 billion dollars so far or nearly two-thirds of every dollar spent. The number of direct and indirect jobs created for Russian nationals will total more than 13,000 over the development of the project. Hundreds are already receiving professional training, and as they do, we expect 90 per cent of the project workforce to be Russian nationals in ten years.

Developing National Content

Achieving such value is a long-term enterprise – projects like the one I just described operate for decades. Partnerships between IOCs and host nations must therefore be built to last, with clearly understood, mutually compatible objectives and a commitment to contract sanctity over the duration of the project. Building local capacity – sometimes referred to as “national content” – is integral to such a long-term partnership. When the capabilities of local and international partners grow in tandem, the bonds between them strengthen.

In the countries where we do business, ExxonMobil collaborates with host nations by making strategic investments in needed infrastructure … creating local jobs … helping educate and train local workforces …. applying knowledge and skills … and purchasing local goods and services. To maximise national content – just as we maximise value – we take a long-term, strategic management approach, based on four key principles.

1. It begins with a firm foundation. Governments must lead the way by creating a free market environment in which local businesses can flourish. This calls for the rule of law, stable and predictable government regulations, respect for the sanctity of contracts, transparency in transactions and a financial system that supports economic growth with minimal government interference.

2. Next, governments – with input from industry partners – should develop a long-term national development plan. Planning starts with an assessment of national capabilities. It also requires setting measurable and realistic goals and focusing on multiple local suppliers with growth potential. These suppliers should be encouraged to compete for work and contracts – our experience shows that a competitive business environment encourages innovation and efficiency, which are key ingredients to international competitiveness over time.

3. Creation of educational and development opportunities is the next stage. This should include government-supported vocational training schools to teach trade skills, crafts and basic business skills, as well as company internal training and mentoring programmes. Projects also require qualified technical and engineering skills over the long term, which can be developed through national educational institutions. In establishing these, international accreditation and training in international business languages is important.

4. Finally, successful local capacity-building requires long-term partnerships between national and international companies. These bring the advanced technology, training, quality and control processes essential to success. They also provide opportunities to accelerate development of a national workforce while providing access to international markets and expertise. Let me share an example from our national content efforts in Africa.

Chad-Cameroon Pipeline Project

Since the beginning of the Chad-Cameroon Pipeline project, the project consortium has spent upwards of 1.8 billion dollars on local goods and services. Many local businesses have taken advantage of our supplier training programme and have learned how to make project bids using ExxonMobil's electronic bidding system.

One such business is Distribution Services, a new locally owned business which recently won a multi-national competition to build and operate a waste management facility in Chad, the first of its kind in that country. The project will employ more than 50 people, with a total contract value exceeding five million dollars. Skilled waste-management staff from around the world will go to the project site and help train the Chadians as they start up their new business. Ensuring the effective use of state-of-the-art practice, the project is providing jobs, new skills and helping to protect the environment. This is just one example, but it shows that our objective is to ensure that the benefits from our projects are spread widely in host countries and are sustainable over the long term.

These four stages of national content development have proven time and time again to be the most effective. It is important to note, however, that this is a phased implementation plan. It does not happen overnight. Prioritisation is key. The focus of development should first be on high employment industries and progress gradually toward higher investment and technology industries.

Case Studies: Malaysia and Qatar

To see real-world examples of this approach, one only has to look at nations such as Malaysia and Qatar.

In the early 1980s, the Malaysian government and Petronas began by focusing local content initiatives on logistics, transportation and warehousing. By the end of that decade, they had begun establishing design engineering and other high-value sectors. Today, just two-plus decades later, Malaysian industry is competitive internationally, providing jobs, tax revenues and economic stability.

Qatar is following a similar path. In a country half the size of Wales, with a total population of only 800,000, Qatar is blessed to be endowed with the third-largest proved gas reserves in the world. Through partnerships with international oil companies – and backed by favourable fiscal policies, rule of law, sanctity of contracts and a reputation for being a reliable supplier – Qatar is now the world’s largest LNG exporter, and is on target to double its capacity to 77 million tonnes per year by 2010. Oil and gas now accounts for 55 per cent of GDP and 85 per cent of export earnings.

In both Malaysia and Qatar, international oil companies are viewed as partners with knowledge and expertise that go beyond extracting oil and natural gas from the ground. Working with host governments and national oil companies, IOCs helped develop a foundation of skills, technology, infrastructure and financial resources that created entire industries and economies to the benefit of all citizens.

Ultimately, however, no national content development plan can be successful without meticulous attention to discipline and controls. An ethic of prudence and precision is essential. A focus on safety is the prime example of this. Safety is a priority in and of itself, of course – but is also an indicator of the excellence of an operation. Companies committed to safety are the companies that succeed.

Two good examples of this are our partnerships in Chad and Russia. In both countries, host nation collaboration among all sectors is grounded in a strong commitment to safety. In Chad, the national workforce recently completed more than 40 million work hours without a lost-time accident. In Russia, the Sakhalin project has demonstrated world-class safety performance that is nine times better than that of the global oil and gas construction industry. And it is no accident that our operational performance in both countries is strong as well.

Conclusions

Let me conclude by summarising the key thoughts.

Growing global energy demand and the challenge of developing sufficient energy resources requires strong IOC-host nation partnerships, based on complementary strengths and mutual interests in achieving greatest total social and economic value.

IOCs provide a unique ability to integrate all aspects of a successful development -leading technologies, financial strength, market experience, operating and project management capability. In addition, IOCs assist with developing national content, which is integral to achieving greatest total value over the long-term and is best achieved through a phased process aimed at making local industries internationally competitive themselves.

And ultimately, working together, we can all maximise the value of the national endowment of natural resources, to the benefit of all concerned.

Our growing interdependence is not something to be feared or even to view cautiously. Rather, it is a source of strength that will enable us to meet the challenges ahead confidently and successfully.

Thank you.