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IHS CERAWeek: 'World Watching' North American Energy, ExxonMobil CEO Says

ExxonMobil Corp., which made strategic decisions in recent years to capture massive unconventional shale gas and tight oil resources in North America, is now seeing the continent undergoing a "historic energy transformation," CEO Rex Tillerson said Friday.

On the closing day of IHS CERAWeek 2012 in Houston, Tillerson was keynote speaker. Following four days of speeches and panels in which much was made about how shale gas has become something of a burden for the gas market (prices) and industry's image (fracking), the ExxonMobil CEO took a broader, longer view.

"The new sources of oil and natural gas our industry is developing here -- and the way in which we are developing them -- will shape their development on a global scale.

"Being at the vanguard of this global energy transformation, industry and policymakers in the United States and Canada are setting a standard. It is essential that we learn from our success. The world is watching."

The energy industry can't operate alone, Tillerson said. "Government has an indispensable role in this quest. Policy decisions regarding access, taxes and regulations have profound implications for our ability to develop these new sources and share the enormous economic benefits they promise.

The ExxonMobil chief said the transformation unfolding in North America represents a "potentially decisive shift in the history of energy." Technologies and techniques that have been developed have taken what were "unconventional, uneconomic, inaccessible" resources and made then "conventional, economic and economically responsible."

Shale gas and tight oil "are transforming the outlook for energy security as well as reshaping global markets and supply lines. Advances in horizontal directional drilling and hydraulic fracturing technology have unlocked the potential for recovering enough natural gas to power the U.S. and Canadian economy for more than a century. In fact, by the year 2040, we expect natural gas demand to increase by 60%."

In just a few years, he noted, shale gas and tight oil have created thousands of U.S. jobs and helped improve a faltering economy. He highlighted a few studies:

"Taken in full, in 2010, the unconventional resource development supported 600,000 jobs and contributed more than $76 billion to the U.S. gross domestic product. Across the United States, from Pennsylvania to North Dakota, from West Virginia to North Texas, from Oklahoma to Ohio, affordable and reliable natural gas and domestically produced crude oil have helped strengthen and create jobs far beyond our industry...

"The unanticipated benefits of this energy transformation are also changing the political landscape...A new energy consensus is emerging. Policymakers from both sides of the political aisle, and from around the world, recognize that energy is essential to growth and progress -- and that every technological advance in our field offers tremendous economic and environmental opportunities to achieve our shared aspirations of hope and opportunity for all.

"In his recent State of the Union speech, President Obama said that 'This country needs an all-out, all-of-the-above strategy that develops every available source of American energy.' The president has recognized the transformative potential of our technologies and investment," said Tillerson. "In an important statement of the emerging energy consensus, he noted that 'The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don't have to choose between our environment and our economy.'" However, the consensus isn't universal.

"Energy policy making is most effective in meeting national goals when the deliberation and dialogue are driven by open and frank discussions of the scientific, economic, and practical realities that shape global energy markets. In pursuing the 'all-out, all-of-the-above strategy,' we need to welcome every voice from every sector of the energy industry as we develop all economically competitive sources."

Developing energy supplies will depend on more than just "geologic conditions and technological innovations," said Tillerson. "Success will depend on the private and public sector fulfilling their respective responsibilities -- and, where they can, working together to build a climate of investment in and discovery of new technologies. In short, government and business must both do their part...

"In states and communities that have put in place hydraulic fracturing [fracking] moratoria, we have sought to respond to public concerns and point to the successful practices. Industry has a key role to play in building public confidence in, and the effectiveness of, our risk-management practices...Shale gas development is the result of years of industry investment in technology and safety techniques. Yet, even with this commitment, state and local government play a vital role of oversight and accountability..."

Industry's success in the Barnett, Bakken, Marcellus and other shale plays "has been possible because of the mutual respect among industry leaders and state and local officials," said Tillerson. "We are committed to continuing this positive relationship, which recognizes our different strengths and builds upon them..."

ExxonMobil also on Friday called for adopting a systematic frack fluid disclosure program in Europe to provide further information to communities, policymakers and regulators about natural gas development technologies.

"Natural gas from shale holds tremendous promise in many places in Europe due to its lower carbon intensity and suitability for power generation, but we want policymakers and the public to be confident that it can be produced safely and responsibly," he said.

More than two years ago ExxonMobil began working with U.S. state regulatory agencies to help create the FracFocus website, an online registry where companies submit data about chemicals used to fracture natural gas and oil wells. The site is managed through a partnership with the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission. ExxonMobil proposes that a similar initiative be developed in Europe.

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