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ExxonMobil CEO: U.S. Energy Industry Needs Market-Based Policies

Market-based policies that have a long-term focus would enable the energy industry to make investments and support research efforts that would assist in the economic recovery of the United States, ExxonMobil CEO Rex Tillerson said Thursday.

"In these challenging economic times, we must not lose sight of the foundations of our economic success," he said in a speech to the Executives' Club of Chicago. "Our best hope for reenergizing growth and creating new jobs is a stable policy framework that supports investment, research and development, and the international competitiveness of American companies."

The magnitude of the energy challenge facing the world is outlined in the company's annual world energy outlook, which was released earlier this month (see NGI, Dec. 8). Growing populations and expanding economies are expected to increase global energy needs by 35% between 2005 and 2030, the report noted.

"There is no silver bullet," Tillerson told the Chicago crowd. "We will need all viable sources of energy and multiple technology breakthroughs across many sectors of the economy to achieve the balance we need and the progress we seek."

Both government and the business community have to provide "pragmatic, informed, farsighted leadership," he said. Policies have to provide for a stable tax, legal and regulatory framework, open access to resources for production, respect for the sanctity of contracts and promotion of free trade and investment, Tillerson said.

"All of us aspire to economic growth, energy security and a cleaner environment," said the CEO. "Central to achieving this shared vision is an understanding of the need to adopt long-term stable policies that are grounded in a realistic understanding of the scale of the challenge."

What shouldn't be lost in the debate is how critical the energy industry is to the United States, Tillerson said. He noted that the industry supplies the energy equivalent of 50 million boe/d to heat homes, power factories and keep the nation moving. It employs 1.8 million people directly and another 4.6 million indirectly, and it paid more than $90 billion in income taxes in 2006, he said.

Exxon and its rivals have called for greater access to drill both onshore and offshore in the United States, and Tillerson encouraged political leaders to consider the benefits more access would allow.

"A long-term, growth-oriented policy approach, coupled with the American people's support for increased access to domestic energy supplies, would enable the energy sector to contribute even more to the U.S. economy," said the CEO. "By opening up new domestic sources of energy, we would also open up new sources of government revenue. Increased domestic access opens up the potential for tens of billions of dollars in new revenues from oil and gas lease bonuses, royalties and income taxes for decades to come."

To meet U.S. energy goals, Tillerson suggested a "cooperative approach" using integrated solutions to address "supply, efficiency and environmental protection." He suggested that to develop a workable U.S. energy policy, the government should consider using the same method that was used to develop the Internet: private sector innovation coupled with some federal support.

The energy industry is taking a "wait-and-see" approach on the incoming Obama administration. A "clear interest" exists for alternative energy, but Tillerson said the incoming administration should be realistic.

"We must not think in terms of quick fixes over the next few months or the next one or two years," he said.

Unlike many of its rivals that already have announced spending cuts for 2009, the Irving, TX-based major is projecting a capital expenditure (capex) budget of $30 billion in 2009 to lease drilling rigs and expand fuel plants. That would be about 20% more than the 2009 capex program.

"We don't see a need to make any cuts at this point," Tillerson said. "We don't pay attention to the day-to-day price of oil because it's somewhat unimportant to us."

Capex may rise, but Tillerson said buying assets is not planned. Exxon has made dozens of small acquisitions in recent years, but its last major purchase was in 1999, when it bought Mobil Corp.

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