Energy Finance

The energy industry has seen unprecedented volatility in world energy markets, followed by an extraordinary period of uncertainty in the financial markets, and is now experiencing an economic downturn that has affected almost every nation in the world, said Sherri K. Stuewer, vice president of environmental policy and planning for ExxonMobil Corp. Stuewer made her comments at the Business and Sustainability Conference held in Washington, D.C. on June 17, 2009.

“Rapidly changing market realities are nothing new, of course, but I believe the magnitude of the recent changes has added to the challenges of addressing sustainability — for both business leaders and policy makers,” she said. “Given the attendance at this conference, I think it is apparent that U.S. businesses believe that sustainability is an enduring issue that deserves our focus — even in the most difficult economic circumstances.”

Affordable and accessible energy supports long-term economic and social development, and at the same time, economic growth drives increased energy usage, she said. Today, global energy use is equivalent to some 245 million barrels of oil per day, used for transportation and to run farms and factories, power schools and businesses and heat and cool homes. Despite the current economic downturn and projected energy-efficiency improvements, ExxonMobil predicts 2030 global energy demand is likely to be about 30% higher than today.

“The core sustainability challenge for the energy industry is how to provide the energy which enables economic development while at the same time reducing the environmental footprint of energy. Too often, however, the magnitude of this challenge is understated. The enormous anticipated growth in energy use will mean increased emissions, much of it in the developing world. If we are to make progress reducing the environmental footprint of energy, it is imperative that we find ways to address the emissions challenge in both the developed and the developing world,” she said.

To address the needs of developing countries, ExxonMobil champions a variety of economic support and incentive programs for capacity building, called “national content development.” The strategy focuses on workforce development, supplier development and strategic community investments to address current economic and social needs while supporting the growth of in-country business.

An examples is the company’s effort to increase the number of national employees over the life span of a project and to train them in technical and professional skills necessary for working on existing and future projects.

“We also seek to create economic opportunities for local businesses by investing in developing the capabilities of local contractors, suppliers, and vendors to help them meet global industry standards to qualify for contracts with ExxonMobil and others,” she said.

By purchasing goods and services in-country and developing long-term supplier relationships, ExxonMobil supports the development of the local business community and reduces costly delays by easing demand on the global supply chain. But in many emerging economies this is easier said than done.

“While our goal is to nationalize the workforce and contract with as many local suppliers as possible, often the local capacity simply does not exist, ” she said. “So we must invest significant amounts of time to train both employees and suppliers with the technical and professional skills to meet our high business standards. In many cases, we must start from scratch, because adequate training facilities do not even exist. For example, at our Sakhalin-1 Project in Russia’s Far East, we helped establish a rigorous two-year training program for Russian technicians. And in Nigeria, we set up a technical training center for local recruits. To date, nearly 500 students have graduated from this program.”

Anohter challenge is the pressure to balance short-term and longer-term needs. Few industries require longer time horizons for planning and execution than the energy industry. Yet, producers are confronted with strong pressure from some sectors of society to deliver short-term fixes, sometimes at the expense of longer-term progress.

“The projects we undertake can span generations from start to finish, and for our industry to continue to draw investors, these projects must remain viable and attractive throughout different business cycles. Balancing our need for long-term viability, while managing expectations by some in society for quick fixes, can be difficult — particularly when energy prices swing or short-term political interests dominate public dialogue,” said Stuewer.

With rising global energy demands, energy-related carbon-dioxide emissions are expected to rise by an average of 1% per year through the year 2030. The energy industry must continue to provide the energy necessary to help billions of people move up the economic ladder, while mitigating the risk posed by growing CO2 emissions. ExxonMobil’s conclusion is to work to improve energy efficiency and to develop and deploy new technologies that will provide energy with lower emissions.

“At ExxonMobil, our primary role is to responsibly provide the energy to sustain and improve standards of living for people worldwide while delivering a return to our shareholders. We are committed to fulfilling this role while balancing the three drivers of sustainability — economic growth, social development, and environmental protection<” she said.

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