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Mark W. Albers Senior Vice President, Exxon Mobil Corporation Sixth KazEnergy Eurasian Forum Astana, Kazakhstan October 4, 2011 Time ~14 minutes (~1,700 words @ 125 words per minute) Opening New Frontiers With Innovation and Investment Thank you, Larry [Larry King, moderator]. I am delighted to be back at the KazEnergy Eurasian Energy Forum. Since its founding six years ago, this Forum has established itself as one of the premier conferences for discussing the future of global energy markets as well as the crucial role that Eurasia must play in shaping that future. The theme for this opening session is the “Geopolitics of Eurasia: Challenges and New Frontiers.” This is fitting, because in the 21st century, energy promises to play a pivotal role in international economics and geopolitics. And nations such as Kazakhstan will be 1 increasingly important because they have the resources and potential to respond to the energy needs of the global economy in ways that few others can. In considering the importance of energy – and the importance of Kazakhstan on the world energy map – it is imperative that we take a long-term perspective. There is an old and well-known Kazakh proverb, which says: “There is nothing as far as yesterday, and there is nothing closer than tomorrow.” Nowhere is this more true than in our industry. We must prepare now for the decades to come because like tomorrow, they will be here before we know it. In my remarks this morning, I will discuss the energy challenges we face in the decades ahead … the role of Eurasia in these energy challenges … and the new supplies of energy that will come from forging strong partnerships, leveraging innovative technologies, and investing over the long term. Let’s begin by considering the forces shaping the global economy and energy markets. An understanding of these forces is fundamental to building policies that support the 2 investment, and collaboration required to maximize the value of energy resources - for the Kazakh people, and for the investors in this extraordinary nation. Economic and Energy Outlook To understand the full potential of Eurasian energy, we must understand the importance of energy to the global economy. At this moment in history, the short-term outlook for the global economy is uncertain. Many nations throughout the world continue to struggle with high unemployment, slow growth, and high levels of debt, while some others face challenges with the pace of economic growth and inflation. Despite these short-term challenges, the long-term prospects for the global economy remain promising. Populations continue to grow with education levels rising and free trade expanding. Technology and expertise are increasingly crossing borders, improving efficiency, opportunity, and the hope of higher standards of living for all. 3 As we look toward the decades to come, we would expect the global economy to grow by some 80 percent by the year 2030 [vs 2010], driven largely by population growth in Eurasia. That growth will be even more impressive in developing nations, where economic growth is expected to expand by 150 percent. And for many nations in Asia, growth could be even higher. With this long-term growth comes a need for affordable and reliable sources of energy. Energy is a fundamental building block of developed – and developing – economies. It powers technology, supports development, and literally makes trade among nations possible. This essential nature of energy is why we project that global energy demand will be about 25 percent higher by the year 2030. Significant gains in energy efficiency … largely technology driven … account for the difference between economic and energy demand growth rates. Meeting this increase in demand for energy will require the development of all economic sources of energy. Foremost among these energy sources will be hydrocarbons, including oil and natural gas. In fact, we project that oil and natural 4 gas will continue to supply more than 60 percent of all energy needs by the year 2030. Challenges and Opportunities on New Frontiers For the nations of Eurasia, this demand for oil and natural gas is an extraordinary opportunity. Because nations such as Kazakhstan have the potential to supply this energy, these resources can be the gateway to economic growth … job creation … technological advancement … higher levels of education … and greater foreign trade. In addition, the nations of Eurasia are strategically placed to supply both the developed nations of Europe and the rising nations of Asia and beyond. Of course, meeting the world’s growing energy demand brings new challenges. As we have seen here in Kazakhstan, physical and geological challenges can combine in ways that require innovative thinking and novel applications of both established and new technologies. Industry has confronted 5 the challenges of extreme environmental conditions combined with deep, high-pressure, high-H2S reservoirs. To do so, we have incorporated cutting-edge metallurgical and drilling technologies and pioneered development of the world’s highest pressure sour-gas compression. And offshore, we have developed capabilities to meet the added challenges of seasonal ice-flow conditions, while seeking to protect the environmentally sensitive Caspian Sea. Overcoming such challenges are a fact of life in today’s energy industry. The world’s new energy frontiers are increasingly found in hard-to-reach places that require significant capital investment and breakthrough technologies. In our industry, we face financial risks, geopolitical risks, and technical risks associated with exploration, development, and production. In addition to these many challenges, we must unlock new energy sources in ways that are safe, secure, and environmentally responsible. The key to achieving these goals is effective risk management. 6 Simply put, effective risk management is an operations imperative and the cornerstone of safe, sustainable cooperation between resource owners and energy producers. Maximizing Value Together For more than 125 years, we have proven that there are ways to manage risk so we can achieve our shared goals. We know that effective risk management can be strengthened by long-term planning, sustained investment, and technological innovation and rapid deployment. We have also learned to strengthen risk management with teamwork, international cooperation, and a relentless commitment to implement best practices. Finally, we can strengthen risk management by recognizing and building on the strengths of our national oil company partners while building a clear understanding and strong support from leaders in government. 7 As we look to the future in Kazakhstan, Eurasia, and beyond, it is clear that we all have a role to play in opening up new energy opportunities in ways that make them sustainable and competitive in the market place for decades to come. For example, international oil companies have an opportunity to share cutting edge technology and expertise in national content development. In markets all around the world, we have proven we have the ability to add value along the entire energy value chain. And we have found, with the right policies in place, we can do this while contributing to local communities and economies through mentoring, knowledge transfer, and interaction with international scientific and engineering experts. National oil companies bring a deep understanding of local geology, operating and environmental conditions … established relationships with government and community leaders … and a desire to invest in the long-term education and development of their people. 8 And in this global effort, we have seen time and time again that governments also have a crucial role to play. Importance of Government Policies In the development of future energy supplies, government policies will determine how competitive and how sustainable new sources will be. When governments build stable policy frameworks, uphold the rule of law, encourage free trade and the flow of technology, they create an environment that allows for longterm planning, long-term investing, and long-range partnerships. The energy industry has proven that with such policies in place, we can bring energy to the global marketplace in a way that maximizes value … creates economic and educational opportunity … and protects lives and the environment. Here in Kazakhstan, President Nazarbayev has a vision for the nation and the people, and he sees the potential of 9 energy development in further building a thriving economy with opportunity for all. In order to achieve the president’s vision, government and industry must continue to work collaboratively to address the full range of risk management issues … support policies that advance technology deployment … welcome international experts in developing a globally competitive resource … and engage in a consultative process to ensure legislation can achieve governmental objectives and encourage economic growth. By aligning our efforts through open and mutually supportive dialogue, investments by global industry and local Kazakh business-development can be accelerated. Such open dialogue and sound policy development will help create the business environment that encourages international companies to invest their time and money with confidence. For the national workforce, these policies will lead to training and mentoring in high-tech industries by international experts, including management systems and processes. And for local businesses and local suppliers, 10 international investment can lead to new markets for expansion and development of globally competitive businesses. Industry and government have worked together this year on legislation impacting expatriate work permits. Our collaborative dialogue to find pragmatic solutions to satisfy National Workforce Development objectives is an example of what we must do to achieve more, together. In this dialogue, we have striven to balance the need for workforce skill development and the experience requirements needed to implement challenging projects. We believe that international managers and technical experts living and working in country can have an invaluable multiplier effect, helping accelerate the training and mentoring of more Kazakh citizens to be the scientists, engineers, and business leaders of the future. Finally, government can help by ensuring timely decision making to support the project implementation schedules necessary for commercial viability. 11 Conclusion This December, the Republic of Kazakhstan will celebrate its 20th anniversary as an independent and sovereign nation. We congratulate the president, the leaders, and the people of Kazakhstan. Industry and governments have proven that by working together we can invest, innovate, and open up opportunities that create a better future here in Kazakhstan, Eurasia, and around the world. Thank you. 12