Daniel Yergin, CERA Chairman, in his welcome on behalf of CERA and IHS, cited the significance of CERAWeek as a global forum to understand the major forces driving the energy industry today as well as the changing social context. Through maintaining its focus on oil, gas, power, coal, renewables and alternatives. CERAWeek is more “cross-cutting” this year than in the past. Oil Day, more broadly covering “liquid fuels,” will emphasize geopolitics; Global Energy and Gas Day will include a focus on the energy consumers’ perspective; and Electric Power Day will include discussion on coal as well as renewables. The underlying themes of investment and innovation cut across the energy spectrum. Pivotal issues include supply timing and challenges (access, geopolitics, and cost), climate change, growing demand in developing areas of the world, and the changing relations between national oil companies and international oil companies.

In the Oil Day opening address, Rex W. Tillerson, Chairman and Chief Executive Officer of Exxon Mobil Corporation, focused on the state of the energy industry today: strengths, realities, and solutions. He was optimistic: “The challenges we face are great—but the opportunities are even greater.” The ability to seize these opportunities and to deliver energy safely, reliably, affordably, and in an environmentally sound manner requires further development of technological expertise, support of responsible resource access and the role of free markets, and understanding the fundamental realities that define the industry—and sharing this understanding with policymakers and the public. Too often overlooked, he said, is the industry’s record of accomplishment in facilitating economic growth worldwide through investment, innovation, and interdependence in a global free market system—and ultimately in providing products of great value, many of which “define modern life,” to its customers for over a century. He provided examples of ExxonMobil’s recent, ongoing, and increasing investments on six continents to search for new supplies, build new production facilities, expand refining capacity, and deploy new, environmentally advanced technologies. In the question period, he discussed Exxon’s approach to innovation and research and development, on which the company spends $1.4 billion a year.  He described how research is linked to the business objectives, but also the effort that is  being put into “break through” technologies and to longer-term innovation. After his morning keynote, Mr. Tillerson responded to questions from reporters. Questions addressed the future role of alternative energy, climate change policy, the impact on oil prices of growing investor interest in commodities, and the status of specific ExxonMobil projects. ( Mr. Tillerson's address is now available on CERA.com.)

In the Global Oil Plenary, Farouk Al Zanki, Chairman and Managing Director, Kuwait Oil Company (KOC), discussed KOC’s “2020 Strategy” for upstream growth to reach 4 million barrels per day by 2020. He also discussed the importance of the relationship between KOC as a national oil company and the international oil companies, and the need to find new ways for that relationship to develop.  He also emphasized the need for a highly skilled workforce. John Hofmeister, President, Shell Oil Company, commented on the industry’s past 50 years of innovation and energy delivery; but emphasized an overriding need to communicate with the public and with "public policy enablers” to support technology development, access to resources, and public understanding of the industry for the next 50 years of growth. Energy must take its place along with health care, education, and long-term financial security as a matter of urgent national discussion. David Hobbs, CERA Managing Director and Vice President, used three words, “if we can,” to frame the current upstream industry’s efforts to meet forecasts and bring capacity onstream, tackling development in the deep water, extra-heavy oils, and workforce and political uncertainties. His answer was, we can, as exploration and production spending has nearly doubled in two years, and for three years production has exceeded demand. Mr. Hobbs described the IHS/CERA Upstream Capital Costs Index—“a kind of Consumer Price Index for the oil industry”—that quantifies costs to weigh how they might affect growth. Questions from the packed ballroom focused on Kuwait’s reserves and Shell’s public education efforts.

In parallel Industry Plenaries the upstream panel looked at dramatic increases in the cost base, changing competitive environments, access to assets, risk management, optimizing profitability, and competition between international oil companies and national oil companies as the latter undertake a strategic shift internationally. Issues of dwindling human resources, the application of technology and the growing role of India and China in the global energy equation were also discussed. The Downstream Plenary looked at environmental issues, company strategies for growth, competition and margins, and the impact of alternative fuels, among other issues.

José Sérgio Gabrielli de Azevedo, President and CEO of Petrobras, in the keynote luncheon address described Latin America’s and Brazil ’s position as both oil exporters and biofuels suppliers; the continent has potential to change its global role in the oil and alternative fuels markets. Mr. Gabrielli provided points of comparison based on production, revenues, and economics: the relative importance of the oil sector, the role of exports, regulatory trends from greater government control to more liberalization, and the debate over “who is going to get what” from the revenue streams. Brazil with abundant resources can produce biofuels efficiently and also increase oil exports; it satisfies 40 percent of its domestic gasoline market with ethanol, a result of over 30 years of investment. Technology is fostering a “second generation of biofuels” to produce high quality products. However, oil and gas will continue to be very important. The growth of Brazil ’s off-shore production has been very substantial over recent years. He commented that political, economic, environmental, and technological answers to very difficult questions are needed to link the continent’s gas reserves with markets. The targeted production growth will have Brazil at 4.5 million barrels per day by 2015. Petrobras is also active in the Gulf of Mexico frontiers of the ultradeep water and the deep shelf. Concluded Mr. Gabrielli, “We are proud to be successful at both ends of the energy spectrum.” He answered questions on the challenge of a natural gas pipeline from Venezuela, among other issues.

The CERA experts in the Oil Insights panel provided outlooks on oil reserves, rising development costs, global oil production dynamics, corporate responsibility, effects of politics on oil prices, the growing significance of Caspian oil production, refining capacity challenges, and the increasing role of biofuels.

The afternoon's Critical Issues Forums covered the evolving industry structure, oil sector finance, geopolitics and energy in the Middle East, rising capital costs, synthetic crude and synfuels, and the next generation of Russian oil. Panel participants from the energy industry and outside including financial interests, debated issues and discussed solutions.

Daniel Yergin gratefully acknowledged Chevron as the CERAWeek global energy partner. Delivering the keynote dinner address, David O'Reilly, Chevron’s Chairman and Chief Executive Officer, declared that the challenges and opportunities he described at CERAWeek 2005 loom even larger now. A new energy equation had emerged, requiring strategies that acknowledge global interdependence and the need for environmental, economic, and foreign policy alignment. But the government and industry response is lagging. Most people want pragmatic, bipartisan solutions to energy challenges. Given that energy demand will grow 50 percent in the next 25 years, all potential resources must be developed. “Managing our energy portfolio” means fostering efficiency, managing core investments, protecting our principal, and investing in the next generation of energy, and will require compromise and trade-offs. To reduce dependence on foreign sources, the US market should increase access to domestic supplies. The Jack prospect in the deepwater Gulf demonstrates the potential results when companies can invest and innovate, he said. There is a need to bridge divides, and shift from “special interests to the common good.” He emphasized the need to move from the “tyranny of ‘or’ to the genius of ‘and’.” 

Regarding transportation fuels, E-10, or 10 percent ethanol per gallon of gasoline, can be accommodated with the existing vehicle fleet and distribution system and could lower US petroleum imports by 25 percent. The energy industry must create stronger alignments with venture capitalists, universities, and national research labs in addressing climate change. A national (not a state-by-state) framework is the more rational and effective strategy. Mr. O’Reilly called for increased interdependence and collaboration among government, businesses, the energy industry, researchers, and investors in the creation of pragmatic and effective solutions, concluding, “Our shared future demands nothing less.” Dr. Yergin led the question and answer session, which covered taking interdependence and alignment to the next stage, Chevron’s alternative energy initiatives, developing infrastructure for biofuels, the impact of escalating costs, and accountability in public policy. ( Mr. O'Reilly's address is now available on CERA.com.)