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Building public policies that encourage investment and integrated solutions
Remarks by Andrew P. Swiger
Senior Vice President, Exxon Mobil Corporation
Fairmont Pallister Hotel
Calgary, Alberta
October 30, 2009
Good morning, ladies and gentlemen. It is an honor to be here today to help launch the Energy for Life Program at the University of Calgary’s School of Public Policy.
It is a tribute to the students, faculty, and the University that so many leaders from business and government have so quickly shown their support for this important program.
The School of Public Policy has dedicated itself to a noble vision.
The program’s founders have recognized that “To achieve sustainable prosperity for Canada in the Global Era, smart, well-informed energy policies and regulations are fundamental.” The founders also understand that in order to build those “smart, well-informed energy policies,” the public and policymakers need to understand the dynamics of the energy industry as well as the impact that different tax and regulatory policies can have on the energy sector, economic growth, and job creation.
With the Energy for Life Program, the University is doing much to further that understanding. You are advancing the dialogue about energy, reaching out to the community, providing facts and impartial analyses, educating future leaders and laying the groundwork for finding the innovative solutions that are our best hope for the future.
In fact, from the vantage point of my more than three decades working in the energy industry, your program is a model worthy of emulation. We need more such programs – and not just in Alberta and other provinces of Canada. We need such informed dialogue and open, honest discussion around the world.
Such discussion must be grounded in the fundamental facts that govern the world’s energy industry. We need to recognize these facts because the decisions made today will determine the progress and opportunities of hundreds of millions of people around the world.
Therefore, this morning I would like to draw from my experience in the energy industry to talk about some of the fundamental facts I see shaping our energy future. It is my hope that this global perspective will help explain how we can best solve the world’s most pressing energy challenges, while maximizing the value of energy resources for the benefit of all.
First, I will discuss the relationship between energy demand and economic growth.
Next, I will discuss the potential and promise of new technology, free trade, and international partnerships in meeting our shared energy challenge.
Finally, I will discuss how technology and teamwork will make Canada an especially-important link in the effort to meet the world’s energy needs in a safe, secure, and environmentally responsible manner.
Economic Challenges
It is important to begin any discussion about energy policy with a basic but often overlooked question: Why is energy so important to the world’s future?
Simply put, energy is the fuel for economic growth and the gateway to opportunity for every nation on Earth.
For developed nations, affordable and reliable energy offers greater access to the technologies and services that sustain prosperity. Advanced computing, improved transportation, expanded communications, state-of-the-art medical devices and other modern advances rely on ready access to economic energy sources.
For developing nations, growing access to affordable, reliable energy offers these benefits and something even more fundamental – hope and opportunity. Energy drives expanding industry, increasing trade and improving transportation – all of which create the growth that helps people escape poverty. Affordable, reliable energy is also vital to building new homes, schools, hospitals, and clean water and sanitation systems that can improve and save lives. The world is also learning that energy and development are also key enablers of better conservation and environmental improvements.
Therefore, in discussing energy policies, we must recognize that energy touches every life and every business, every day. As the name of this program implies, energy is essential to life.
As we look at increasing demand, we must also keep in mind that reliable sources of energy cannot be seen as a luxury reserved for a few developed nations. Reliable energy supply is a fundamental building block of economic growth and development, which will be sought by every nation and community working for a brighter future.
Rising Energy Demand
The far-reaching consequences of global expansion and development mean we are living at a time of tremendous promise in the community of nations.
At ExxonMobil, we believe that long-term planning for future needs will be critical to success. That’s why we give energy use and demand trends a great deal of attention in a comprehensive annual analysis we call The Outlook for Energy.
Over the next two decades, we expect energy needs will grow because of increased demand from both developed and developing economies. In fact, we believe that, despite the current downturn, economic growth will return and that by the year 2030, energy demand will be approximately 35 percent higher than it was in the year 2005 – and this is with substantial improvements in energy use efficiency.
This means that more and more people around the world will have access to higher standards of living. But this growing energy demand also presents the world – and the energy industry – with a dual energy challenge.
First, how can we find and deliver the new supplies of energy needed to meet this enormous demand? Second, how can we do so in a way that reduces the environmental impacts associated with increased energy use?
Where they are economic, alternative energy sources such as wind and solar will be needed. In fact, we anticipate that these sources will grow at a rapid pace in the years to come. Because they start from a relatively small base, however, their contribution to global energy mix will remain limited for the foreseeable future. But as they become more advanced, alternatives will play a larger role over time.
Developing all economic energy resources will also require us to find and produce more oil and natural gas. Hydrocarbons such as these currently provide the vast majority of the world’s energy. They have proven their value to modern economies because they are relatively accessible, affordable, and versatile. They have also proven capable of achieving the enormous scale needed to meet global needs. Oil and natural gas alone are projected to supply nearly 60 percent of the world’s energy needs through the year 2030.
But with this increased energy demand, we also must recognize the second part to the energy challenge: reducing environmental impacts and greenhouse gas emissions associated with energy use.
Globally, we expect energy-related carbon-dioxide emissions to rise by an average of one percent per year through the year 2030. Much of this emissions growth will come from rapidly developing nations such as China and India. Meeting the challenge of reversing this trend in greenhouse gas emissions will require the help of every nation, industry and consumer.
The history of our industry tells us that one of the most important ways of solving both parts of the dual energy challenge is to advance technology.
We must bring innovators, companies, and even countries closer together – through free trade and the free exchange of ideas – to find and apply new technologies to old problems. This means we must pursue sound and stable policies that make it possible for the energy industry and other sectors of the economy to invest in the research and development of integrated solutions.
Integrated solutions leverage technology to expand supplies, increase energy efficiency and reduce environmental impact. Integrated solutions can increase energy diversity by improving and advancing the efficient use of all economically viable energy sources.
The efficient use of energy extends the life of the world’s resource endowment. Over the past 25 years, worldwide gains in energy efficiency have helped lower global energy intensity by about one percent annually. This efficiency translates to doing more with less.
In the Energy for Life Program, you understand what research into new technologies requires from government, industry and academia. It means we must have stable policies so we can invest in promising research. It means we must educate new engineers, scientists, and thinkers. It means we must encourage human ingenuity to explore new and transformative ideas that will solve challenges we face in the short, medium, and long-term.
In the decades ahead, the need for integrated solutions means we will need more investment, more teamwork and more international cooperation than ever before.
The reality is that the world’s conventional oil and gas resources are increasingly found in harsh environments such as the arctic cold or in hard-to-reach places like ultra-deep water. Many projects in such environments will be beyond the capability of a single company and might even require international cooperation.
The International Energy Agency estimates that the energy industry will need to invest more than $25 trillion in the world’s energy supply infrastructure by the year 2030 to meet growing energy demand. Bringing new energy supplies to world markets will also require long-term planning, disciplined investment, and unparalleled project management.
Integrated Solutions and Canada’s Increasing Role
The value of integrated solutions can be seen right here in Canada.
Integrated solutions in the energy industry already create hundreds of thousands of jobs and strengthen Canada’s economy. They are also increasing energy supplies and reducing environmental impact.
I’d like to discuss a few examples of how technologies are opening up new energy frontiers and how these advances will increase the already-critical role Canada will play in meeting the world’s energy needs.
For decades, Canada has been integral to U.S. energy diversity and security. This fact has not gone unnoticed at the highest levels of U.S. government. President Obama’s national security advisor said, “The United States recognizes that our energy future is very much intertwined with that of Canada.”
Oil Sands
Of course, many of you already know that Canada supplies the United States with one-fifth of its imported oil. As conventional sources become more difficult to reach, demand for unconventional sources will increase. About 13 percent of the world’s known oil reserves are contained within oil sands, and Canada holds the world’s largest reserves of this type.
But as this audience also knows, producing and upgrading oil sands consumes more energy and water than conventional oil production would at the same location. That’s why it is so important to develop the integrated solutions that can improve both energy efficiency and water use.
We are seeing how improved technologies can help address this challenge. Over the last 40 years, Imperial Oil has worked to pioneer state-of-the-art water recycling techniques at its Cold Lake operations. As a result of these improvements, since the mid-1980s, more than 95 percent of the water now used during recovery operations is recycled to produce more steam.
In addition, Cold Lake has become a model of how the energy industry can reach out to work with First Nation groups, to refine techniques that respect community priorities, create local jobs, and produce energy in a safe, secure, and environmentally responsible manner.
Imperial Oil’s efforts at Cold Lake are just one example of how the energy industry can find mutually beneficial solutions when dialogue is open and public policy stable. There are others.
At the Kearl Oil Sands Project, we are using an innovative and proprietary paraffinic froth process, which generates pipeline quality bitumen that will be blended with diluent for shipment. This technology requires less solvent at lower cost making the tremendous oil resources at Kearl more economic to develop. It also means that the crude needs to be upgraded just once, at a refinery, reducing energy requirements. Also at Kearl, we will be deploying co-generation technology, which generates both electrical power and steam efficiently, reducing greenhouse gas emissions by an estimated half million tonnes per versus buying the power from the grid.
Kearl is also the site of some of our most creative ways to reduce our environmental footprint. Using a water storage system, we will reduce water withdrawal from the Athabasca River during the low-flow periods of winter. Early in the process, we worked with the government and the First Nation community to identify ways to not only reduce and offset impact from the project, but to actually increase bio-diversity in the area as the project progresses.
Gas Technology Advances
For years the energy industry has known that the North American continent holds vast quantities of so-called tight gas and shale gas – natural gas locked in geological formations denser than concrete. Unfortunately, we lacked the technology to extract this gas in a cost-effective way.
However, over the last decade, advances across a whole range of technologies have made the economic production of these resources possible.
This has been a crucial breakthrough, as our projections indicate that increased natural gas production will be greatly needed.
With its abundance and environmental advantages over coal, natural gas is expected to be the fastest growing major energy source over the coming decades – increasing by more than 50 percent by 2030. By then, natural gas is projected to have overtaken coal as the world’s second-biggest source of energy.
Natural gas is especially important to power generation. Today, power generation accounts for 35 percent of the world’s total energy usage, and is expected to account for more than 40 percent of the increase in global energy needs from 2005 to 2030. In the Asia Pacific region alone, demand will grow by 150 percent by 2030.
After more than a decade of research and development, ExxonMobil and others achieved a breakthrough on tight gas commercialization with the invention of Multi-Zone Stimulation Technology. Using this approach we can “stimulate” – or fracture a number of tightly-cemented geological formations in one continuous operation. Doing so efficiently improves recovery from natural gas reservoirs that were once thought to be economically out of reach.
In the Piceance Basin in Colorado, Multi-Zone Stimulation Technology will allow my company to increase natural gas production by 300 percent. This will allow our project there to provide enough energy to heat 50 million homes for a decade. Other technologies being applied in this project include water recycling and the drilling of more production wells from a single surface location, which reduces the footprint of the operation – a technique that we are also using at Cold Lake, incidentally.
Significant advances in other technologies, in particular in horizontal drilling and fracturing, have unlocked the potential of North America’s shale gas resources. Here in Canada we see opportunities to apply these advanced technologies to promising new areas such as the Horn River Basin in British Colombia. ExxonMobil Canada and Imperial Oil have acquired over 300,000 net acres in this shale gas play and have just embarked on our second winter season drilling program to further evaluate this.
By making greater supplies of cleaner-burning natural gas available to consumers, all of these technologies help reduce greenhouse gas emissions in a substantial and meaningful way.
Conclusion
These are just a few of the technologies and promising developments in Canada. For decades, Imperial Oil and ExxonMobil Canada have proven that long-term planning, disciplined investment and human ingenuity can open up new energy frontiers and strengthen job creation and economic development, while reducing environmental impact.
But such planning, investment and innovation are only possible with sound and stable public policies, which are grounded in fact-based analysis. These policies must also recognize the very long-term nature of the energy industry, where investment decisions are made on projects that will operate over timescales of decades – and not the electoral cycle.
We’ve all heard about potential political barriers to exporting crude from Canadian oil sands to the U.S. Many an article has been published about the environmental impact and greenhouse gas emissions associated with developing the oil sands. Few, if any, have referred to the objective, technical studies conducted by bodies such as the Alberta Energy Research Institute, which recently found that the life-cycle greenhouse gas emissions of an oil sands development incorporating co-generation are similar to those of conventional oils imported into and refined in the U.S. Nor do they typically mention the lands that have been reclaimed and restored after mining activity has ceased, let alone include photographs of such areas. The Energy for Life program can play a vital role in fostering a much-needed, informed debate on these and other issues, and in providing objective data and analysis to the public and to policymakers.
In the years ahead, energy policies will become even more important, as nations become more developed, energy demand grows, and economic competition increases.
The energy industry – and the global economy – will need governments to do their part to encourage free trade, uphold the rule of law and build the sensible tax, legal, and regulatory frameworks that allow for long-term planning and investment to take place.
I am convinced that if we learn from the successes of the energy industry, learn from examples right here in Canada and learn the lessons being taught at the School of Public Policy, we can build energy policies that will allow us to work together to expand supplies, increase energy efficiency and reduce environmental impact.
By advancing solutions in all of these areas in the decades ahead, we can succeed in our shared goals to increase progress and prosperity for all.
Thank you.
