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Enhancing energy prospects in the Middle East and North Africa
Remarks by Andrew P. Swiger
Senior Vice President, Exxon Mobil Corporation
Chatham House Energy Conference
London, England
February 1, 2010
It is a privilege to participate in this Chatham House Energy Conference.
Today, I am particularly delighted to address a question that will determine the economic growth and destiny of nations around the world. That question is: What role will energy from the Middle East and North Africa play in the decades to come — and how can we maximize the value of this region’s resources for the benefit of both energy producers and consumers?
To answer this question, I believe we must begin by recognizing the fundamental importance of energy to economic growth — the need for harnessing technology and teamwork to solve our energy challenges. And we must explore how the partnerships between national oil companies and international oil companies can unlock new energy sources, develop new technologies, and add value along the entire energy chain.
Let me start out with a core idea that cannot be emphasized enough: Affordable, reliable energy fuels economic development and progress.
For developed nations, reliable energy fuels commerce and sustains progress. For developing countries, energy is even more fundamental because it is the key to easing hardship and saving lives. Energy means liberating people from poverty by strengthening manufacturing, modernizing agriculture, sanitizing water supplies and providing more sophisticated medical care.
This connection between energy demand and economic prosperity is undeniable.
In the wake of the economic downturn, energy demand fell. In 2009 global energy demand was down more than three percent.
Fortunately, over the last year, we have seen economic growth improve slightly — and with that growth we have seen energy demand return. And global energy demand is expected to rise by approximately two percent in 2010.
Even with the recent economic downturn and the short-term changes in energy demand, we expect economic growth and energy demand to rise substantially in the years ahead. By the year 2030, we expect global demand for energy to increase by almost 35 percent over 2005. Most of the new demand growth will come from developing nations in which we project energy demand will rise about 65 percent by 2030.
As we consider these global and regional trends for energy demand, it is imperative that the world recognizes that the economic growth driving energy demand is good news for all people. It reflects progress and advancement in many nations that have long been accustomed to economic struggle and deprivation.
Yet, with this good news comes two significant challenges for the world. We must not only find ways to expand our supplies of energy, but we must also to do so in a way that is safe, secure, and environmentally responsible.
As global energy demand increases, we will need to find innovative solutions to reduce the greenhouse gas emissions associated with energy use. By the year 2030, energy-related carbon-dioxide emissions are expected to have risen by an average of nearly one percent per year. Once again, much of this increase will occur in fast-developing nations. But as we seek to meet these challenges, we must recognize that developing nations cannot be expected to forego the economic growth and advancement desired by their people.
Thus, we will need to develop integrated solutions — solutions founded in technologies that expand supplies, improve efficiency, and reduce emissions. Such technologies taken together will maximize the value of our energy resources — for both consuming and producing nations. The best way to develop and deploy these technologies is found throughout our industry’s history. We can do it by investing with discipline in innovation, and by seeking mutually beneficial partnerships between NOCs and IOCs.
Simply put, no one nation or company can do it alone.
Indeed, the International Energy Agency predicts that the world’s energy industry will need to invest some $25 trillion over the next 20 years in technology and infrastructure. Achieving this feat will require the combined and coordinated efforts of IOCs and NOCs, and both consuming and producing nations. A large proportion of this investment will need to occur in the countries of the Middle East and North Africa. As we all know, beyond the energy it has already supplied over decades, this region has the potential to continue providing significant resources long into the future.
Expanding Supplies
Meeting future energy needs will require us to invest in developing all economically viable sources of energy — including oil and natural gas, nuclear, hydroelectric, geothermal, wind and solar power, among others.
In the years ahead, alternative energy sources will grow quickly. Wind, solar and biofuel energy production will increase nearly 10 percent per year on average through the year 2030. This rate of growth is impressive — and welcome — and will meet about 2.5 percent of total energy demand in 2030.
Meeting the world’s energy demands will also require that we continue to develop oil and natural gas.Hydrocarbons currently supply a majority of the world’s energy — owing to their availability, affordability and versatility. Because of these strengths, even with the anticipated growth of alternative energy sources, oil and natural gas are projected to supply nearly 60 percent of the world’s energy needs through 2030.
Therefore, the world will need to expand supplies of oil and natural gas — and we will need to use these supplies more efficiently.
NOC-IOC Cooperation
For the nations of the Middle East and North Africa, the need to expand supplies of oil and natural gas means that the region’s policies and strategic investments will be critical to the global economy.
In addition, the producing nations of the Middle East and North Africa will need to address their own energy needs as their economic growth increases. Regional oil demand is expected to grow by more than 60 percent by 2030 and natural gas demand is projected to grow by 120 percent over the same period.
For national and international oil companies operating in this pivotal region, the need to expand supplies will mean we must forge new partnerships and develop new technologies. It is encouraging to remember that our industry has proven time and time again that cooperation in the Middle East brings together strengths, maximizing the value of resources for the benefit of all.
National oil companies bring a keen understanding of their country’s natural resources, expert historical perspective, and an understanding of local businesses, which can help provide a dependable, cost-effective supply of goods and services in country. NOCs also have extensive connections to national universities, which can provide educated workforces. And NOCs can also reach out to interest groups within local communities and provide guidance on cultural and environmental sensitivities.
International energy companies bring complementary strengths to their partnerships with NOCs. Around the world, IOCs are recognized for their ability to deploy new technologies, and execute complex, capital-intensive projects.
In energy project after energy project, IOCs and NOCs have proven that by working together we can deliver greater value to resource-owning nations and more energy supplies for the world’s consumers.
Role of Middle East and North Africa
Nowhere are such partnerships more visible — or more transformative and beneficial — than in the Middle East and North Africa.
At ExxonMobil, we take great pride in the strong partnerships that we have built up in this region over the years, and we are encouraged by the new opportunities emerging in the region.
We are proud of our joint ventures with Qatar Petroleum and our cooperation with the State of Qatar. Our partnerships are maximizing the value of Qatar’s energy resources through the development of new technologies which are opening up new natural gas markets around the world.
Thanks to breakthroughs pioneered by ExxonMobil and Qatar Petroleum, we have achieved new economies of scale for development of Qatar’s North Field — the largest non-associated natural-gas field in the world. We have jointly designed, constructed and started up the largest LNG trains in operation anywhere in the world. Our new Q-Max ships can carry 80 percent more LNG than conventional-size ships, and are delivering this gas to global markets more cost-effectively than ever before.
With our joint venture partners, we also inaugurated two key LNG re-gasification terminals in 2009. The first is the South Hook LNG terminal in Wales, about 200 miles west of here. This key terminal is contributing to energy diversity in the United Kingdom and Europe. The second is the Adriatic LNG terminal, the first offshore gravity-based re-gasification terminal in the world, and it has the capacity to provide 10 percent of Italy’s gas needs.
In addition to this work in the State of Qatar, we also greatly value the long-term partnerships we have forged with other nations.
In Abu Dhabi’s Upper Zakum field, ExxonMobil scientists and engineers work side by side with their counterparts from the National Oil Company, jointly developing and executing new phases of development for this world-scale resource.
In Kuwait, we continue to seek new opportunities to work together in the application of new technologies.
We have also returned to Libya, a country which we first entered in the 1950s, and we are drilling deepwater wildcat wells there as I speak.
And you will also have heard that just last week we signed an agreement to redevelop Iraq’s West Qurna oil field. We greatly look forward to building strong new partnerships there.
ExxonMobil is also building on some of our longest, most enduring relationships in the Middle East.
In the Kingdom of Saudi Arabia, we are working to expand our joint ventures with SABIC to produce specialty products for the automotive industry. And with our partners, Saudi Aramco and Sinopec, we recently celebrated the start-up of China’s first fully-integrated refining, petrochemical and fuels marketing joint venture with foreign participation.
Increasingly, our industry will need to develop projects that will meet growing energy needs within the Middle East and North Africa. In the State of Qatar, for instance, Qatar Petroleum and ExxonMobil recently commenced the start up the Al Khaleej Gas-Phase 2 project. Combined with Phase 1, these new facilities are Qatar’s largest source of domestic natural gas and a key driver for local industries.
Working to Improve Efficiency
As we work to expand the world’s supplies of energy, teamwork and technology in our industry can help us achieve other shared goals, such as increasing the efficient use of energy.
In what might come as a surprise to some, advances in efficiency have already produced remarkable energy savings. From 1980 to 2000, the energy it took to produce one unit of GDP fell by an average of 1.2 percent per year. And we expect such gains to accelerate. Efficiency gains are projected to continue over the next 20 years, curbing energy demand growth by about 65 percent.
Efficient energy use extends the life of the world’s resource endowment. It reduces greenhouse-gas emissions. And it strengthens energy security.
As a result, the global economy has grown more resilient to energy demand and supply shocks. With more efficient energy use, sudden changes in energy prices have less economic impact because energy becomes a relatively smaller part of overall costs.
As our industry reaches out to consumers and seeks to shape sound energy policies, we must work to explain this important concept. Energy efficiency does not need to mean doing less. It means doing more — with less.
Energy efficiency means using energy wisely — from employing advanced technologies to exercising common sense in consumer and industrial operations.
Innovation plays a crucial role in this process and is a strong reason why our industry must maintain its commitment to investing in research and development. The cumulative results can be impressive.
For instance, ExxonMobil has systematically worked to improve efficiency and environmental performance throughout our facilities worldwide.
As a result of these efforts, we have reduced greenhouse gas emissions in 2008 by ten million metric tons a year since 2005. That is the equivalent of taking two million cars off the road in the U.S.A.
Sound Policies
For more than 100 years, the energy industry has expanded the world’s supplies of energy, improved energy efficiency, and, more recently, worked to reduce emissions growth. But all these achievements depend on factors outside the industry.
To meet the enormous and growing demand for energy, the industry must operate at a vast scale — and over a long time horizon.
Time in the oil and natural gas industry is not measured in business cycles, and certainly not by the political calendar. It is measured in generations. The energy we use today is the product of investment decisions and technical work that were undertaken many years or even decades ago.
Thus, government has an important role to play.
By putting in place sound and stable energy policies, governments can help encourage the long-range thinking, sustained investment, and long-term, mutually beneficial partnerships that allow the industry to excel. By promoting free trade and the free flow of goods and services, government can help bring expertise, education, and technology from around the world to find ways to maximize the value of national resources for the benefit of citizens, consumers, and shareholders.
With such building blocks in place, NOCs and IOCs can expand the world’s energy supplies and do so in a safe, secure, and environmentally responsible manner.
The decades ahead will hold many challenges. But our industry has proven we can meet these challenges together. ExxonMobil is proud of its work with partners to develop the integrated, technology-based solutions that have unlocked new energy supplies, unleashed economic growth, and opened the doors of opportunity to millions.
We look forward to continuing these efforts with our partners in the Middle East, North Africa, and beyond — as our industry strives to provide the energy we need to build a better future for all.
Thank you for your kind attention.
