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Farouq H. Al-Zanki, CEO, Kuwait Petroleum Corporation

NOC-IOC Ventures Can Be Win-Win

Farouq H. Al-Zanki, CEO, Kuwait Petroleum Corporation

The relationship between NOCs and IOCs is critical in facilitating or hindering investment for one very simple reason: Close to 90 per cent of the world’s oil and gas reserves are owned by governments, and any IOC investment in the upstream sector is bound to involve close interaction with an NOC or a government agency. ... [ More ]

NOC-IOC Ventures Can Be Win-Win

Farouq H. Al-Zanki, CEO, Kuwait Petroleum Corporation

The relationship between NOCs and IOCs is critical in facilitating or hindering investment for one very simple reason: Close to 90 per cent of the world’s oil and gas reserves are owned by governments, and any IOC investment in the upstream sector is bound to involve close interaction with an NOC or a government agency.

Most international oil and gas companies have invested vast human and financial resources to build a capability to understand and manage below-ground opportunities and risks.

In the 1970s and early 80s, the competitive environment in the industry was characterised by limited opportunities and abundant financial resources, largely because significant parts of the world were closed to direct foreign investment and because of high oil prices.

In the early 1990s, as most governments started to open up, new opportunities became available to the IOCs at a time when the available financial resources were scarcer because of relatively low oil prices. Today, the industry has entered a phase where it has have access to abundant financial resources for a very large number of diverse opportunities.

The global energy business is driven by access to management skills, capital, markets, technology, and innovation. Investment in the global upstream is determined by the balance between opportunity and risk.

When NOCs and IOCs see how their interests are aligned and understood, how each side benefits from the other side, projects acquire a new momentum and investments can take place.

Companies compete for opportunities and improved terms; governments compete for foreign investment, markets and enhanced value from their alliances with IOCs, while NOCs compete for budgets, autonomy, and access to above-ground resources such as management skills and technology.

Both IOCs and governments face new priorities and challenges; the former are primarily driven by the demands of capital markets and the investment communities, with the latter are primarily driven by socio-economic and political demands. Furthermore, IOCs are aware that they are in competition, and are forced by the market to improve their competitive positions; governments need to make the most of their competitive potential.

KPC Experience

In its search for a win-win, and effective cooperation with the industry, Kuwait is using Enhanced Technical Service Agreements (ETSAs), which were developed as a new model, to define the relations with IOCs. These agreements should provide the technical knowledge, the know-how, the expertise and the reservoir management KPC needs.

In February 2010, Shell signed an Enhanced Technical Service Agreement (ETSA) to provide technical as well as management assistance for the development of non-associated gas. Such relationship will be extended include the development of heavy crude.

NOCs as well as IOCs need to align respective interests in many respects, through cooperation, dialogue and partnership built on the clear synergies all along the value chain, at all levels. This is the most promising avenue to enhance global energy security.

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John S. Watson, Chairman And Ceo, Chevron Corporation

The Affordable Energy Challenge

John S. Watson, Chairman And Ceo, Chevron Corporation

Since the International Energy Forum last gathered, some dramatic events in the Middle East, Asia, and elsewhere have added to the challenges of energy ministers and of the energy industry. That is just the nature of the energy economy: the whole enterprise is so central to the life of the world that almost every year ... [ More ]

The Affordable Energy Challenge

John S. Watson, Chairman And Ceo, Chevron Corporation

Since the International Energy Forum last gathered, some dramatic events in the Middle East, Asia, and elsewhere have added to the challenges of energy ministers and of the energy industry. That is just the nature of the energy economy: the whole enterprise is so central to the life of the world that almost every year brings a critical new development, whether a political crisis, a major discovery, or a potentially game-changing technology.

For all of the unexpected turns, however, there are certain constants that we can set our sights by. We know that demand for energy of every kind will continue to rise with population and economic development. And we know what will make such development and progress possible: affordable energy. I view this as the great objective that keeps us moving forward on all the right fronts. If we stay focused on delivering affordable energy to a world of seven billion people, we will achieve many other important goals along the way – from growth and job creation to the success of new energy sources.

Progress will also depend mainly on the very same energy sources – the ones we draw from the earth. Their share of the global energy portfolio will not diminish in the foreseeable future, even under the most hopeful projections for renewable and alternative fuels that have yet to reach commercial scale. Worldwide demand will grow by some 45 per cent just in the next 20 years. For the industry’s part, this will require large, long-term investments in the exploration and development of oil and gas reserves. And prudent public policy will follow a balanced approach that sustains such investment, allowing access to resources while holding energy producers to high standards. One of the worst mistakes we could make is to take the affordability of energy for granted, discouraging production until one day we are confronted with scarcity and all the economic troubles that would bring.

At the same time, we have to understand that as vital as fossil fuels remain, even they will not be enough in the long term. Every element of the portfolio is crucial to the overall picture. Oil, gas, coal, nuclear, all the various renewables in development – in the end, we will need them all, along with technologies that reduce the amount of energy needed at the point of use. Efficiency, after all, is the cheapest source of energy we have, yielding gains at no cost whatever to the environment.

At the strategic level, there is agreement on these broad goals among the nations represented at the IEF. There is agreement as well that technological innovation is our best ally on every energy front – preserving affordability against the enormous pressures of rising demand. This consensus extends across the industry, and is shaping the policies of many governments – all to the good.

In the end, we can get everything else right, but still go nowhere unless we have affordable supplies of the energy that makes things run, economies grow and improve lives. As this biennial conference recognises, energy producers and government regulators can achieve this objective only together – committed to shared progress, and moving forward as partners in a common enterprise.

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Christophe De Margerie Chairman And Ceo, Total

Long-Lasting Partnerships

Christophe De Margerie Chairman And Ceo, Total

Secure and affordable energy supplies and well balanced energy markets remain essential vectors in the global economy. The industry has to operate in a context of long-term transition periods, addressing three intertwined issues: meeting growing energy demand, developing a more diversified energy mix and developing acceptability and sustainability. These contemporary challenges impose a vision and ... [ More ]

Long-Lasting Partnerships

Christophe De Margerie Chairman And Ceo, Total

Secure and affordable energy supplies and well balanced energy markets remain essential vectors in the global economy. The industry has to operate in a context of long-term transition periods, addressing three intertwined issues: meeting growing energy demand, developing a more diversified energy mix and developing acceptability and sustainability.

These contemporary challenges impose a vision and tremendous research and development as well as investment efforts. Hydrocarbon producers are particularly concerned as oil and gas remain the two most important energy sources for the foreseeable future. Open dialogues between consumers and producers on the one hand and between NOCs and IOCs on the other are very fruitful means in addressing output and market issues. The IEF is living proof of that. Key actors, whether national or international, private or state-held, are faced with largely common challenges. Investments needed in the upstream oil and gas sector need to be sufficiently large to meet demand and to offset the accelerating decline of producing fields. The real constraint is not geology, it is our ability to bring additional resources into production.

Upstream projects tend to become more and more technologically innovative, relying upon advanced know-how, with a growing share of non conventional: ultra-deep offshore, gas shales, oil sands. Environmental and safety rules have rightly become more stringent, and companies are not entitled to fail in these matters anywhere in the world.

What do IOCs need to implement their mission? They need first to get access to hydrocarbon resources and to benefit from a stable and reasonably attractive investment framework. Once interests are aligned, IOCs must work in such a way that the producing countries where they operate find a genuine interest in developing their hydrocarbon resources.

Traditional business ventures between an NOC and an IOC tend to be replaced by a long-lasting partnership with a broader scope covering training of human resources, technology transfer, environmental management, local industrial and business development. It often extends to the fields of health, education or culture. This demonstrates the genuine interest of most IOCs for the country where they operate, and their willingness to behave as local actors deeply rooted in the society. Total offers many examples in various countries all over the world of a sincere dedication to local development. Upstream projects are capital-intensive, their implementation takes time and they involve a large financial exposure. Their life extends over several decades. It really matters that the stakeholders concerned feel comfortable with such projects, and can reconcile the needs of producing countries with consumer expectations.

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Peter Voser, CEO, Royal Dutch Shell

The Role Of Natural Gas

Peter Voser, CEO, Royal Dutch Shell

The world faces the long-term prospect of a surging demand for energy. Growing population and prosperity in developing countries will require a massive expansion in energy sources. National oil companies (NOCs) and international oil companies (IOCs) can address this challenge by forging value-driven partnerships that look beyond short-term economic and political volatility. These partnerships can ... [ More ]

The Role Of Natural Gas

Peter Voser, CEO, Royal Dutch Shell

The world faces the long-term prospect of a surging demand for energy. Growing population and prosperity in developing countries will require a massive expansion in energy sources. National oil companies (NOCs) and international oil companies (IOCs) can address this challenge by forging value-driven partnerships that look beyond short-term economic and political volatility. These partnerships can drive rapid progress towards a secure and sustainable global energy system. And a key part of that system will be based on natural gas.

Thanks to technical advances in the production of tight gas, shale gas and coal-bed methane, total worldwide recoverable gas resources are now estimated to be equal to 250 years of current gas production. The International Energy Agency’s new gas scenario forecasts that, between 2008 and 2035, primary natural gas demand could increase by 60 per cent globally. We at Shell see three major opportunities for NOCs and IOCs to increase the global gas supply by exploiting tight gas, LNG and associated gas.

Shell estimates that three-quarters of the non-associated gas in the Middle East is sour or found in tight reservoirs – or both. These are technically challenging resources to develop safely and profitably. They push the boundaries of innovation. We at Shell know first-hand how the development of tight-gas resources transformed the energy outlook for North America. Now is a perfect opportunity for IOCs and NOCs to work together to replicate this success in other parts of the world.

LNG demand is growing in line with the gas import needs of the Middle East and Europe as well as of China, India and a clutch of other Asian countries. In response, global LNG supplies will continue to expand. Moreover, LNG is fast becoming a truly global commodity, supply matching demand as they shift around the world. With an integrated IOC’s access to a global customer base, more gas-resource holders will obtain the full value of their resources in the international marketplace.

Because associated gas is tied to oil production, its supply is difficult to manage. A producer nation can find itself with more gas than it needs. Sometimes, for a lack of alternative, the gas is flared. But there is real economic and environmental value in capturing associated gas instead of flaring it. A good example is the Gbaran-Ubie project, executed by the operating company of our joint venture with the Nigerian National Petroleum Corporation. The project captures associated gas and converts most of it into LNG for export. The remainder is used to fuel power plants, bringing electricity for the first time to many people. The project also strengthened the capabilities of many Nigerian businesses.

The technical capabilities of NOCs are first-rate; their people are immensely skilled; and they are fast expanding their international reach. But IOCs bring complementary capabilities to projects that can propel the growth of the global gas market. By extending and accelerating the natural gas revolution, NOC-IOC partnerships have a chance to make an immediate impact in the world’s quest for more and cleaner energy. And they would generate significant economic growth for resource-holder nations and their people.

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Rex W. Tillerson, Chairman And Ceo, Exxon Mobil Corporation

Understanding Roles And Responsibilities To Spur Investment And Innovation

Rex W. Tillerson, Chairman And Ceo, Exxon Mobil Corporation

Energy is the lifeblood of the global economy, and an enabler of economic, social and environmental progress in every developed and developing nation. Given the central role energy plays, it is imperative that world leaders recognise and address the challenges we face in continuing to develop sufficient, reliable, responsible and affordable energy in the decades ... [ More ]

Understanding Roles And Responsibilities To Spur Investment And Innovation

Rex W. Tillerson, Chairman And Ceo, Exxon Mobil Corporation

Energy is the lifeblood of the global economy, and an enabler of economic, social and environmental progress in every developed and developing nation. Given the central role energy plays, it is imperative that world leaders recognise and address the challenges we face in continuing to develop sufficient, reliable, responsible and affordable energy in the decades ahead.

We will need government and industry, international oil companies and national oil companies, entrepreneurs and investors to work together as never before. We all have something to contribute to the effort to unlock new supplies of energy, increase energy efficiency, and reduce the environmental impacts associated with energy use.

The best way to achieve our shared aspirations is to understand our respective strengths and roles in economic growth and energy production. Government and industry each have core responsibilities. By comprehending and capitalising on them, we can build markets that attract long-term investment, foster open competition, and develop the innovative technologies and partnerships that maximise value for all.

The scale of the challenges ahead – driven by population growth and expanding economies – makes clear the need for understanding and cooperation. The world recently noted a significant global milestone when the global population surpassed 7 billion people. By the year 2040, experts project that the global population will grow by close to 25 per cent – reaching nearly 8.7 billion people. Not only will populations grow, but so will the global economy, which is set to more than double in size between now and then.

Taken together, these two trends – the continued growth in the world’s population and the associated expansion of economic output – will mean that global energy demand will be more than 30 per cent higher in the year 2040 than today.

In the years and decades ahead, the world will need to invest in and develop all economically competitive sources of energy if we are to meet projected demand.

Need For Oil And Gas

The most important sources in the foreseeable future will continue to be oil and natural gas. In the decades ahead, they will provide nearly 60 per cent of the energy used in the global economy. But we will see a continued evolution in energy use. By the year 2040, oil will remain the most widely used fuel, but we expect natural gas will grow fast enough to overtake coal for the number two position. In fact, demand for natural gas will rise by more than 60 per cent over the next 30 years.

The single biggest driver of demand over the next three decades will be the need for energy to generate power – a sign in itself of increased global prosperity as more consumers and businesses have access to a secure and reliable electricity supply. By 2040, the fuels used to generate electricity will account for more than 40 per cent of global energy consumption. Natural gas has already proven itself to be a safe, reliable, affordable, and efficient means of power generation, and it will continue to grow in importance in this sector.

A second major part of this evolutionary change will be where that oil and natural gas will come from. Although the majority of oil and natural gas will continue to come from conventional sources, in the years ahead, a growing share will come from unconventional sources, such as shale, tight sands, deepwater, and oil sands.

High-impact technologies have made these un-conventional sources not just economical, but environmentally responsible. This development of unconventional sources is a reminder that innovative thinking, advanced technologies, and partnerships will be the key to meeting the challenges of the future.

Roles And Responsibilities: Industry

Both industry and government have core responsibilities that when fulfilled help encourage and expedite the investment and innovation we need. For industry, we have a responsibility to develop and deliver new supplies of energy in a safe, secure, and environmentally responsible way. As part of this responsibility, we must engage in effective risk management. We must engage in long-term planning, undeterred by the ups and downs of business cycles. We must invest with discipline and ingenuity. And we must focus relentlessly on our operational integrity and best practices – to protect our employees and the communities where we operate.

Our track record as an industry shows that not only can we fulfill these responsibilities, but we can do so in a manner that generates new economic opportunities for host nations and maximises value for consumers and shareholders.

One of the most effective ways we do this is by building international partnerships that leverage our strengths. For instance, over the years, National Oil Companies have demonstrated a wide range of capabilities as strong partners in energy development, including secure access to resources, detailed experience operating in specific environments, and a firsthand understanding of the local and national governments’ regulations and requirements. These strengths are augmented by the educational and cultural leadership that NOCs bring to their people as they pass on new skills and create new employment opportunities.

Our industry is further strengthened by the contributions of International Oil Companies. IOCs have an unparalleled breadth and depth of experience taking on energy challenges around the world, across a wide range of conditions, developing new approaches and best practices that can be brought to new partnerships and new countries.

We invest in large-scale capital projects, develop new technologies, and use our global perspective to maximise value along the entire energy value chain. IOCs have pioneered exploration and production in some of the world’s most remote, most difficult environments. And we have done so by maintaining a steadfast commitment to innovation and technological advancement to make what was previously thought impossible, possible. Further improving our operational expertise and developing and implementing best practices is a must in our business. Without continuous improvement, we can lose our competitive edge – and our ability to create higher value – and face the prospect of falling behind.

As we look at the energy needs in the decades ahead, it will take our entire industry combining these strengths to meet growing energy demand. We will need access and knowledge, technology and expertise, project excellence and operational integrity, to deliver reliable and affordable energy to the billions of people who need it.

Roles And Responsibilities: Government

The energy and economic challenges the world will face in the decades to come require a business and policy climate that enables investment, innovation, and international cooperation. Here is where sound policies are critical. In other words, industry has an important role in the future of energy – but so do governments.

When governments fulfill their roles effectively, the results can be extraordinary – bringing enormous benefits in terms of investment, social and economic growth, and job creation. These benefits go beyond promises of a better future for citizens. They put in place the essential elements to deliver that better future – with increased education and improved healthcare.

Our industry especially respects the role that only government can play in determining the rules and framework to enable and stimulate competition. Because we are a global industry, we can see which principles work and why they should underpin energy policymaking.

Simply put, history proves that energy policies that are efficient and market-based are the best path to economic growth and technological progress. By promoting the rule of law and the sanctity of contracts, government helps attract, increase, and sustain capital flows so that they are directed to their highest and most efficient use.

Governments and their leaders must make clear and set high standards of ethical conduct for all participants – industry, government employees and their citizens. Government also has a responsibility to provide a stable and fair legal, tax, and regulatory framework. Uncertainty undermines the long-range thinking, investment decisions, and mutually beneficial partnerships that allow our industry to excel. Our industry thinks in terms of decades, not years. To do so successfully, we need the confidence that the rules of the game will not be changed or altered haphazardly.

Government has a role that industry cannot replicate or replace. Only governments can open – and keep open – the doors to international trade and cooperation between nations. The more energy policies promote free trade and the free flow of goods, services, and expertise, the more they can help maximise the value of energy resources for all.

Finally, energy developments are most effective when there is a level playing field for all participants. By allowing people, ideas, and industry to come together in innovative, competitive ways for long-term projects, citizens and consumers benefit from the fairness and transparency of free markets.

If we meet our roles and responsibilities together, government and the energy industry – along with citizens and consumers at large – can lay the foundation for sustained economic growth – by providing reliable, affordable energy in a safe, secure, and environmentally responsible way.

For millions of people, this will mean new jobs and new opportunities in the years ahead. For governments, sound, long-term policies will mean increased revenues and greater prosperity. And for the billions yet to be born, an energy industry able to operate in a climate of investment and mutual cooperation will mean a brighter future and a better life for all.

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Interview With Sudhir Vasudeva, Chairman And Managing Director, Ongc

Maximising India's Energy Potential

Interview With Sudhir Vasudeva, Chairman And Managing Director, Ongc

What is the energy scenario in India, especially with regard to hydrocarbons, and what challenges do you foresee? While the present global economic distress has not spared India, driven by fundamentals, the country’s GDP growth rate is still expected to exceed 7 per cent. As a result, the oil and gas industry is also expected ... [ More ]

Maximising India's Energy Potential

Interview With Sudhir Vasudeva, Chairman And Managing Director, ONGC


What is the energy scenario in India, especially with regard to hydrocarbons, and what challenges do you foresee?

oil rig

While the present global economic distress has not spared India, driven by fundamentals, the country’s GDP growth rate is still expected to exceed 7 per cent. As a result, the oil and gas industry is also expected to continue its role in fuelling this growth.

India is currently the 4th largest consumer of primary energy, after China, the USA and Russia. It is also the 4th largest consumer of oil and the 12th largest consumer of gas, and its consumption rate is still growing rapidly. With the economy projected to grow at a steady rate in the range of 7-9 per cent in the near term, per capita energy consumption is bound to increase, and so will the demand for energy.

India will require all forms of energy in the desired quantity and quality to sustain growth. However, for a country with 17 per cent of the world’s population, 0.6 per cent of its oil reserves and 0.8 per cent of its natural gas, the task of matching energy requirements with economic growth is a daunting one.

Total hydrocarbon resources in India, inclusive of deepwater, are estimated at around 28 billion tonnes of oil and oil-equivalent of gas (O+OEG), of which, as of 1 April 2011, initial in-place resources of 10.11 billion tonnes and ultimate reserves of 3.79 billion tonnes have been established. However, converting prognosticated resources into proven reserves, and bringing them to production through intensive exploration and innovative production methods, is a major challenge for the Indian upstream sector.

As Indias leading exploration and production (E&P) company, what steps is ONGC taking toward strengthening the countrys long-term energy security?

The development or growth of any nation, especially of a developing country, is directly related to its energy consumption. ONGC, being the leading energy contributor of India has been playing a pivotal role in ensuring the growth of our nation. Oil and gas together comprise over 45 per cent of India’s primary energy basket. Of the total oil consumption, India’s indigenous contribution in terms of oil production is about 25 per cent, whereas about 75 per cent is imported. And in the case of gas, the present scenario is precisely the reverse; about 75 per cent is indigenously sourced and about 25 per cent is imported. ONGC produces about 60 per cent of the total indigenous oil and gas at present. It is a matter of pride for us that our pioneers have shaped the energy landscape of the nation by discovering 6 out of the 7 producing basins of India. Through its 370-odd discoveries to date, ONGC has established about 2.4 billion tonnes of hydrocarbon reserves, of which 1.506 billion tonnes has already been produced and has contributed toward the growth of our nation.

In order to secure further energy assurance for the country, ONGC, through its wholly-owned subsidiary ONGC Videsh Limited (OVL), has forayed abroad to acquire equity oil and is presently operating 33 E&P projects in 15 countries. Today, ONGC and OVL combined source about 1.27 million barrels of oil and oil equivalent gas daily for 1.2 billion Indians. In addition, ONGC has extended its core competency to explore new sources of energy in the form of coal bed methane (CBM), underground coal gasification (UCG), shale gas and gas hydrates, and has also ventured into new and renewable sources of energy.

Global natural gas reserves are of the order of 187 tcf and it has a low carbon footprint as well; how is India placed with regard to utilising this eco-friendly fuel?

Dependence on oil needs to be drastically reduced by utilising gas wherever possible. For this reason, gas infrastructure in India needs to be developed expeditiously.

India is seeking to supplement domestic natural gas supply through other options such as cross-border gas pipelines and LNG to enhance the availability of natural gas. However, India would have to develop commensurate supply and distribution infrastructure as well to utilise imported gas. The pipeline network in India is currently one of the least extensive amongst gas consuming countries; however a national gas grid is being implemented in phases to open up new markets for this eco-friendly fuel.

Unconventional sources such as coal bed methane, underground coal gasification, gas hydrates, shale gas, etc, have huge potential. The Indian upstream industry is keen to monetise these resources; however it will require substantial investment, technology infusion and innovation, as well as an enabling policy framework.

After the shale gas revolution in the USA, India too is keen to monetise its shale gas resources. Rough estimates have pegged the reserves of gas in shale deposits across the country at 63 trillion cubic feet (tcf), which is much higher than the reserves of conventional gas available in India. ONGC discovered shale gas in Damodar Valley in January 2011 and has drilled 4 wells as an R&D effort. ONGC has identified the Gondwana, Krishna Godavari, Cauvery, Cambay and Indo-Gangetic basins as a potential shale gas province and is awaiting a National Shale Gas Policy, which is likely to be announced this year, to prioritise its efforts toward shale gas exploration.

In addition, India is endowed with substantial coal reserves that can be monetised using coal bed methane and underground coal gasification. Then we have methane gas hydrates in the KG and Mahanadi basins, the Kerala-Konkan basin and offshore Andaman. The total prognosticated gas resource from gas hydrates in the country is placed at 1894 tcm. So there are substantial upsides to the domestic gas scenario and we at ONGC are active on all fronts, i.e. CBM, UCG, and shale gas, as well as in gas hydrates.

ONGC has a number of joint ventures in India and some abroad. What has been ONGCs experience of cooperation with IOCs, given that IOC-NOC cooperation is a major topic for IEF activities?

The experience has been most satisfactory. Whether an NOC or an IOC, we are business entities and work together to achieve common goals under a well-established commercial framework. Working together enables the use of complementary skills and competencies. While IOCs invariably possess better technology and management practices, NOCs have access to reserves, local business acumen, better understanding of local regulatory frameworks and a social charter focused on community development around operational areas. Together, this combination has delivered on its promise and we remain extremely sanguine about this relationship in monetising global oil and gas reserves, especially under the prevailing regime of 'exigent hydrocarbons' and unconventional hydrocarbons that needs a healthy infusion of cutting-edge technology as well as capital.

Wind farm in India

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Jakob Thomasen, chief Executive Officer, Maersk Oil

Novel Solutions For Making Power

Jakob Thomasen, chief Executive Officer, Maersk Oil

The future looks bright for the oil and gas industry as world energy consumption keeps growing. The IEA expects oil demand to rise to 125 million barrels per day in 2020 from today’s 106 million barrels. But the reality is also that global oil production is declining fast; this year it will drop 6 per ... [ More ]

Novel Solutions For Making Power

Jakob Thomasen, chief Executive Officer, Maersk Oil

The future looks bright for the oil and gas industry as world energy consumption keeps growing. The IEA expects oil demand to rise to 125 million barrels per day in 2020 from today’s 106 million barrels. But the reality is also that global oil production is declining fast; this year it will drop 6 per cent. In addition, we find ourselves in an increasingly crowded market of a variety of national and international players. We all compete for a smaller number of opportunities to explore for and develop oil and gas in more challenging areas under increasingly challenging operational environments. So we need to revive our commitment to technology and human innovation.

The starting point must be to work closer together. It is only through trusting partnerships – with our peers, with the service industry and with governments – that we can meet world demand for energy. Partnerships will allow us to explore previously impossible regions and develop the technology to access oil and gas thought to be inaccessible or non-commercial.

At Maersk Oil, we have just launched our new TriGen technology together with our partners, Siemens and Clean Energy Systems. TriGen is a good example of what could be the next generation of oil and gas development.

TriGen is a power generator the size of a shipping container which burns gas with pure oxygen to produce clean power, pure water and ‘reservoir ready’ carbon dioxide. The gas can come from stranded fields, finally unlocking their resources. The high purity CO2 is captured, making the power generation emission-free, and can be transported to oil and gas fields for Enhanced Oil or Gas Recovery. TriGen has the potential to commercialise hydrocarbon resources which have so far remained undeveloped and boost recovery in mature fields, while supplying local populations with clean water and power.

TriGen is a real step-out for a purely upstream company like Maersk Oil. It is a unique product which, for the first time, joins oil and gas production with power generation in one integrated project. It involves innovative partnerships that share knowledge and technology, and will require close collaboration with NOCs and other resource holders as well as players in the power and water sectors. The prize is significant but no company can solve future challenges alone.

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Interview With Eelco Hoekstra, Chairman Of The Executive Board And Ceo, Royal Vopak

Building Bridges In The Energy Logistics Value Chain

Interview With Eelco Hoekstra, Chairman Of The Executive Board And Ceo, Royal Vopak

Given the context of IEF's focus on promoting cooperation between energy producers and consumers, how does Vopak see its role in the energy supply chain?The world of energy is more dynamic than ever before. Energy producers and consumers are forming new alliances, gas and oil flows are finding their way around the world through ever ... [ More ]

Building Bridges In The Energy Logistics Value Chain

Interview With Eelco Hoekstra, Chairman Of The Executive Board And Ceo, Royal Vopak

Given the context of IEF's focus on promoting cooperation between energy producers and consumers, how does Vopak see its role in the energy supply chain?

The world of energy is more dynamic than ever before. Energy producers and consumers are forming new alliances, gas and oil flows are finding their way around the world through ever more complex networks, and emerging markets are shaping global markets. Meanwhile, there is growing interest in new forms of energy, and in diversification and in sustainable energy production. And through it all, supply and demand are continually fluctuating. In this situation, independent service providers have a unique role to play.

The global economy is changing and the structural geographical imbalance in the production and consumption of oil products, chemicals and natural gas is increasing – at both the regional and global level. At the same time, the demand for energy is growing, especially in non-OECD countries in Asia, the Middle East, Africa and Latin America. This thirst for energy is triggered by expanding populations, rising gross national products, and increased mobility. In particular, the demand for fossil fuels has risen significantly, while the need for chemicals and vegetable oils to support industrial production in these regions has also increased.

Increasing Demand

These developments have clearly led to an increased demand for the physical transport of products and, as a result, for the efficient and secure storage and transshipment of these products. Concurrently, many emerging countries are becoming big energy users; they are relying on imports to supplement their local resources in order to meet their growing demand. This creates a need for more transport to move the energy from producers to consumers, and for reliable storage solutions, with sufficient tankage, to meet the needs of consuming countries. Producing countries, for their part, need a solid infrastructure that will enable them to facilitate their production in the most efficient manner. In general, sufficient tankage is essential for markets to operate efficiently, and a reliable infrastructure is needed to connect the logistics networks of producers, handlers and consumers.

An Independent Alternatice

 Producing and consuming parties therefore have a choice – either to build their own terminals or to utilise independent storage and transhipment specialists. The prerequisites for storage are being present in the right logistic location; having a strong and clear focus on safety, security and sustainability; and delivering reliable and efficient services. The overall benefit of independent storage facilities is that they alleviate the pressure on a party’s logistic systems. They can also lower costs, as they can generate economies and efficiencies of scale: after all, storage used solely by one party is always more expensive than creating economies of scale through usage by multiple parties. Given this fact, storage providers such as Vopak, with their expertise and global presence, can contribute to the improved reliability and efficiency of regional and global supply chains, optimising volumes and guaranteeing environmental health and safety.

Knowledge Of The Market

Vopak's success as an independent service provider depends on its ability to respond to changes in the energy market. This requires a deep understanding of both global and local markets. Each terminal needs to be aligned with a region’s long-term trends and requirements, and understanding these factors is essential in order to be able to secure the right location at the right moment.

For this reason, we invest substantially in business development globally, and continuously monitor and anticipate future changes in product flows. Our teams continually seek out and evaluate appropriate sites for storage and transhipment in strategically situated ports. At the same time, we also engage in intensive discussions with key parties, to understand their markets and take heed of their queries.

Independent service providers occupy quite a unique position in the link between producers and consumers of energy. For us, it is about building bridges: our role is to make that connection possible.

Our business is also to create a connection between global and local levels. We invest a great deal at a global level; and we remain very active at the local level in the countries in which we operate. For example, in many of our locations, we have local joint-venture partners, where most of our employees originate from the local area. In our view, once a good location has been secured, it is imperative to make a sustainable long-term investment and create permanency for all parties involved. Here, we add value by offering host countries a high-quality infrastructure, thus increasing the country’s options for energy flows. From a macroeconomic viewpoint, our aim is to remove as many barriers as possible and to maximise the range of options. With greater choices, the more liquidity there is in the market, thus more value created and better efficiency between supply and demand. Efficiency, however, requires a regulatory environment which is open to market parties and ensures that there are no trade barriers, whether in relation to financial, transport or customs matters.

Energy security is a major theme of the IEF dialogue - what part does Vopak see storage playing in energy security?

Oil, gas and chemicals are the lifeblood of economies today, and security of supply is more urgent than ever. How countries deal with energy security varies from region to region, and traditionally, the interests of producing and consuming countries differ – security of demand versus security of supply respectively. Yet, both governments and companies in these arenas are definitely attaching greater importance to the subject.

A clear example relating to security of supply is, of course, the IEA measure requiring each IEA member to hold oil stocks equivalent to at least 90 days (of net imports), and to maintain emergency measures for responding collectively to sudden disruptions in oil supply. For a country to be able to import and export sufficient energy products, its government needs a solid logistics and terminal infrastructure. This is precisely where independent service providers come in. In this respect, Vopak, for example is building a strategic storage facility at Eemshaven in the Netherlands.

On another point, the IEA predicts that by 2035 the world will require approximately one-third more energy than it does at present. This means that governments should adopt a multi-product approach and investigate different energy sources. In other words, it is vital to diversify one’s energy portfolio as much as possible. The recently opened Gate terminal in Rotterdam, the first LNG terminal in the Netherlands, will not only reduce the country’s dependence on particular sources of energy, but will also provide companies with an additional option besides pipeline gas.

Diversification of supply is certainly a positive step towards ensuring energy security. In our view, it is essential for countries to utilise various energy sources, and that – in due course – consuming, transit and producing countries will cooperate on matters of energy production and consumption.

Is the mix in Vopaks energy storage changing for example, from oil to biofuels and LNG?

With the growing demand for energy globally, traditional energy resources still remain strong. While oil remains important, we see a relatively stronger growth in renewables and natural gas. The demand for the latter is attributable to its clear advantages over other fossil fuels. Firstly, it is the cleanest fossil fuel. It also costs less to transport over long distances than pipeline gas (a significant a factor, given the growing geographic imbalance between the demand and supply of natural gas). Lastly, LNG offers greater diversification of supply than pipeline gas.

In 2011, Vopak not only entered the natural gas market with the opening of Gate terminal in the Netherlands, but also acquired the Altamira LNG Terminal in Mexico. Given the growth in oil products and renewables, Vopak energy storage will continue to be representative of the above noted energy segments, including LNG.

On the whole, our primary business model remains unchanged, and we will continue to add value in our current role by performing a specialist niche activity as an independent provider of conditioned storage facilities for bulk liquids. Importantly, Vopak does not own products and ownership remains at all times with our customers.

The Logistics Contribution

It is important for us to be involved in the global dialogue with large oil companies (both IOCs and NOCs) as we are well-positioned to address their logistic and commercial needs. The industry realises that logistics issues are important to the overall discussion, and an efficient supply-on-demand system supports their business model. Vopak is honoured that we have the opportunity to contribute to the International Energy Forum and to exchange ideas with other participants on how logistics can be used most efficiently and effectively in the coming years. Vopak welcomes and supports the Joint Organisations Data Initiative (JODI). It will ensure a single set of data on the oil market, and help to promote transparency and clarity for all parties across the sector.

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Farouq Al-Zanki, Deputy Chairman & Chief Executive Officer,
Kuwait Petroleum Corporation

Producer-Consumer Dialogue

Farouq Al-Zanki, Deputy Chairman & Chief Executive Officer, Kuwait Petroleum Corporation

The signing of the IEF Charter by more than 85 countries, and the increasing number of candidacy has many important implications. It implicitly indicates the acceptance of the growing importance of the IEF as an international arena for effective dialogue, an expression of satisfaction of the IEF's accomplishments thus far, as well as sets a ... [ More ]

Producer-Consumer Dialogue

Farouq Al-Zanki, Deputy Chairman & Chief Executive Officer, Kuwait Petroleum Corporation

The signing of the IEF Charter by more than 85 countries, and the increasing number of candidacy has many important implications. It implicitly indicates the acceptance of the growing importance of the IEF as an international arena for effective dialogue, an expression of satisfaction of the IEF's accomplishments thus far, as well as sets a high expectation for its role in the future. The world is interdependent and the energy system is interconnected, through physical infrastructures and markets.

Energy security is the main driver for the dialogue among producers and consumers. A New era have commenced, after the approval of the IEF charter, which provides the International Energy Forum a lead role, in enhancing this dialogue.

The challenge of energy security requires a continuous dialogue and partnership not only between governments but also between governments and industries.

The success of the International Energy Forum is because it's a process of informal, global dialogue on energy at the level of ministers as well as industry experts within the business forum. IEF has been the means to drive a productive dialogue and spread sense of confidence among leaders to proceed on long term perspective for production and consumption patterns, as well as investment requirements that are evolving in a changing geopolitical environment, since energy is crucial for economic and social development. The informal producer-consumer dialogue in the IEF that was commenced in Paris in 1991, promoted a common sense of interdependence, vulnerability and win-win opportunity for long-term co-operation.

The International Energy Forum provides a venue for ministers of energy exporting and importing countries, of developing and industrialised countries, to identify effective and sustainable ways of promoting energy security and stability in our interdependent world.

It is affirmed that that increased use of fossil fuels is consistent with the protection of the environment, through the development and dissemination of advanced cleaner fossil fuel technologies, and in particular the promising technology of carbon capture and storage.

The future challenges facing the industry require commitment to international co-ordination to promote a more positive atmosphere, to progress further in technology transfer, energy efficiency and transparency.

Through years of dialogue, the industry has a common understanding of the pressing challenges, and is ready to generate further concrete actions to foster interdependence between all industry participants.

IOCs as well as NOCs need to align respective interests in many respects, through cooperation, dialogue and partnership built on the clear synergies along the value chain, at all levels. This is the most promising avenue to enhance global energy security and reach tangible progress on future challenges.

The continuity of investments is rather essential in various aspects, among which is cleaner fossil fuels and development of alternative energy sources.

The IEF charter is the umbrella, where the producers, consumers, governments, the international oil companies as well as the national oil companies, the financial institutions will closely work together to support overall global welfare, the effectiveness, the growth and the general evolution of the industry that will maintain energy security in the future.

The approval of the IEF charter marked a unique opportunity to move from good intentions to generate concrete actions to foster interdependence between all the industry participants.

With the signing of the IEF Charter by more than 85 countries at the Extraordinary IEF Ministerial meeting in Riyadh in February 2011, a solid foundation for a productive global energy dialogue is well established, and in this regards, we are confident that the 13th IEF in Kuwait (12-14 March 2012), will be an extra milestone on the way to foster greater mutual understanding between producing and consuming countries on key energy policy issues.

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Christophe de Margerie, Chairman and Chief Executive Officer, Total

What A Difference A Year Makes

Christophe de Margerie, Chairman and Chief Executive Officer, Total

What a difference a year makes! Merely 12 months after the Cancun declaration, which called upon producers and consumers to stabilise markets expectations, landmark events unfolded and fundamentally changed our perception.They included, only to name a few, the growing role of the state in key marketbased economies, where the debt crisis had devastating effects on ... [ More ]

What A Difference A Year Makes

Christophe de Margerie, Chairman and Chief Executive Officer, Total

What a difference a year makes! Merely 12 months after the Cancun declaration, which called upon producers and consumers to stabilise markets expectations, landmark events unfolded and fundamentally changed our perception.

They included, only to name a few, the growing role of the state in key marketbased economies, where the debt crisis had devastating effects on the Euro-zone, the worst oil spill in US history which led to a fundamental rethink, strict adoption and sometimes readjustment of Health Safety Environment protocols across the oil industry and the catastrophic consequences of a natural disaster which highlighted amongst other things the inherent contradiction of clean and risk-free energy sources. Across the world, nuclear policies subsequently are being reviewed. The necessity of industries like ours to restore trust and confidence with the public has emerged as a key issue while consumers continue to centre their objective around secure, accessible and reliable energy sources.

On the political level, new and unprecedented forms of governance are gradually emerging in the Middle East and North Africa - the outcome of which is still unknown.

Against this backdrop of uncertainty, the Producer-Consumer Dialogue navigates steadily in an energy inter-dependent world as the call for changing business models and behaviour is getting louder. The issues of security of energy supply as well as security of demand are gaining centre-stage and the need to look further, deeper and differently for energy sources are becoming ever more a reality. Never before has the Dialogue played such a significant role where producers and consumers, whether traditional or new, strive to establish certainty.

The Extraordinary IEF Ministerial Meeting on 22 February, 2011 and the ensuing signing of the charter coinciding with the Dialogue's 20th anniversary was doubly charged with symbolism: it celebrated the Dialogue's path from its informal almost covert beginning in 1991 in Paris to its current institutionalised form and it can henceforth be assured of a frank political commitment in times of political mutation. It can provide consumers and producers alike with the continuity and stability they seek: in the face of doubt, internationally coordinated regulation can be called upon and energy market volatility can be mitigated. The role of industry has been fleshed out in its capacity to provide advice and to have a fixed platform where it can meet biennially.

But the Dialogue has also been most tangible in the cooperation and alliance between international oil companies and their national state-owned counterparts. Above and beyond the fact that most oil companies were at one point in their history state-held, the barriers are gradually dropping. Cooperation on large-scale industrial projects requires the alignment of business interests as well as the project's acceptability and the stakeholders' trust. As we face common challenges, IOCs and NOCs must ensure that our technology, facilities and products are acceptable to the local population and consumers. The transfer and deployment of technology must be performed in a secure, responsible and confidence-building manner. The equilibrium between risk, reward and transfer continues to be the basis of long term and successful partnerships.

The Producer-Consumer Dialogue continues to build relationships between producers and consumers, National Oil Companies and International Oil Companies as well as new-comers and traditional players. The Charter reflects this ambition. We must laud such initiatives if we are to continue to invest and empower the foundation of trusting partnerships for the satisfaction of our customers.

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Rex Tillerson, CEO, ExxonMobil

Enabling Integrated Solutions with Teamwork

Rex Tillerson, CEO, ExxonMobil

As we look to how we can meet our future energy challenges, it is clear that dialogue and understanding between all participants in the energy sector - producers, consumers and policymakers - will be critical to our success.The scale of the challenge is immense. Energy demand is expected to be about 35 percent higher by ... [ More ]

Enabling Integrated Solutions with Teamwork

Rex Tillerson, CEO, ExxonMobil

As we look to how we can meet our future energy challenges, it is clear that dialogue and understanding between all participants in the energy sector - producers, consumers and policymakers - will be critical to our success.

The scale of the challenge is immense. Energy demand is expected to be about 35 percent higher by 2030 than it was in 2005, driven by population and economic growth in the developing world. The sheer size and scope of the world's increasing energy needs requires a thoughtful, long-term approach to how participants in the energy sector can work together to meet these needs.

In addition to the fundamental need for more energy to enable economic and social progress, we must also address another critical aspect of the energy challenge: reducing the impact of energy use on the environment. Greater energy use worldwide is expected to result in about a 25 percent increase in global carbon dioxide emissions from 2005 to 2030.

It will take national energy companies, international energy companies, governments and citizens all working together to solve these dual energy challenges. There is no one source of energy, technology, course of action, or policy approach that will deliver the answer. It will take an integrated set of solutions, made possible by technological innovation, to meet our energy and environmental needs.

One of the actions we must take is to expand access to all economic energy sources. Oil, natural gas and coal will continue to meet the majority of our energy needs for the foreseeable future, and technology is continually expanding the horizons of what can be discovered and produced. For example, technology advancements in the Gulf of Mexico helped expand the estimated resource base from 9 billion barrels of oil in 1987 to 45 billion barrels in 2006. We can explore and develop those resources safely thanks to advanced seismic and drilling technologies. We must continue creating partnerships that will allow the industry to invest in large-scale projects to find and develop these resources.

In meeting the world's growing need for energy, we must mitigate emissions by pursuing fuels such as cleaner-burning natural gas, nuclear energy, and renewable sources when and where they are economically feasible. In addition, with further research and development, technologies such as carbon capture and storage have the potential to make a significant contribution to mitigating emissions.

Beyond the need to expand energy supplies, it is essential that we use energy in the most efficient manner possible. Efficiency technologies have the power to extend energy supplies and save emissions by reducing the amount of energy we use in our homes, cars, businesses and manufacturing. For example, advanced technologies exist for engines, transmissions, vehicle bodies and tires that could improve the efficiency of today's conventional vehicles by about 35 percent - saving significant amounts of fuel and emissions in the process. Further efficiency gains are possible through the development of hydrogen technologies for transportation.

These integrated solutions - expanding supplies, mitigating emissions and promoting efficiency with technology - are already proving effective. But deploying them on a global basis to meet long-term goals will require investment, teamwork and international cooperation on a sustained scale.

National and international energy companies must work together to apply their technological and business strengths to bring more resources to worldwide markets. The world's oil and gas resources are found in increasingly challenging locations, and it will take the expertise of a wide range of industry participants to recover these much-needed supplies.

At the same time, businesses and governments must work together to build energy policies that maximize the use of markets, encourage free trade, protect contracts and uphold the rule of law. The International Energy Agency estimates that the industry will need to invest more than $25 trillion in the world's energy supply infrastructure by the year 2030 to meet growing demand. Energy companies must have sound and stable tax, legal and regulatory policies that enable this long-term planning and investment to take place.

The International Energy Forum plays a valuable role in bringing together those who have a keen interest in meeting the world's energy challenges. Moving forward, the dialogue must not only address the range of solutions at our disposal, but also the cooperation necessary to put those solutions to work. By working together, we can meet our energy and environmental challenges and create greater opportunity for all.

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Peter Voser, Chief executive officer, Royal Dutch Shell

A Vision for the Consumer-Producer Dialogue

Peter Voser, Chief executive officer, Royal Dutch Shell

Throughout the economic crisis, governments have acted with decisiveness and imagination. In shoring up the financial system, policy-makers have acted across borders and against the clock. For the most part, shared interests have trumped more narrow national concerns.The energy challenge, no less global in scope, requires an equally urgent commitment to international co-ordination. And that ... [ More ]

A Vision for the Consumer-Producer Dialogue

Peter Voser, Chief executive officer, Royal Dutch Shell

Throughout the economic crisis, governments have acted with decisiveness and imagination. In shoring up the financial system, policy-makers have acted across borders and against the clock. For the most part, shared interests have trumped more narrow national concerns.

The energy challenge, no less global in scope, requires an equally urgent commitment to international co-ordination. And that must include an open and healthy dialogue between consumer and producer countries. The global energy challenge is two-fold. First is the need to find enough affordable energy to promote economic growth and reduce poverty around the world. And second is the requirement to stabilize and reduce the emission of greenhouse gases that contribute to global warming.

All countries will need more energy at a sharply reduced cost to the environment.

With every passing year, the task becomes more pressing. By 2050, the world will consume twice the energy it does today, as populations and living standards continue to grow. Yet easily accessible supplies of oil and gas are dwindling. The world needs to develop additional energy sources, including unconventional oil and gas, alternative energy and nuclear power - all of which will require much time and money to deploy. And even then supply will still struggle to meet demand.

The recession has only made the challenge tougher. Weaker profits and tightened credit conditions have slowed investment in the energy industry. And volatility has intensified: over the past year or so, the price of oil has fallen from a high of $147 per barrel to below $40, before recovering to between $60 and $70. Volatility feeds uncertainty over the future price of energy, also discouraging investment.

International co-operation will be critical to building a sustainable energy future. Neither consumers nor producers can meet the energy challenge in isolation. Working together, they must produce tangible results. Dialogue must not be an end in itself.

Paramount is the need for more timely information on energy supply and demand. A reliance on out-of-date market information drove last year's spike in prices. We now know that demand had already begun to decline in the fourth quarter of 2007. Yet in early 2008 analysts still expected global oil demand to continue rising, sending the oil price to its record high the following July. Only concrete progress on the Joint Oil Data Initiative will produce a more accurate picture of market conditions.

Producer and consumer countries can also help to smooth the path of a viable climate change policy framework. In particular, the world needs a hard price for carbon dioxide to stimulate investment in the low-carbon economy. And that will require international acceptance for a global cap and trade scheme.

The world also needs cleaner fossil fuels that build a bridge to a distant future when renewable energy can supply a significant portion of global energy. Together, producers and consumers must support rapid advances in carbon capture and storage technology. And strive to reduce the CO2 intensity of liquid fuels on a well-to-wheel basis.

In all these areas, dialogue must produce material results. That in turn pushes the International Energy Forum to centre-stage in the global energy challenge. The Forum is the only organisation open to both producers and consumers, and its membership includes countries beyond OPEC and the International Energy Agency. It is in the midst of a major programme of work in support of a productive dialogue.

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Khalid A. Al-Falih, President & CEO, Saudi Aramco

Investing Today for Stability Tomorrow: The Need for Oil Industry Reliability

Khalid A. Al-Falih, President & CEO, Saudi Aramco

Today, the petroleum industry finds itself buffeted by the aftershocks of the global financial crisis. Over the last year, both energy demand and crude oil prices have dropped sharply, as markets around the wor ld absorb the impact of the worst economic downturn in generations.And yet in the years and decades to come, global demand ... [ More ]

Investing Today for Stability Tomorrow: The Need for Oil Industry Reliability

Khalid A. Al-Falih, President & CEO, Saudi Aramco

Today, the petroleum industry finds itself buffeted by the aftershocks of the global financial crisis. Over the last year, both energy demand and crude oil prices have dropped sharply, as markets around the wor ld absorb the impact of the worst economic downturn in generations.

And yet in the years and decades to come, global demand for energy - including petroleum - will increase markedly as a result of steady population growth and rising standards of living in the developing world, even as consumption in the OECD nations flattens. If we couple that fact with the essential role that petroleum plays in modern life, then the importance of the oil industry's ability to serve as a reliable, responsible and dependable supplier of energy becomes clearer.

Therefore, decisions made today on whether, when, where and how to invest all along the value chain will be critical tomorrow - not just for petroleum companies and institutions, but for economies and societies the world over. Of course, timely investments depend in large part on an enabling environment characterized by a level playing field among energy sources, decreased price volatility, and reduced uncertainty surrounding energy policies - which is why the wider energy landscape is so important.

At Saudi Aramco, we've consistently maintained a long-term view of our business, and thus have stayed the course in making suitable investments in the upstream, midstream, refining and petrochemical segments. In terms of exploration and production, we view timely investments as critical to achieving three key objectives: offsetting the natural decline of our producing fields, growing production capacity to meet incremental calls on our production, and maintaining the spare capacity which helps to underpin global market stability and dampen volatility. This year, in fact, we reached our stated goal of 12 million barrels per day of sustainable crude oil production capacity by commissioning Khurais, the largest crude increment in the history of the industry - despite the short-term downturn in demand.

In the midstream segment, we continue to expand the gas-processing facilities, which help to meet domestic energy demand and power Saudi Arabia's economic development and diversification. Downstream, we're developing three world-scale refining projects, each with 400,000 barrels a day of capacity: export-oriented joint-venture refineries in Jubail and Yanbu', and a major expansion of our flagship Ras Tanura refinery. We're also partnering with leading international chemicals concerns to integrate petrochemicals with domestic refining assets, both at PetroRabigh on the Kingdom's Red Sea coast and with the Ras Tanura Integrated Project, on the country's eastern shores.

However, investments don't always centre on infrastructure: equally important are the resources the company devotes to the development and deployment of cutting-edge technology, and to the professional development of our employees. As the rate of technological change and the pace of business both continue to accelerate, we recognize that highly skilled and highly motivated people will become an even more important factor in Saudi Aramco's continued success - and we invest accordingly. At the same time, we are also committed to reducing the environmental footprint of both our operations and our products, and in recent years have allocated more than a billion dollars to an environmental master plan designed to do just that.

Clearly, if our industry is to fulfill its future role as a reliable provider of energy for economic and social development, we must make wise and timely investments in infrastructure, technology, and human resource development, while also working to minimize the environmental impact of petroleum production and use. At the same time, governments around the world need to promote sensible energy policies which create an environment conducive to those essential investments. Similarly, institutions such as the International Energy Forum can enhance the exchange of ideas and information among all concerned parties, helping them to make better-informed choices, while meeting its mission of promoting the producer-consumer dialogue.

Failure among any of these entities to act wisely now may curtail necessary investments, which could in turn jeopardize the availability of adequate and affordable future petroleum supplies. The stakes are indeed high, as the ultimate cost of lagging investments and stretched production, refining and transportation capacities will be borne not just by the industry, but also by consumers around the world and the economies and societies in which they live - a fact that energy decision-makers need to consider as they craft their investment plans, resource development strategies, and policy frameworks.

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Saad Ali Al-Shuwaib, CEO, KPC

IEF Newsletter, Issue 13, May 2009

Saad Ali Al-Shuwaib, CEO, KPC

National Oil Companies are not only becoming more international in nature, but also more integrated, investing in refining and petrochemicals both at home and abroad. The role of national companies in the world oil industry has become more emphasized due to the ownership of huge resource base and the production of hydrocarbon substances, which help ... [ More ]

IEF Newsletter, Issue 13, May 2009

Saad Ali Al-Shuwaib, CEO, KPC

National Oil Companies are not only becoming more international in nature, but also more integrated, investing in refining and petrochemicals both at home and abroad. The role of national companies in the world oil industry has become more emphasized due to the ownership of huge resource base and the production of hydrocarbon substances, which help to expand the vital role of national oil companies in securing adequate supplies to the world to maintain energy demand, sustainability, prosperity and growth.

With the fall in demand and the collapse in oil and gas prices, the oil industry is faced with many challenges. These include: the security of supply and investment required; security of demand; oil-price volatility and transparency needed; cost inflation; the talent shortage; and climate change. The continuous series of discussions will eventually lead to enhancing co-ordination and co-operation of all players and ensuring adequate energy investments and technology co-operation.

The current global financial crisis has created opportunities to enhance stronger co-operation and co-ordination based on mutual benefit among national and international oil companies. The current situation has created an environment to unite efforts to overcome such hard times. It has pushed forward the challenge of financing of necessary infrastructure and technology projects, given the fact that the industry would be seriously affected in case of cancellation or even delay.

A consensus view of projections indicates continuous global rise in demand for fossil fuels and the dominance of hydrocarbons as the energy source over the coming decades. However, growing demand uncertainty increases producers' perceptions of investment risk.

As the balance of supply and demand shifts, the benefits of partnership between NOCs, IOCs, and service companies become more compelling - to rethink existing models and develop new models of partnership.

NOCs of energy import-dependent countries are adopting more aggressive foreign expansion plans, to encourage the build-up of grass-roots refineries and upstream exploration. Improved accountability and transparency, regulatory compliance and corporate governance can help to access new markets and ensure sustained industry growth.

The oil industry would continue to heavily invest in the areas that would promote cleaner hydrocarbon energy to maintain its position in a carbon-constrained world. Spending on R&D and in the development of more efficient and clean technologies, specifically in new energy technologies such as carbon capture and storage is one area where NOC and IOC co-operation can easily be paved.

A skillful workforce is an essential requirement for oil industry, since projects are becoming more complex and management is becoming more difficult. Human resources, learning and development are therefore becoming increasingly important. This can easily be met by the right joint ventures, partnerships and technical service agreements.

Shared responsibility between producers and consumers could help in addressing future challenges and reducing anxiety in the market.

Closer co-operation between governments, their agencies and international oil and gas companies is the key for sustained energy security. While producer governments have to ensure that the right conditions exist for long-term investments, business must adapt to the new realities and seek new solutions to fulfill their part in achieving energy security.

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Andrew Gould, Chairman & CEO, Schlumberger Limited

IEF Newsletter, Issue 13, May 2009

Andrew Gould, Chairman & CEO, Schlumberger Limited

Schlumberger is the world's leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. Founded in 1926, the company employed more than 82,000 people by the end of March 2008, who represented over 140 nationalities working in approximately 80 countries. Knowledge, technical innovation and teamwork ... [ More ]

IEF Newsletter, Issue 13, May 2009

Andrew Gould, Chairman & CEO, Schlumberger Limited

Schlumberger is the world's leading supplier of technology, integrated project management and information solutions to customers working in the oil and gas industry worldwide. Founded in 1926, the company employed more than 82,000 people by the end of March 2008, who represented over 140 nationalities working in approximately 80 countries. Knowledge, technical innovation and teamwork are at the centre of Schlumberger's operations, with the objective of delivering solutions that improve oil and gas companies' performance. With 23 research and engineering facilities worldwide, and a research and engineering (R&E) investment of $819m, a strong emphasis is put on developing innovative technology that adds value to exploration and production (E&P) operations.

The oil and gas industry is currently going through another cycle, with the period of strong activity from 2005 to 2008 being followed by a significant contraction in 2009. Decreased investment levels can impact Schlumberger in three main areas:

  • A major decline in activity related to gas drilling and completion in the US. The increased production of unconventional gas - which has been a technological success story in the development of resources that were deemed marginal only a decade ago - combined with decreased natural gas demand in the US, has led a price erosion for gas that is impacting the development of several shale plays.
  • A reduction in exploration activity throughout the world. This is affecting both seismic and exploratory drilling, especially in frontier areas, for which exploration and development costs would be higher than current oil prices.
  • A drop in rig activity in Russia, amplified by currency factors. Given the high natural decline rates, recovery through increased investment would need to be steep once oil demand returns.
  • In other areas, while most IOCs and several NOCs have announced that so far they are planning to maintain their activity, they also are expecting a significant reduction in operating costs to compensate for the high inflation experienced during the 2004-2008 period. Negotiations are going on with both operators and suppliers to optimize costs in the current environment, with these costs including the impact of decreased commodity prices that had been one of the main inflation drivers. Long lead items required in E&P operations, however, will require more time to incorporate price changes.

Within this environment, Schlumberger is determined to protect its investment in three ways:

  • A commitment to continued technology development. The time required between a new product concept phase and its deployment in oilfield operations is generally far longer than the period of one industry cycle. Stopping and restarting R&E projects can be very costly; therefore, Schlumberger will not reduce its R&E spending - maintaining it in 2009 at a level similar to 2008. At the same time, the company is progressing with its strategy of opening focused technology centres close to major E&P development countries. Recent examples include the Dhahran research centre dedicated to carbonates in Saudi Arabia, a gas condensates technology centre in Russia, a heavy-oil centre in Venezuela, and a new regional technology centre in Brazil that will be working on pre-salt oil deposits. The overall R&E portfolio is evolving in line with the shift of production to reservoirs in extreme environments and unconventional hydrocarbons.
  • The development of expertise among engineers and field specialists. Schlumberger has recruited and trained over 20,000 technical staff since 2004, and it is critical that the industry does not lose this expertise. In line with the current market cycle, the company has recently announced plans to reduce its workforce, which will mainly impact the three markets described earlier - but it is critical that the company does not lose any acquired expertise. In addition, the industry is also faced with a 'crew change', and it is essential that retirement is managed in order to have a sufficiently large qualified workforce when higher levels of activity return.
  • Service delivery performance. The Schlumberger initiative on 'Excellence in Execution' combines a focus on quality, through the continuous upgrading of the systems and procedures used in E&P operations, with a major overhaul of maintenance systems and an emphasis on product and service reliability through manufacturing best practices.

In summary, downturns in the E&P sector are becoming shorter and shorter. Given current post-peak oilfield decline rates, it remains critical to replace production and add new capacity in order to avoid future tensions between oil demand and supply. 

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Dave O’Reilly, Chairman and CEO, Chevron Corp

The case for continued investment

Dave O’Reilly, Chairman and CEO, Chevron Corp

Today we confront one of the toughest challenges in our industry's history: planning for the world's long-term energy needs in the midst of the most serious global economic recession in decades. In the past, major economic downturns led almost invariably to a period of underinvestment in both energy-industry assets and people. The result? Another period ... [ More ]

The case for continued investment

Dave O’Reilly, Chairman and CEO, Chevron Corp

Today we confront one of the toughest challenges in our industry's history: planning for the world's long-term energy needs in the midst of the most serious global economic recession in decades. In the past, major economic downturns led almost invariably to a period of underinvestment in both energy-industry assets and people. The result? Another period of tight supply. Let me make the case for continued investment.

Reliable, affordable and abundant energy helped drive the prosperous periods in the past, and it's essential for a healthy global economy and social climate in the future. Our industry must continue to invest in assets and people, especially in crude oil and natural gas. Despite the near-term problems, long-term growth prospects are robust, with total energy demand projected to grow by 40% by 2030. Energy demand in OECD countries is expected to increase by a modest 12% by 2030, whereas demand in non-OECD countries is expected to increase by 76%.

Expanding and diversifying future oil and gas supplies will require significant investments. To ensure sufficient energy supplies, the International Energy Agency has projected investments of $400bn-$500bn a year between 2007 and 2030. Although in recent months oil demand has slumped and is expected to decline further in 2009, there are risks to adequate reliable, affordable supply in the long term. The 2007 National Petroleum Council study projected an additional 30m barrels a day (b/d) to 45m b/d of new capacity by 2015, and 70m-100m b/d by 2030 because of a natural production declines and expected demand growth.

Even if demand were to remain flat to 2015, we will need about 30m b/d of additional capacity to make up for declines. In 2008, half of the top-15 oil producing countries experienced production declines, and many doubt that sufficient new capacity will be in place to meet the demand required by 2015.

Meanwhile, the near-term natural gas markets are expected to face periods of oversupply due to weakened demand and sufficient liquefied natural gas (LNG) supply to 2012. But longer-term natural gas demand is expected to increase by more than 50% by 2030, with growth driven by the power sector. And more than three-quarters of that demand growth will come from developing countries.

LNG is projected to account for 80% of the increase in inter-regional gas trade by 2030, requiring LNG infrastructure capacity expansion. At times, there could be risk that gas demand may test the upper bounds of capacity due to temporary shortfalls in infrastructure - upstream facilities, LNG supply chain, and long-distance pipelines - and upstream development.

The downstream sector is better situated, with little capacity risk for the next five years. Currently announced refining projects are expected to add about 12.5m b/d of crude distillation capacity by 2015, although some of these projects may be deferred. Growth in oil demand will continue to be dominated by transportation fuels. Over the long-term, average yearly demand growth for road diesel and gasoline are projected at roughly 0.7m b/d. Capacity should be adequate in the medium term.

We are in a long-term business, so investments must focus on the long term. The best enabler for adequate investment is a stable investment environment. The long-term capacity challenge is not about resources. We know the resources are there. Rather, investment today depends on:

  • Financial system stability;
  • Access to resources;
  • Commitment to invest in assets and skilled people;
  • Development and application of innovative technologies;
  • Confidence that the fiscal climate will be stable for the duration of decades-long projects.

Our success as reliable suppliers of energy for economic growth and human progress will be determined on how well we stay focused on the long term - and on our shared commitment to continue investing in people and assets through the commodity cycle.

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Mr. Yongfa Xu, President of CNPC Research Institute

Natural Gas: A Growing Energy in China

Mr. Yongfa Xu, President of CNPC Research Institute

In recent years, natural gas in China has witnessed rapid development and has become a spotlight in Chinese petroleum industry. Gas is increasingly revealing its great potential.During the years 2000-2007, the annual average newly-added proven gas reserves are over 500 BCM, and the annual growth rate of gas production is averaged at 14.8%. The accumulative ... [ More ]

Natural Gas: A Growing Energy in China

Mr. Yongfa Xu, President of CNPC Research Institute

In recent years, natural gas in China has witnessed rapid development and has become a spotlight in Chinese petroleum industry. Gas is increasingly revealing its great potential.

During the years 2000-2007, the annual average newly-added proven gas reserves are over 500 BCM, and the annual growth rate of gas production is averaged at 14.8%. The accumulative newly-added gas reserve and production in the past few years surpassed the total in the previous 50 years. The length of the newly-built gas pipelines is more than 30,000 km. After the establishment of several trunk lines, such as 'West-East Gas Pipeline' which transmits gas from Xinjiang to Shanghai, a gas pipeline network is completed connecting major gas producing areas, and a trunkline framework is constructed connecting major gas producing areas and major gas consuming areas.

Gas consumption market goes up rapidly. At present, gas is consumed in 28 provinces (and municipalities directly under jurisdiction of central government), covering over 40% of medium cities. In 2007, gas took 3.4% in total energy consumption, one percentage point up than that in 2000.

According to the recent appraisal for China, the forecast conventional gas resources are 35 TCM with the recoverable of 22 TCM. The proven degree is only 15%, which bears great potential for gas development.

Particularly, along with the acceleration of industrialization and urbanization, and the increasing requirements of environmental protection and energy mix optimization, gas demand is increasingly booming, driven by social and economic development. Chinese government has attached great importance to gas industry development and established a series of stimulative policies. The Eleventh Five-Year Plan of Energy Development clearly demonstrates that the gas proportion shall be up to 5% in total primary energy production and 5.3% in total energy consumption by 2010, and another 2 percentage points shall be added by 2015.

It should also be noted that a series of new achievements have been made in international oil & gas cooperation and gas import. The first onshore transnational gas pipeline, i.e., Central Asia-China Gas Pipeline, is now under construction. It will play an active role in building up a diversified oil & gas supply system in China.

Thus, Chinese natural gas industry is displaying a brand-new pattern of quickening development, providing a strong drive to the sustainable and steady development of Chinese petroleum industry.

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Mr. Christophe de Margerie, CEO of Total

The Oil and Gas Industry: Stable or Volatile?

Mr. Christophe de Margerie, CEO of Total

The energy industry is going through a period of uncertainty that is characterized by extreme price volatility and by the gloomy short-term prospect of the global economy. But the current situation doesn't alter fundamentally the basic drivers of our industry: oil and gas demand will continue to rise; supply is structurally tight, energy prices have ... [ More ]

The Oil and Gas Industry: Stable or Volatile?

Mr. Christophe de Margerie, CEO of Total

The energy industry is going through a period of uncertainty that is characterized by extreme price volatility and by the gloomy short-term prospect of the global economy. But the current situation doesn't alter fundamentally the basic drivers of our industry: oil and gas demand will continue to rise; supply is structurally tight, energy prices have no reason to remain low. We are facing two major challenges: energy transition and climate change.

To maintain an adequate balance between supply and demand, it is both the oil producing countries and the IOCs' responsibility to increase production. IOCs can offer their investment capacity and their ability to manage large projects supported by cutting edge technologies. Frontier domains such as ultra-deep offshore, extra-heavy oils, complex gas reservoirs or LNG will account for a growing share of IOCs' production. However meeting energy demand primarily requires better access to reserves. The key lies in the hands of host countries, but they have to be convinced that hydrocarbon projects really bring a positive contribution to local development and meet with their local needs and expectations.

Investing more in new hydrocarbon production capacities will not be sufficient. We also need to save energy and to develop other energy sources. Let's not see hydrocarbons and renewables as mutually exclusive fuels. All energy sources are required to meet demand in a sustainable manner. Let's not regard oil and gas production as irreconcilable with tackling climate change. Fossil fuels will still remain a major energy source for several decades but at the same time, the climate issue is a critical global challenge and we have to reconcile these targets by developing more energy efficient products and economically viable capture and storage solutions. Consumer and producing countries should have a broader and more open dialogue with each other about these critical issues.

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Mr. Helge Lund, President And CEO, StatoilHydro ASA

We Are All Now Faced with A New Game

Mr. Helge Lund, President And CEO, StatoilHydro ASA

Our industry deals with continuously increasing complexity. Technically, we are attacking deeper waters, harsher environments, heavier oils and tougher projects. Commercially, the competitive landscape is changing and the race for resources is more intense than ever. Politically, terms and conditions are under pressure all over the world. The resources we exploit influence the global power ... [ More ]

We Are All Now Faced with A New Game

Mr. Helge Lund, President And CEO, StatoilHydro ASA

Our industry deals with continuously increasing complexity. Technically, we are attacking deeper waters, harsher environments, heavier oils and tougher projects. Commercially, the competitive landscape is changing and the race for resources is more intense than ever. Politically, terms and conditions are under pressure all over the world. The resources we exploit influence the global power balance, generate cash flows that can make or break governments, and have a direct impact on all aspects of everyday life. Hydrocarbons go to the core of the challenge between energy security and demand on the one hand, and climate change on the other. It would be breaking news if resource access was easy or not a hot topic.

Our industry has an impressive track record in terms of meeting growing energy demand. I have no doubt that this will be the case also going forward. However, we have never had to deal with more complexity, and we have never been more dependent on working together to succeed. That is why I consider technology and collaboration to be our key instruments in the hunt for new reserves.

Beyond fiscal incentives, technology is key to commercialise smaller discoveries and to get maximum recovery and value out of existing reserves. It unlocks reserves in frontier areas, and it is often the pivot in competitions for new business or partnerships with national and international oil companies.

I think technology-driven, integrated oil and gas companies continue to bring important things to the table. First, we bring full valuechain skills. There is significant value to be added further down the chain. Second, technology is not primarily about hardware, but about the ability to drive, develop and apply technology in real projects. Going forward, integration skills will be in more demand than ever.

However, I think it is reasonable to ask if our industry now finds itself at a crossroads. Abundant capital is out there chasing limitedtraditional E&P opportunities. I think we are all now faced with a new game: How to accommodate interests and expectations in a world that has prospered even between $50-100/barrel:

· Governments have clear expectations in terms of resource rent and control

· National oil companies want to build their own industrial capacity to strengthen them at home and/or abroad

· Host societies have developmental aspirations that they expect oil and gas to underpin

· International oil companies answer to shareholders and depend on acceptable returns and governance

· Service companies want to get the maximum out of their niche expertise and capabilities

I don't find any of these expectations unreasonable. Therefore I believe we now are in a phase of realignment and rebalancing of business models. The business models of the future will have to align interests in ways that create genuine win-win partnerships. They will be more collaborative and draw on best practice from companies and sectors. The companies that will be the best at striking the balance may also strike the best deals.

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Mr. Antonio Brufau Niubo, President And CEO, Repsol YPF

The IOCs And The NOCs In The Modern Energy Context

Mr. Antonio Brufau Niubo, President And CEO, Repsol YPF

The competitive advantage of the international oil companies (IOCs) has been traditionally based on their great experience in the sector, on great investor muscle and on advanced technological development. However, forty years ago the IOCs had access to over 85% of the global reserves and they negotiated almost lifelong concessions with the governments of producer ... [ More ]

The IOCs And The NOCs In The Modern Energy Context

Mr. Antonio Brufau Niubo, President And CEO, Repsol YPF

The competitive advantage of the international oil companies (IOCs) has been traditionally based on their great experience in the sector, on great investor muscle and on advanced technological development. However, forty years ago the IOCs had access to over 85% of the global reserves and they negotiated almost lifelong concessions with the governments of producer countries.

Nowadays, the IOCs have access to only 14% of the proven global reserves and they are finding increasing difficulties in acquiring new oil and natural gas reserves. This new reality is translated into low reserve replacement ratios (RRRs).

It is clear that the IOCs are seeing that their entry into projects with great potential is limited. It is also true that the national oil companies (NOCs) have developed sufficient financing capacity in order to expand their business in the domestic and international markets, but what is important is not to overlook the fact that both the IOCs and the NOCs are facing a common challenge of great dimensions.

This challenge is the growing demand from emerging countries, a new environment that affects two-thirds of the world's population.

The size of the population concerned means that the availability of resources through exploration and the development of reserves is a crucial subject for the sector and for the world.

The world's oil needs can only be covered by investment. The magnitude of the challenge needs all of the capital sources, of both the NOCs and the IOCs.

It is true that it has historically been the IOCs that have carried out over 70% of the global investments in both upstream and downstream, but both the dynamic of restricting access of the IOCs to the resources and the greater financial muscle of the NOCs determine the need to re-double the investments by everyone.

We must all be aware that the investment capacity is being limited by the new environment of price increases of metals and due to the lack of capacity in industry in both machinery and skilled manpower. It is worth setting out one example. The wholesale price indices related to the oil industry underwent an increase of higher than 160% between 2004 and 2007. This produces a situation in which the nominal increase in investments only makes it possible to cover the increase in inflation, while the real investments continues being at a rate below what is necessary to meet the challenge of growing global demand.

It is possible that the current environment of growing prices has led to a lack of confidence and difference in opinions between some parties and others but the challenge is common and unique for everyone. Mutual trust is of the utmost importance and the IEFS can contribute to this goal. Also, it would be very appropriate to carry out joint IOCs-NOCs projects that generate production increases in the short term at the lowest possible cost with the aim of not increasing the bottlenecks of the system even further. This joint effort entails giving the best of each one: the NOCs having access to the reserves and their growing financial capacity and the capacity to run large projects and to adapt to the technological and regulatory change of the IOCs.

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Dr. David J. O’Reilly , Chairman And CEO, Chevron Corporation

Partnerships – A Framework For Success

Dr. David J. O’Reilly , Chairman And CEO, Chevron Corporation

Dr. David J. O'Reilly was elected Chairman of the Board and Chief Executive Officer of Chevron Corporation in January 2000. A Chemical Engineer, he started his career with Chevron Research Co. in 1968. Dr. O'Reilly is a director and a member of the Executive Committee and Policy Committee of the American Petroleum Institute and a ... [ More ]

Partnerships – A Framework For Success

Dr. David J. O’Reilly , Chairman And CEO, Chevron Corporation

Dr. David J. O'Reilly was elected Chairman of the Board and Chief Executive Officer of Chevron Corporation in January 2000. A Chemical Engineer, he started his career with Chevron Research Co. in 1968. Dr. O'Reilly is a director and a member of the Executive Committee and Policy Committee of the American Petroleum Institute and a member of various national and international councils, including the World Economic Forum, National Petroleum Council and the Trilateral Commission.

Chevron, a strong supporter of the IEF and the IEBF, has participated actively in the Joint Committee of representatives of industry that has advised 2nd IEBF Host and co-hosts on 2nd IEBF Host and co-hosts on themes and agenda for the Doha meeting of Ministers and CEOs and has given generous financial support to the activity of the IEF Secretariat.

Dr. O'Reilly outlines in this special article for the Ministerial elements for a co-operative framework for global energy security, which includes use of the IEF to continue a substantive producer-consumer dialogue.

Energy security is one of the most critical issues facing the world today. With the world's population expected to grow by 1.5 billion people over the next 20 years and worldwide demand for energy to grow by more than 40 percent in the same period, delivering reliable, affordable supplies of energy is one of the biggest challenges we face as an industry and as a global community.

Meeting this growing demand for energy, which is unprecedented in the world's history, will require a robust response from all parties in the energy value chain - NOCs, governments, IOCs, and consumers. It must be a multilateral response. There are few industries as global, and as interconnected, as energy. Success in addressing energy challenges will come not from isolation, energy 'independence,' or unilateral, nationalistic energy policies. In an interconnected marketplace, sustained success can be significantly enhanced through cooperative partnerships.

We are seeing the fruits of cooperation and partnership around the world, particularly in the Middle East. They include the Kingdom of Saudi Arabia's leadership role in maintaining robust production to help stabilize global markets; the massive investments in GTL infrastructure in Qatar and other countries to create a new generation of ultraclean energy; and new oil and gas exploration openings from the Gulf to North Africa.

To create true global energy security we need to collaborate on a framework in which cooperation and partnership can continue to flourish. The fundamental elements of this framework should include:

  • Open markets. We need to enhance the free flow of capital and investment, and the sharing of transparent, detailed data on supply and demand. The Joint Oil Data Initiative is a good step in the right direction.
  • Sound policies. Governments should provide predictable, secure fiscal and regulatory regimes, balance supply security secure fiscal and regulatory regimes, balance supply security with demand security, and develop policies that recognize the with demand security, and develop policies that recognize the interdependency of global energy markets.
  • Robust technology. We should continue investing in technology to conserve and optimize the resources we have technology to conserve and optimize the resources we have now while developing a full range of future energy sources now while developing a full range of future energy sources and mitigating the environmental impact of our industry's and mitigating the environmental impact of our industry's operations.
  • Energy efficiency. This is the cheapest form of new energy we have at our disposal. We should focus on ways to capture we have at our disposal. We should focus on ways to capture new energy savings in transportation, power generation and new energy savings in transportation, power generation and facilities management.
  • Responsible development. One of our biggest responsibilities as an industry, and as a global community, is to use energy as a as an industry, and as a global community, is to use energy as a platform for broader economic growth and social well-being- platform for broader economic growth and social well-being and to ensure that the economic benefits of energy production and to ensure that the economic benefits of energy production flow to all stakeholders.

Putting this framework into place will require leadership- Putting this framework into place will require leadership-responsible, accountable leadership from key players throughout the energy chain. It must be leadership rooted throughout the energy chain. It must be leadership rooted in action, not words. And it must be leadership rooted in partnership, not nationalism or isolation. For too many, the benefits of globalization are still just a promise. True energy security - the successful delivery of affordable, reliable energy is one of the key levers of a fully functioning global economy. Let's use the platform of the IEF to continue a substantive producer-consumer dialogue and accept the leadership challenge of creating the new level of energy security required for a growing, multilateral world.

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Helge Lund, President And CEO Of Statoil ASA

Rise Early, Work Hard, Strike Oil

Helge Lund, President And CEO Of Statoil ASA

Mr. Helge Lund took up the post of President and CEO of Statoil in 2004. He had previously been Chief Executive of Aker Kvaerner. Before assuming executive positions in industry, Mr. Lund had been a political adviser to the Conservative Party in the Norwegian Parliament and a consultant with McKinsey & CO. A business economist, ... [ More ]

Rise Early, Work Hard, Strike Oil

Helge Lund, President And CEO Of Statoil ASA

Mr. Helge Lund took up the post of President and CEO of Statoil in 2004. He had previously been Chief Executive of Aker Kvaerner. Before assuming executive positions in industry, Mr. Lund had been a political adviser to the Conservative Party in the Norwegian Parliament and a consultant with McKinsey & CO. A business economist, Mr. Lund is a graduate of the Norwegian School of Economics and Administration and has his MBA from Insead, France. Statoil is a member of the Joint Committee of companies that is advising host country Qatar on the development of the agenda of the 2nd International Energy Business Forum that will take place in conjunction with the 10th IEF Ministerial.

In a period of comparatively high oil prices, the notion of «peak oil» appears to have gained prominence: If you do a Google search of the term «peak oil», your browser is likely to return nearly 2 million hits. The pages popping up warn that we should start preparing for the post fossil fuel era. It is a paradox that a web search for «oil» and «gas» «discoveries» returns a mere 300,000 hits…

The fear that the world will soon run out of oil has been a concern to most global decision-makers since the 1970s. This concern reminds me of the ancient fears that the sky would suddenly fall down.

Comfort can be sought in the history of the oil and gas industry: Since 1980, global consumption of oil has increased by more than 30 per cent. In the same period the world's oil reserves have grown by almost 80 per cent. This development is the result of human creativity, ground-breaking engineering and massive technological progress.

An example from my own company illustrates my point: Cutting edge technology and a strong competence base on reservoir management and IOR have enabled us to add substantial reserves and value from our legacy «elephants» offshore Norway: On the Statfjord field we have improved recovery by 900 million barrels since 1982. When we started production from the Gullfaks field in 1986, we expected to recover 1.3 billion barrels. In May this year we passed 2 billion barrels and we have now set our sights on 2.5 billion. We currently aim to reach a recovery factor of 70 per cent for our platform fields on the Norwegian Continental Shelf.

IOR is not only responsible resource management and good business. It will also be a critical activity to grow global production to meet future demand.

The growing energy demand presents great opportunities to oil and gas companies around the world. However, also in the future we will face challenges that we have to solve:

  • We need to replace production and reserves in an industrial environment where competition is harder than ever and where net debt is lower than in 25 years.
  • We need to meet growing energy demand while at the same time contribute to reducing greenhouse gas emissions, which are set to double by 2030.
  • We face execution of increasingly complex projects in a situation where the race for talent is getting fiercer almost by the day.

As we attack ever bigger challenges, sufficient supply of competence may emerge as a major bottleneck to the whole industry in the future.

In the years to come, the oil and gas industry must replace a significant part of current global production capacity. However, experience from the past tells me that that the industry will continue to deliver the energy the world needs.

A legendary oilman once said that his formula for success was to «rise early, work hard, strike oil». Today, we have to work harder than ever to turn opportunities into sustainable long term business.

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Jeroen van der Veer, Chief Executive Of Royal Dutch Shell

Competition And Cooperation

Jeroen van der Veer, Chief Executive Of Royal Dutch Shell

Mr. Jeroen van der Veer is Chief Executive of Royal Dutch Shell plc. He was born in Utrecht in the Netherlands and has degrees in mechanical engineering and economics. He joined Shell in 1971 and has worked in the Netherlands, Curaçao, United Kingdom and the United States. He was a Managing Director of Royal Dutch ... [ More ]

Competition And Cooperation

Jeroen van der Veer, Chief Executive Of Royal Dutch Shell

Mr. Jeroen van der Veer is Chief Executive of Royal Dutch Shell plc. He was born in Utrecht in the Netherlands and has degrees in mechanical engineering and economics. He joined Shell in 1971 and has worked in the Netherlands, Curaçao, United Kingdom and the United States. He was a Managing Director of Royal Dutch Petroleum from 1997 until the unification under Royal Dutch Shell in July 2005. He is a non-executive director of Unilever.

Shell is a member of the Joint Committee of companies that is advising host country Qatar on the development of the agenda of the 2nd International Energy Business Forum that will take place in conjunction with the 10th IEF Ministerial.

Mr. van der Veer attended the inauguration of the IEF Secretariat's headquarters and took part in the meeting of IEF Minsters in Riyadh.

Meeting the world's expanding energy needs presents great challenges for the companies who must deliver these supplies and the governments who must set the policy framework that makes this possible. Commercial competition drives progress. But meeting these profound challenges will depend on effective cooperation - between producing and consuming governments, and national and international energy companies.

The challenges have two main dimensions. One is to expand supplies from maturing fossil resources by perhaps 50% over the next 25 years. The other is to find ways of producing and using that energy - needed to fuel development and support higher living standards - without destroying our environment.

The world will continue to depend on fossil fuels for most of its energy and there are adequate resources to meet growing demand for some time. But these will become increasingly difficult to find, develop and deliver. We will have to recover more from existing fields, develop new ones in harsher conditions and more difficult geology, explore in new areas and ways, develop unconventional hydrocarbons, expand the global gas supply infrastructure, and use coal more efficiently. Doing all this will require new technologies and skills, applied in more costly and complex projects.

I believe that the major international integrated companies have a vital role in this. We have the capital and risk management capabilities to invest in demanding and long-term projects. For example, Shell plans to invest some $19 billion in 2006, twice as much as at the beginning of the decade. We have global experience of applying advanced technologies, and the understanding to develop new ones. Our ability to integrate along the supply chain from reservoir to customer provides security and efficiency.

International companies live by their ability to serve resource holders, national partners and customers. In a competitive world, there is always somebody offering to do better, spurring a constant drive for innovation and improvement.

Environmental challenges include reducing the impact of projects and operations, developing cleaner fuels, and reducing carbon emissions.

In Shell, we have been working for many years to develop Gas to Liquids as another way of commercializing gas resources to deliver much cleaner fuel. We are also focusing on ways of dealing with carbon emissions from fossil fuels, so that the world can continue to benefit from their efficiency. The potential to capture carbon dioxide and use it to enhance oil recovery is a major prize, particularly in areas like the Middle East.

The key is to have a stable international policy framework that enables and encourages the necessary investment in more difficult projects and in long-term technological development. The International Energy Forum is a vital forum for producer and consumer governments to respond to these challenges.

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Bjorn Stigson, President Of The World Business Council For Sustainable Development

Energy And Sustainable Development

Bjorn Stigson, President Of The World Business Council For Sustainable Development

Mr. Bjorn Stigson, President of the World Business Council for Sustainable Development, calls in this issue of the IEFS newsletter for new partnerships between governments, business, financial community and academia. He underscores the need for a global framework that ensures visibility and a level playing field and that enables action. Governments should agree on realistic ... [ More ]

Energy And Sustainable Development

Bjorn Stigson, President Of The World Business Council For Sustainable Development

Mr. Bjorn Stigson, President of the World Business Council for Sustainable Development, calls in this issue of the IEFS newsletter for new partnerships between governments, business, financial community and academia. He underscores the need for a global framework that ensures visibility and a level playing field and that enables action. Governments should agree on realistic and quantifiable long-term objectives for low-carbon strategies and technology choices. A financial analyst by training, Mr. Stigson has extensive experience in international business and been actively involved with the business sector response to the challenges of sustainable development. He was President and CEO of the Flakt Group, the environmental control technology leader, and subsequently Executive Vice President and member of ABB's Executive Management Group before becoming WBCSD President in 1995.

Energy is one of the single most important engines of growth and prosperity. This applies to the industrialized world, but even more so to the developing countries. The production and use of energy will increase dramatically over the next decades. This represents a crucial challenge for our society in terms of the long-term sustainability of our energy system. If we do not significantly alter the way we produce and consume energy today, the adverse impacts on our climate and environment will become both unmanageable and irreversible.

The WBCSD has clearly identified this dilemma, and has formed an Energy and Climate Focus Area to tackle these issues and propose solutions. So what can we do to address these challenges considering both the inertia of the climate system and the long haul nature of technological change? We see three main avenues that can be pursued without delay. These are a more stringent and widespread implementation of energy efficiency, a broad mix of energy sources, including nuclear power, hydro power and renewables; and the development of carbon capture and storage. However, no part of society can address these challenges alone. To succeed, new and innovative partnerships and cooperation structures between governments, business, the financial community, and academia, in all the regions of the world, are needed.

The recent partnerships established on government level, such as the Asia - Pacific Partnership for Clean Development and the one between the EU and China, demonstrate that there is such a need in order to progress complex issues. But how can constructive partnerships involving business as a key solution provider be created and deliver results? First and foremost, and in order to ensure a global response to the challenges, there is a need for a global framework that brings long term visibility, establishes a level playing field, and enables action. To this end, it is essential that governments agree on realistic and quantifiable long-term objectives that will clarify and frame the definition and implementation of low-carbon strategies and technology choices.

We live in a carbon-constrained world and in certain regions, notably the European Union, carbon emissions already carry a price that factor into investment calculations. The introduction of new efficient and market based mechanisms and tools, such as emission trading schemes and the Clean Development Mechanism, has the potential to stimulate industry actions and therefore accelerate the pace of change. The WBCSD and its members remain committed to pursuing their relentless endeavor to 'walk the talk', and to taking an active role in defining sustainable solutions for our energy future.

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