Jerre Stead, Chairman and Chief Executive Officer of IHS, and Daniel Yergin, CERA Chairman and Executive Vice President of IHS, welcomed delegates to CERAWeek 2009, CERA’s 28th annual Executive Conference, and thanked CERAWeek sponsors and partners. Dr. Yergin commented on the economic focus of the week’s agenda. “Demand shock has given way to recession shock,” he said; the industry’s fundamental challenge is how to invest across the economic cycles.

In his Opening Address Tony Hayward, Group Chief Executive, BP, acknowledged the “sudden and severe” impact on the energy industry of the current economic turmoil but urged delegates to look beyond the short term. Investment of more than $26 trillion will be needed between now and 2030 to meet demand. Partnerships between national and international oil companies will be essential. Development of renewables and low-carbon technologies will be important, though hydrocarbons, in ample supply, will dominate the energy picture for the foreseeable future. Mr. Hayward offered seven suggestions, including lower trade barriers and tariffs, carbon cap-and-trade, and a step change in investments in energy technology. He urged that we “liberate the ingenuity and intelligence of industry, academia, and government” in the quest for a stable energy supply and a sustainable planet.

CERA’s Daniel Yergin welcomed Tuesday’s Oil Plenary opening CERAWeek. Andrew Gould, Chairman and CEO, Schlumberger, said, “Tough environments always provide opportunities.” Schlumberger’s strategies include bolstering subcontractors, focused capital expenditures to lower costs, and strong research and engineering support. Jesus Reyes Heroles, Director General, Petroleos Mexicanos (PEMEX), urged embracing a long-term vision to avoid the “stop-and-go” behavior of past crises. PEMEX’s broad project portfolio and legislative reforms offer new flexibility, financial resources, and contractual regimes to foster the required oil production in the smaller and more technically challenging fields. Jiping Zhou, Vice President of China National Petroleum Corporation and President of PetroChina Company Limited, cited the country’s growth and its contributions worldwide. He outlined four viewpoints for a healthy industry—“a reasonable oil price,” accelerated technology advancement, environmental awareness, and cooperation to join national oil companies’ resources and markets with international oil companies’ capital and technologies.

At Tuesday’s Critical Issues Forum on Russian oil, CERA Director Thane Gustafson chaired a panel composed of speakers from industry and government. Peter O’Brien, Chief Financial Officer of Rosneft, and Andrei Gaidamaka, Deputy Vice President of Strategic Development at LUKOIL, each cited the benefits of a depreciating ruble on their companies’ performances, calling it a cushion against falling oil and gas prices. Gazprom Neft Vice President of Exploration and Production Boris Zilbermints gave an overview of his company’s operations and explained how Gazprom Neft was coping with a shortage of talented workers. Grigory Vygon, Director of Economy and Finance Department, Russian Ministry of Natural Resources, acknowledged that extraction and export taxes are major obstacles to oil and gas production growth and described a series of ministry initiatives to reduce the tax burden on Russian companies.

Tiffany Groode, CERA Associate Director, facilitated a lively discussion on the future of the internal combustion engine, ethanol, electric vehicles, and urban mobility. John Heywood, Sun Jee Professor of Mechanical Engineering and Director of the Sloan Automotive Laboratory at the Massachusetts Institute of Technology, said the internal combustion engine-transmission-vehicle system “can and will steadily get better.” Andreas Lippert, Director, General Energy Systems, General Motors, described his company’s commitment to give consumers options by making half of its cars flexible fuel vehicles able to use E85. Lee Schipper, Senior Research Engineer, Precourt Institute of Energy Efficiency, Stanford University, discussed the need to provide mobility for growing populations within the space constraints of megacities in Asia. Julius Pretterebner, CERA Director, dispelled the auto industry myth that electric vehicles must be more complex and more expensive. Transportation technologies will evolve to meet the challenges of urban mobility, energy security, and greenhouse gas reduction.

Other Critical Issues Forums discussed collaboration to leverage industry expertise, maximizing the potential of mature assets, oil sector finance, and the effects of political change and the global financial crisis on the Middle East.

At the Keynote Luncheon CERA’s Daniel Yergin thanked Armando Zamora, Director General of ANH Columbia, a CERAWeek premier sponsor, along with strategic sponsors ExxonMobil and Chevron. Jeroen Van der Veer, Chief Executive of Royal Dutch Shell, focused on long-term trends, the effect of the current recession, and government’s role, urging continued investment. “The upturn in the economy will come,” and a long-term demand for energy will continue. Volatile economic factors—demand, commodity prices, and rapidly changing exchange rates—challenge the industry and its investments. However, government can help during these times by accelerating permitting and access processes. Mr. Van der Veer concluded that the oil industry is “capital intensive and not for the faint-hearted,” but there is enough long-term future energy demand, especially with government support.

Peter Jackson, CERA Senior Director, Global Oil Group, chaired a panel examining the impact of recent extreme oil price volatility on upstream investment. Peter Mellbye, Executive Vice President of International Exploration and Production at StatoilHydro, focused on the industry’s need to continue investing through the current economic downturn. He also said that industry needs lower exploration and production costs to meet future demand economically. Alireza Moshiri, President, Africa and Latin America Exploration and Production, Chevron International Exploration and Production Company, emphasized three elements for companies to focus on during the downturn: retaining good people, planning and investing for the long term, and cooperating with suppliers and national oil companies. Hernán Martínez Torres, Minister of Mines and Energy, Colombia, represented CERAWeek’s Premier Partner, ANH. Minister Martínez said that Colombia has one of the most competitive fiscal regimes in the world” for oil and gas exploration and production.

William R. Veno, CERA Director of Downstream Oil, chaired Tuesday’s Refining Challenge plenary session. Clarence Cazalot, President and CEO of Marathon Oil Corporation, noted that forecasting oil demand is inherently difficult given uncertainties such as the pace of economic growth, the rate of improvement in energy efficiency, and changes to energy taxation. Philip G. Gott, Director, IHS Global Insight, remarked that there is substantial room to improve fuel consumption of existing internal combustion engines, and he expects increasing powertrain technology diversity. B. N. Bankapur, Director (Refineries) of Indian Oil Corporation, gave an overview of the evolution of oil demand and the challenges to the refining sector from the perspective of Southeast Asia and other rapidly developing economies. He expects India to become a refining and petrochemical hub, with substantial product surpluses for export. James Burkhard, CERA Managing Director, delivered two key CERA research insights: the “refiner’s new diet,” predicated on CERA’s expectation that most of the future growth in world liquids supply will come from light, noncrude hydrocarbons; and “electric world,” the potential for mass manufacturing of simple, low-cost electric vehicles for consumers in emerging markets where demand for mobility is increasing.

CERA’s Daniel Yergin introduced Tuesday’s first Keynote Plenary speaker, Michael J. Dolan, Senior Vice President of Exxon Mobil Corporation, a Strategic Sponsor of CERAWeek. Mr. Dolan discussed a number of risks that energy companies routinely confront and described the role of the industry in providing affordable energy and investing in new energy technologies. He argued strongly in favor of a carbon tax rather than a cap-and-trade system for carbon regulation. He noted that the energy industry has an opportunity to “provide confidence in the midst of the current economic weakness and financial uncertainty [and to] be an important source of strength for reigniting economic growth and building a better future for all.”

In Tuesday's second Keynote Plenary, Nobuo Tanaka Executive Director, International Energy Agency shared the agency's view on the global energy outlook for the medium and long term, with an emphasis on two critical investment challenges. The first challenge is to ensure adequate investment in supplies to meet demand and replace declining oil production. The second challenge is to ensure that the investments lead to a "sustainable energy future for all of us by addressing climate change." Recent economic events may be "overshadowing our [necessary] focus on longer-term concerns," Mr. Tanaka pointed out. The risk is that the weaker demand and lower prices now will cause us to lose sight of the longer-term outlook. He argued for a "clean energy new deal" at the heart of every country's economic stimulus package.

In his dinner toast, Hernán Martínez Torres, Minister of Mines and Energy, Colombia, representing ANH, this year’s CERAWeek Premier Partner, highlighted his country’s modern license and contract framework that would help “position Colombia as one of the most attractive destinations for oil exploration.” H.E. Ali Ibrahim Al-Naimi, Minister of Petroleum and Mineral Resources, Kingdom of Saudi Arabia, gave Tuesday’s Keynote Dinner address on “Achieving Energy Stability in Uncertain Times.” Mr. Al-Naimi noted that “whereas the recent past was all about risk and high returns, the present focus is on stability and survival.” Government intervention should be carefully balanced to preserve the dynamic potential of globally integrated markets. Mr. Al-Naimi highlighted the challenges that could prolong volatility in energy markets: globalized capital markets, the emergence of energy as an asset class, and climate change. Addressing climate change requires an inclusive energy strategy in which renewable energy, energy efficiency, nuclear power, and fossil fuels all have their place. Mr. Al-Naimi said that Saudi Arabia has an important role in advancing stability in world oil markets by keeping markets well supplied and maintaining adequate spare capacity. The Kingdom is investing in science and technology development to ensure a more sustainable energy future.