SPEAKERS
Helge Lund President and CEO StatoilHydro ASA	Mark Albers Senior Vice President ExxonMobil Corporation Executive Interview
John B. Hess Chairman of the Board and CEO Hess Corporation	Daniel Yergin CERA Chairman, CERA (Chair)

In Tuesday’s Global Oil Plenary: Meeting the Supply Challenge, innovation and collaboration dominated the discussion. Helge Lund, President and Chief Executive Officer of StatoilHydro ASA, noted that the industry remains “deeply strategic, political, and emotional.” Oil resources influence the global power balance, generating cash flows that can make or break industry and government. “As reserves belowground increase,” he observed, “risk migrates aboveground,” and this risk must be managed. Today’s increasingly complex industry climate features more difficult projects, higher costs, workforce and equipment shortages, and growing resource nationalism; and “the fierce race for reserves is on.” Mr. Lund noted that in terms of output, “partnerships and collaboration have a better track record than protectionism and isolation.” He described StatoilHydro as an INOC (international national oil company)—a merger between Statoil and Hydro (Norsk Hydro) that is synergistically stronger than either company alone and large enough now to compete globally. Mr. Lund views environmental responsibility as part of a company’s “license to operate.” Technology and collaboration are key tools going forward. Business models must be rebalanced and realigned to create win-win partnerships for all parties; companies that strike the best balance will strike the best deals moving forward, he said. Many NOCs are moving “from privilege to performance, from domestic to international, and from public to private.”

Mark Albers, Senior Vice President, Exxon Mobil Corporation, spoke about peak oil, the impact of nationalism, and the concept of energy independence. He said the public perceives the peak oil issue as a matter of scarcity. Rather, he said, “oil is finite, but is far from finished.” More than 3 trillion barrels of conventional reserves are yet to be produced, and the National Petroleum Council has stated that the world is not running out of resources. The supply challenge is not one of scarcity but of hostile environments and remote locations. The development and deployment of technology on a global scale is essential. Resource-owning governments play a critical role regarding policy, access to acreage, and unique NOC capabilities. About $22 trillion in investment will be needed in the next 25 years, according to the International Energy Agency. Meeting the supply challenge will take “technology, teamwork, and trade”; free markets will be key. Technology can enhance oil recovery, boost energy efficiency, reduce emissions, and enable transportation. Teamwork between public and private entities is essential to resource access and project success. Energy can have a transformative effect on producing countries: Sakhalin-1, on which ExxonMobil is a partner, will bring $50 billion in revenues to Russia, and 90 percent of the workforce will be Russian citizens. The goal is the “greatest total value” for all stakeholders. Trade in a global market for energy unleashes the capital and creativity to build partnerships and drives innovation. Resource nationalism, as either energy independence or energy superpower status, stymies innovation and discourages investment. The long-term costs of these policies are borne by citizens of these countries. “When we should be building bridges to international partnerships, resource nationalism builds walls,” Mr. Albers said.

John B. Hess, Chairman and Chief Executive Officer of Hess Corporation, sounded an alarm on an imminent oil crisis, stating that we have gone from a supply-led market to a demand-led one. While in 1998 producers were “riding out the storm” of $10 per barrel oil, today we are in uncharted waters of $100 per barrel crude, high costs, and workforce shortages. We must act now, he said, to avert the crisis in 5–10 years. Fifty percent of oil demand is for transportation, and this need is growing in developing countries. Fuel standards, conservation, and breakthrough technologies are needed, and gas subsidies should cease, he said; new production provinces must be found. Unconventional contributions will not be enough. Yet “it’s not a matter of endowment; it’s a matter of investment”—in both hydrocarbon E&P and alternatives. Supply will fall short of demand between 2015 and 2020, he said. Failure to address these issues today will have severe consequences for world economic, political, and environmental prospects. Resolution of the energy crisis is essential to world peace, he added, and we must work together to share our resource endowment for the good of all. Free trade, innovation, investment, a stable fiscal and regulatory environment, and common global interests will aid in this effort.

David Hobbs, CERA Managing Director and Vice President, along with Dr. Yergin, concluded the plenary by leading a discussion on investment, financial markets, consumer price expectations, and other issues.