GLOBAL OIL DAY HIGHLIGHTS

CERAWeek 2008, “Quest for Security: Strategies for a New Energy Future,” opened with a welcome to delegates from 55 countries, given by Lou Carranza, CERAWeek Co-Chair. He acknowledged in particular James Rosenfield, CERA Senior Advisor, who has opened the previous 26 conferences, and noted that “thinking big thoughts and sharing ideas on the future of energy is the essence of CERAWeek.”

Daniel Yergin, CERA Chairman, in his welcome on behalf of CERA and IHS, thanked the CERAWeek speakers, partners, and sponsors. He said that this year’s theme, energy security, has different meanings for different industry players around the world. Pivotal issues for this week’s events include the economy, climate change, oil and gas supply, short- and long-term changes in demand, rising costs, the fuel mix for power generation, and the future of transportation. Technology and innovation will be crucial in meeting the challenges ahead, he said, acknowledging the participation this year of the Massachusetts Institute of Technology. Dr. Yergin described the agenda for the week—Global Oil Day, Global Gas Day, and Power Days 1 and 2—noting that events will extend through Friday for an expanded examination of power issues.

In the Oil Day Opening Address, Abdallah Jum’ah, President and Chief Executive Officer of Saudi Arabian Oil Company, focused on the enduring role of hydrocarbons in meeting growing energy demand worldwide. He emphasized that if the difficult root causes of supply concerns—world conflict and tension—were addressed, supply concerns would be alleviated and the industry “could focus on geology instead of geopolitics.” Timely investment, cooperation, technology, and pragmatism are critical in achieving long-term energy security, he said.

In the Global Oil Plenary, “Meeting the Supply Challenge,” Helge Lund, President and Chief Executive Officer of StatoilHydro ASA, said that collaboration between public and private players and the development and deployment of technology are essential in meeting the energy security challenge. “As reserves belowground increase,” he observed, “risk migrates aboveground,” and this risk must be managed. Mark Albers, Senior Vice President, Exxon Mobil Corporation, observed that “oil is finite, but is far from finished.” Meeting the supply challenge will take “technology, teamwork, and trade”; and free markets will be key. John B. Hess, Chairman and Chief Executive Officer of Hess Corporation, warned that an oil crisis is imminent, and that the industry, governments, and other players must take action now to avert it. “It’s not a matter of endowment; it’s a matter of investment” in both hydrocarbon E&P and alternatives, he said. David Hobbs, CERA Managing Director and Vice President, concluded the plenary by leading a discussion among the panelists on investment, financial markets, consumer price expectations, and other issues.

The morning’s six Critical Issues Forums discussed global oil’s next hot spots, the links between energy policy and foreign policy regionally and globally, the capital costs associated with oil and gas exploration and production, refining strategies in an uncertain environment, the Russian oil industry, and the changing role of institutional investors. Industry participants from across the value chain debated energy’s future.

At the Keynote Luncheon, James J. Mulva, Chairman, President, and CEO of ConocoPhillips, exhorted the industry to get involved as society develops policies governing the twin challenges of energy security and climate change. The industry can meet the public’s concerns because of its expertise and technical insights in reducing carbon intensity. He advocated a comprehensive energy policy with increased access to resources, “a consistent framework for managing carbon emissions,” and support for research and development. “Well-intended state efforts” will produce a confusing patchwork. Governments must assess local energy potential and support energy development under stringent environmental guidelines, setting a value on carbon avoidance phased to match the development of technology. In turn industry must reduce its own carbon intensity. None of these steps will be easy for everyone, Mr. Mulva concluded. Yet with “energy independence” unlikely for an import-dependent economy using 85 percent fossil fuel, industry must help to inspire political will and to educate the public.

A Special Address on Energy and the Environment was given by Dr. R. K. Pachauri, Chairman of the Intergovernmental Panel on Climate Change (IPCC), which shared with former US Vice President Al Gore the 2007 Nobel Peace Prize. His midday address noted the unequivocal data of the climate effects of carbon emissions. Climate change issues differ for developing and developed countries, and developing countries must still provide electricity and access to water to their citizens. Developed countries must meet their commitments to reduce emissions. There is a short window of opportunity, but the temperature rise “is within our means to mitigate,” he said, using today’s technologies and a policy framework to deploy them across the globe. “The world will be moving to a low-carbon future, and companies that take the lead will meet with success in both business and the eyes of society,” Dr. Pachauri said.

In a Special Address on Energy and the Economy, Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University held a discussion with James Burkhard, CERA Managing Director, Global Oil Group, K. F. Yan, CERA Director, China Energy, and Daniel Yergin, CERA Chairman, CERA. Dr. Rogoff gave his views on the US recession, the global economic slowdown, and the elements driving each. Saying we face a window of vulnerability, Dr. Rogoff said the length and depth of the recession and slowdown depend on the losses—current estimates range from $50 billion to the G7’s $400 billion, but $1 trillion might be the final figure. The US recession has been driven by the slowdown in a productivity boom that began in early 1990s and the incredible housing boom. Bailouts are suspect. China is at risk because “everyone has a financial crises, and repeated crises, when they’re emerging markets” balancing political and social changes. Dealing with climate change will be costly; he favors a carbon tax as one market-based solution.

James Lang, CERA President and Chief Operating Officer, opened Tuesday’s dinner event by acknowledging that it had been a long “but extremely productive” day: “So many ideas, so little time.” He thanked sponsors Black & Veatch, JDR, Total, and MIT, and offered a toast “to our future” in Japanese in honor of this global event and the evening’s keynote speaker.

Following dinner, Daniel Yergin, CERA Chairman, welcomed the Keynote Dinner speaker Nobuo Tanaka, who became the Executive Director of the International Energy Agency (IEA) in September 2007.

Mr. Tanaka said that speaking at CERAWeek was the greatest honor he has had since starting his appointment at the IEA. He spoke about the IEA’s creation in the 1970s to address international concerns about security of supply and reserves. He sees the agency’s mission evolving beyond providing and sharing energy information to being a more “comprehensive energy place,” where climate change is an important issue. In addressing the need to solve energy security and environment issues at the same time, he said, “We need a global energy revolution.” Mr. Tanaka made clear that this urgently needed energy revolution will be difficult, requiring cooperation among industry, governments, and individuals. He recommended steps to achieving the Intergovernmental Panel on Climate Change’s target of reducing greenhouse gas emissions by 50 percent by 2050: improving energy efficiency, decarbonizing electricity generation, and revolutionizing transportation. At the same time he also urged investment in upstream oil; since demand will continue to grow over the short to medium term, we still need to ensure security of supply and increase spare capacity of conventional fuels, he said. He concluded by noting that time, and not money or any other factor, is in shortest supply in achieving these goals.