US Secretary of Energy Samuel W. Bodman outlined key elements in the energy security and international energy strategy for the United States. He told CERAWeek delegates, “Access to affordable, clean energy is directly related to whether our economy will grow, our industries continue, our people remain safe and secure, and our climate will be sustained.” Energy issues are “inextricably linked to our national security. Full stop.” He called on other nations to join the United States and diversify access and the supply of conventional fuels, with stable regulatory frameworks and open markets; expand the use, availability, and cost-competitiveness of renewable and alternative fuels; promote energy efficiency and conservation; reduce pollution; and maintain the energy supply system. The secretary also called for “sustained investment on a global scale” to fund basic research, push technologies to commercialization, and provide the right policy environment. ( Secretary Bodman's address is now available on CERA.com.)

CERA Senior Director Simon Blakey led Wednesday’s Global Gas Plenary, which covered four themes: the outlook for attitudes and behavior of the major gas resource holders; the handling of trade and commerce; the relationship between the gas industry and its customers, and with society at large; and the implications and impact of the global gas trade. Hon. Andrei Reus, Deputy Minister of Industry and Energy, Russian Federation, described how Russia is in a unique situation as one of the world’s largest suppliers and consumers of natural gas. Russia has adopted international gas trade principles and is open to all participants. Don Voelte, Managing Director and Chief Executive Officer, Woodside Energy Ltd. cited the benefits of both tradition and innovation in global LNG strategy in this period of new risks and unprecedented growth—a “moving back to tradition while seeking to secure the new.” For both buyers and sellers, he said, the “heart of risk management in a high-stakes world will remain diversification.” Theo H. Walthie, Group President, Hydrocarbons and Energy, Dow Chemical Company, discussed five topics from the perspective of the chemical industry: the desired gas market outlook; gas in relation to international energy policies; sustainability as part of an international energy policy; energy security; and energy efficiency. He called upon the global gas industry to become part of a worldwide movement toward a more efficient and responsible energy future. Michael Stoppard, CERA Senior Director, Global LNG, framed his comments around three simple but critical questions: Is the LNG coming? Where will the LNG go? Can we maintain the pace of growth? Despite rising costs, resource nationalism, and technological challenges, the “first phase of 21st century LNG build is well and truly under way,” he said. Demand is rising, particularly in the core and emerging Asian markets, but also in Europe, the United States, and Latin America. Focus has turned to the second generation of LNG projects, and CERA remains optimistic that the market can and will deliver. The question and answer session covered the conflict between US and UK spot markets and international long-term contracts; future Russian gas production; and whether some chemical industries will move from gas-poor to gas-rich countries.

The plenary on "Not Running Out Just Yet” addressed the “the long term availability of oiland gas.” Although the upstream sector seems confident that it can continue to meet demand at least over the medium term, the session looked at where the weak points are, how the sector might respond, and how the components of productive capacity will evolve over the long term. The second plenary comprising industry experts from around the world, discussed gas markets and energy security.

Wednesday’s Luncheon Keynote speaker James E. Press, President of Toyota Motor North America, Inc., said that he always believed that automakers and the oil industry were in the same business, and that the big picture of the future of transportation is clear only when both sides talk together. He acknowledged the potential benefits of ethanol and other alternatives, but maintained that autos will continue to be fueled mainly by gasoline and diesel for the foreseeable future. The auto industry is booming; but over the long term, fuel availability and affordability are a concern. The challenge is to develop a metric of power train technologies and new fuels and bring them to market. Technology sharing is needed: automakers should “compete in the showroom but collaborate in the laboratory,” and work also with energy companies, government, and universities on research. A combined vision and strategy is needed to find solutions that will benefit both stakeholders and society at large. In the question and answer session, Mr. Press commented on the mentality of auto buyers (“the customers’ perceptions are the company’s reality”); the inspiration for the Prius; the booming Chinese auto market; and his advice to the energy industry (“Let’s have coffee!”).

John W. Rowe, Chairman, President, and CEO of Exelon Corporation, offered the views of “an old guy” who has experienced every form of market structure. The choices of industry structure going forward rest on certainty for long-term investments, whether a power plant is built on a regulated rate base or on market-based rates. Each type of market will work, but competition does produce customer savings, utility performance, and service. Arguments that blame rising prices on competition do not take into account “the cost influences under discussion at this conference,” he said; no system of managing the marketplace makes electricity immune from those factors. The argument that market competition isn’t working for consumers ignores basic economic efficiencies and the embedded rights of investors. His experience has encompassed several structural swings, beginning when nuclear plant cost overruns coincided with the waning of rate-based regulation in New England, going through integrated resource planning, to the current hybrids where a competitive retail market may include a fixed rate reduction for customers. How to fuel generation may be answered differently under each market; but he cautioned against expecting profits from growing the rate base, particularly in the current high-cost environment. How electricity is produced depends on all the political and economic factors worldwide described at CERAWeek for oil and natural gas, and also on how strongly we enforce climate change policy and on the challenges to siting new generation. “We can have a less carbon-intense economy,” he concluded, “but we cannot do it unless we deal with these issues.” He made it clear that carbon reduction is a critical challenge for the power industry.

The CERA Global Energy Outlook panel moderated by David Hobbs, CERA Vice President and Managing Director of Global Research, included Daniel Yergin, CERA Chairman, Simon Blakey, CERA Senior Director, European Research, Thane Gustafson, CERA Senior Director, Russian and Caspian Research, Vera de Ladoucette, CERA Senior Vice President, Senior Director, Middle East Research, Lawrence J. Makovich, CERA Managing Director, Global Power Group, and Michael Zenker, CERA Managing Director, Global Gas. The issues discussed included liquefied natural gas, national versus international markets, geopolitical hot spots, and unknowns in the energy future that stretch across regions and energy sectors.

The afternoon's Critical Issues Forums covered the emerging LNG spot market, effects of rising costs on North American natural gas markets, financial institutions as principal investors and commodity traders, the future of biofuels, and strategic planning for an uncertain future.

At Wednesday’s Global Energy & Gas dinner Dr. Yergin joined Frederick W. Smith, Chairman, President, and CEO of FedEx Corporation, a company widely admired for its service, innovation, creativity, mastery of technology, and ability to look ahead, in a free-wheeling discussion of innovation, the energy import imbalance, the current account deficit, and global economics. As a worldwide company with a yearly energy bill of over $3 billion, FedEx, said Mr. Smith, becomes a microcosm of the worldwide economy. Its planes are the clipper ships for the high tech and high value-added goods that are the staples of modern lives, in medicine, telephony, automated offices, and energy extraction. Its business trends in the past year indicate that the economy is definitely not as robust as a year earlier. He was more concerned, however, with the United States’ current account deficit and dependence on energy imports. In response, Mr. Smith and FedEx described the Energy Security Leadership Council, which he co-chairs, comprising leaders from business and the military who have proposed significant steps for compromise legislation to reduce the country’s dependence on imports. The dinner discussion also touched on China’s powerful growth engine; the role of energy insecurity; the FedEx response to the dramatic price changes, which is both to seek greater efficiencies and to pass through costs; and how to foster innovation at a company. Mr. Smith emphasized the need to cherish the innovators--"your crazies"--to allow for failure, and to look outside your own industry. The discussion concluded as Mr. Smith urged energy executives to keep communicating with the public and with Washington.