The United States need to form a comprehensive and sustainable energy policy to prepare for a future energy crisis, Hess Corp. CEO John Hess said last Tuesday.
Before a capacity crowd in Houston at CERAWeek 2011, which was sponsored by IHS Cambridge Energy Research Associates (IHS CERA), Hess called for immediate action by federal legislators.
"To sustain our economic growth and prosperity, we need a comprehensive, long-term approach to energy," he said. "We must act now." Oil demand is escalating worldwide, which in turn is pushing the world toward an energy crisis, he said.
More investment also needs to be made in finding oil and gas reserves, said Hess, an issue stressed by other speakers at CERAWeek.
"As demand grows in the next decade, we will not have the oil production capacity we will need to meet demand," said Hess. "The $140/bbl oil price of three years ago was not an aberration...it was a warning."
With oil used for around 37% of U.S. energy consumption, improving energy efficiency is necessary, but it also will take political will to reduce demand, he noted.
"It serves nobody's purpose for our political leadership to vilify oil producers," said the CEO. "It might be good politics...but not good policy...Our country needs to do everything it can to encourage more drilling to strengthen our energy security, including regulatory oversight to ensure protection of the environment."
The chief executive of French oil giant Total SA, Christophe de Margerie, said energy companies have a responsibility to search for new oil and gas sources. He agreed that producers have to invest more in exploration and development.
"If we do it, we need the cash," he said.
The energy industry is facing a demand problem, the Total CEO said. The worldwide oil supply may not eclipse 95 million b/d of oil. It's not a question of reserves, but what can be brought to market, he said. "The first priority for us is to continue to grow."
A big solution in reducing oil demand will be to find more natural gas, said de Margerie. Shale gas has changed the world for the better, he said, and it holds great promise outside of North America. However, it's still early to determine whether technological solutions can be applied to Europe. And the industry has to do a better job of educating the public about how hydraulic fracturing works.
For shale gas outside of North America to be accepted, transparency is key, said the Total executive. "If we don't prove there is no risk, we will not be able to do it."
De Margerie and other executives said the Macondo well blowout in the Gulf of Mexico last April had a profound effect across the industry. The spill was not only a concern for "one company and one state" but "an issue we all have to face, all over the world. We must inspire trust in those who want to work with us..."
However, "acceptability works both ways," he said. The industry has to be able to make a solid return for the massive investments it makes to find and produce oil and gas.
"Once more we need to prove we're able to find solutions to face a world of change," de Margerie said. "We need to send a message to our clients that we need to find solutions for the long term...
"We know where oil and gas reserves are but we need to send a message that they are not forever," de Margerie said in a keynote address. Producers always should be concerned for safety and the environment when exploring for reserves, and because of those issues, investing in new resources is a top priority.
Member countries of the OECD, or Organisation for Economic Co-operation and Development, also should extend a hand to emerging economics to reduce energy demand and increase energy efficiency, said the Total chief.
"We need to be friends," de Margerie said of China and India and their growing thirst for energy sources. "We have to work together, to prove that we can be better."
Echoing other CERAWeek speakers, de Margerie said it was the responsibility of the Big Oil companies to partner with national oil companies and service providers.
"Partnership is the best way to get the upside of access to reserves," he said. Even though the deals are sometimes risky, "what we're doing at Total is not always pleasing but it is necessary." Those partnerships are needed because "we will be asked, 'what have you been doing?' Why didn't you explore more?'"
Despite the political unrest in Africa and the Middle East, de Margerie told the audience that there is "no reason to consider there is a risk of sufficient supply," for worldwide oil -- a belief held by many of the CERAWeek speakers. De Margerie said he is much more optimistic today about global energy supplies.
The "peak oil" theory is more geopolitical than geologic, he said. "I don't see major concerns as far as the production of oil and gas is concerned."
There will be a world after oil, said de Margerie. Now is the time to prepare for it.
"We have to reduce demand," he said. "That is the only way." In addition to increasing the use of gas, he also said coal could be part of the solution. "We need to rethink using coal in a clean way" and fund the efforts of companies working to create a "clean" coal solution.
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