| Editor's
Note:
The
Saudi-US Relations Information Service
is pleased to provide its readers with
participants' remarks from the April
27, 2004 conference hosted by the Center
for Strategic and International
Studies and the U.S.-Saudi
Arabian Business Council.
The conference addressed U.S.-Saudi
relations and global energy security
with high-level speakers from the
United States and Saudi Arabia.
The conference explored the link
between affordable energy and economic
growth. It
is important to bring you the comments
of leaders from Saudi Arabia and the
United States on these important
issues.
The
following are introductory remarks
made by Dr. Dan Yergin, Chairman, Cambridge
Energy Research Associates, and
Rex W. Tillerson, President, Exxon
Mobil Corporation.
Click
below to read previous transcripts
from this conference:
U.S.-Saudi
Relations and Global Energy Security
Dr. Dan
Yergin, Chairman, Cambridge Energy
Research Associates: We now turn for a global
perspective to Rex Tillerson who's
president of ExxonMobil Corporation.
Rex has had considerable experience
first in North America, and knows very
well the challenges of production and
production growth in North America.
He's had wide experience
internationally. He was President of
Exxon Yemen, and then subsequently was
responsible for Exxon's activities
both in Russia, the Caspian Sea, as
well as Saklan Island.
In 2001 he
became Senior Vice President of
ExxonMobil and this past March, just
last month, became President of
ExxonMobil and a member of the Board
of Directors.
Welcome, Rex.
[Applause]
Rex W. Tillerson,
President, Exxon Mobil Corporation: Thank
you, Dan. It's always nice to be
batting cleanup, but I think the
speakers this morning have done a good
job of loading the bases, as they say,
for a fruitful discussion and I'm
going to try to just add a few other
perspectives to many of the things
that have already been laid out. In
particular some of the issues that
exporting countries and importing
countries need to consider in order to
continue to create and maintain the
proper conditions for this chain of
supply to demand that has been
discussed this morning and the
stability that we've enjoyed around
that.
I do welcome
the occasion to focus attention again
on the need for long term security and
stability in the world oil market. I'm
especially grateful and honored today
to be joined today by Their
Excellencies, Saudi Arabia's
distinguished government and business
leaders.
In my view
the focus this morning on energy
supply, security and stability is
timely and essential. In the coming
decades meeting the expected increase
in global energy demand will require a
broad portfolio of energy options and
among those options hydrocarbon fuels
as you've heard this morning are
likely to remain the primary energy
source, certainly through the middle
of this century.
A great
writer once observed that most human
beings have an almost infinite
capacity for taking things for
granted, and in many respects we in
our industry are victims of our own
history of success. The apparent ease
with which peoples of the developed
world and especially people of this
country have their energy needs met
day in and day out belies the
significant risk and enormous
challenges inherent to our business of
finding, developing, transporting,
refining, and distributing fuels and
other products to the consumer.
In the oil
business, though, we have never been a
stranger to meeting such expectations.
In fact successful oil companies
remain competitive by not taking these
things for granted including security
and stability in the oil market.
Given the
importance attached to this vital and
far-reaching issue it is especially
fitting that the U.S.-Saudi Business
Council and the Center for Strategic
and International Studies have joined
in hosting these discussions. The
U.S.-Saudi Business Council has helped
further strengthen the relations
between the people and governments of
both countries.
I also want
to express my thanks to the Center for
Strategic and International Studies.
In a very real sense CSIS scholars
continue to set the standard for
dispassionate, non-partisan and
thoughtful analysis of the most
important issues of our times. Such
sober analysis and perspective are
critically important to those
responsible for developing sound
public policy.
When the
subject concerns energy and the global
economy, the best policy choices often
compete against the expedient, the
politically different, and all too
often the misinformed.
Saudi
Minister of Foreign Affairs Prince
Saud Al-Faisal recently offered his
view that human development and
economic prosperity are the keys to a
better future in the Middle East. We
agree. In fact as we see it, access to
affordable and secure energy supplies
is essential to the continued
progress, prosperity and well being of
all the world citizens.
The petroleum
industry is a long-term business in
which risk, investment decisions, and
reward or failure are evaluated over
years or even decades, yet despite
this, or as some would have it,
because of this. The oil market is
remarkably responsive to the shifts
and the balance of supply and demand.
As you would
expect at ExxonMobil we devote
considerable time and attention to
trying to understand these dynamics,
and while we never lay claim to being
able to predict the future we
regularly conduct a comprehensive
analysis of the oil and gas business
and develop a planning framework based
on what we see as the outlook for
energy.
For our
purposes this morning I'd just touch
on a few highlights because others
have said much about this already.
But first, as
has been the case in the past,
economic growth will remain the
primary driver of future energy
demand. The global economy has grown
at an average rate of about three
percent since 1970 and we expect
growth to continue at that pace over
the next two decades with reduced
rates of population growth offset by
increases in per capita productivity.
We also think
that the energy demand will grow at a
somewhat lower rate, reflecting
significant but yet to be achieved
advances in energy technology and
efficiencies. We project that the
world's demand for energy will reach
close to 290 million oil equivalent
barrels per day by the year 2020 or
about 40 percent more than today.
The petroleum
industry may need to add about 100
million oil equivalent barrels per day
of new supply over the next decade to
meet projected demand -- an amount
almost 80 percent of today's
production levels.
Such huge
investments will intensify our need
for new technology. Research and the
commercialization of new technologies
that expand resource capture
capabilities are critical, as are
advances in production technology.
Meeting the growing energy demand will
require timely and essential resource
development. We expect to see more oil
coming from the Middle East as well as
West Africa, Russia and the Caspian.
We also expect to witness increasing
interdependency between importing and
exporting countries --a shift brought
about by the variation in demand
growth rates and the continuing shift
in supply
sources.
For example,
net oil imports into the United States
and Europe are likely to grow by about
three million barrels per day over the
next two decades. While in Asia, net
imports could increase five times that
amount to 15 million barrels per day,
representing a growing shift in the
energy demand centroid from west to
east.
These
potential developments inevitably
raise security concerns about long
term oil supply. Import independence
is not realistic in most cases nor is
it necessary if supply risks are
managed effectively. The answer to
concerns about near term and long term
access to petroleum resources is
supply diversity. Governments can help
through allowing access to resource
potential acreage in all parts of the
world. Government funded strategic
energy reserves are appropriate as a
safeguard in the event of a severe and
sustained supply disruption. However,
the use of strategic reserves as a
tool for manipulating short term
energy prices is unwise and it is
contrary to the purposes for which
such strategic reserves were created.
When allowed
to work the free market is
exceptionally efficient. As a means of
communicating information between
producers and consumers to the benefit
of all.
A growing
number of forward-looking governments
around the world are embracing free
enterprise economic policies and
addressing their economic priorities
with market solutions. Reducing or
eliminating harmful economic barriers
such as import tariffs, confiscatory
tax schemes, quotas, price controls,
and competitor restrictions are
actions which further promote
confidence in the market place.
Importing
countries want to have confidence in
stability of supply and predictability
of terms from exporting countries.
They can achieve this by creating
reasonable regulatory regimes and by
relying on competition and market
solutions to meet future energy
demand.
Resource rich
host countries can encourage energy
development by fostering an
environment that gives access to new
areas of hydrocarbon potential and
encourages the long-term investments
needed by our industry to find and
develop new supplies for the United
States as well as other consuming
countries.
Such an
environment is based on respect for
the rule of law, a stable legal
framework and predictable tax
structure, commitment to the
principles of sanctity of contract, an
impartial court system, elimination of
duties, and other fundamental
safeguards that encourage business
investment.
Where
governments do not adopt or enforce a
stable framework of laws and
regulations investments become
difficult if not impossible to
justify.
Governments
that take the lead in encouraging
investment will reap the substantial
benefits that accrue from it. Success
will require collaborative effort and
a cooperative relationship between
exporting and importing countries.
Because major
energy projects are often very
expensive undertaking lasting for
decades, establishing solid, long term
relationships is essential for all
parties involved.
ExxonMobil
has worked hard to build and
strengthen such relationships for more
than a century and today we conduct
business in more than 200 countries
and territories. Our approach is
straightforward. Invest in projects
that take full advantage of our global
capabilities and our cumulated
experience in energy development as
well as our substantial financial,
technical, environmental and
management expertise.
ExxonMobil's
relationships in Saudi Arabia are a
case in point. Our business ties with
the Kingdom date back more than half a
century --a fruitful and mutually
beneficial relationship that continues
even now. Today we remain the
Kingdom's largest foreign investor
participating in multiple joint
ventures and employing more than 3,000
Saudis. We're the largest purchaser of
Saudi crude oil exports, accounting
for nearly 10 percent of the Kingdom's
total exports and making Saudi Arabia
the largest single supplier of raw
materials to ExxonMobil's worldwide
refinery system.
Through the
year we've established business
relationships with various Saudi
enterprises in upstream, refining,
marketing, and petrochemical projects.
These alliances have generated
economic expansion, diversity of the
industrial base, and increased
employment opportunities for Saudi
citizens.
Our long term
commitment to Saudi Arabia includes
energy investments that have
contributed significantly to the
growth of the local economy and help
provide the necessary funding for the
growth in the Kingdom's
infrastructure.
Building on
our current business ties the
cooperation between Saudi Arabia and
ExxonMobil will be as mutually
beneficial in the future as it has
been in the past. Put simply, our
commitment to Saudi Arabia is genuine,
robust, and long term.
Together with
our partners in Saudi Arabia we look
forward to strengthening our
relationships and developing new ones
as we focus on new opportunities to
expand the Kingdom's energy
infrastructure.
In our view
Saudi Arabia possesses significant
undeveloped oil and gas resources.
Thus we should continue meaningful
discussions to fully develop these
resources to meet the world's energy
needs and also help improve economic
conditions for all Saudi citizens.
Finally, if I
may, a word about the broader issue
that brings us together today. The
strong historical ties between the
people of Saudi Arabia and the United
States and the spirit of cooperation
that binds our two governments in a
common purposes remains a steady
bulwark against the unsettling events
of the stormy present.
If I may
again quote Prince Saud Al-Faisal who
said recently, "We must spare no
effort in emphasizing the shared
community of interest between the
United States and Saudi Arabia in
increasing the opportunities of common
understanding and human contacts, and
in identifying the numerous areas of
cooperation that will allow us to view
our future with optimism."
In echoing
these sentiments I would also suggest
that our longstanding business
relationships in the Kingdom of Saudi
Arabia are a good example of the
possibilities and achievements yet to
come.
Though a
broad range of views exist concerning
the future, one thing is clear. The
strong link between economic growth
and energy use shows that the world's
economies will continue to need
reliable and affordable energy
supplies to sustain their growth.
Safeguarding the security and
stability of the world oil market must
be more than a goal. It is an urgent
task that demands our all.
In fulfilling
this mission to provide those vital
supplies the oil and gas industry will
play a central role in helping to
sustain economic growth. I have every
confidence that together we'll be
equal to that responsibility.
Thank you for
your attention.
[Applause]
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Information Service (SUSRIS)
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