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ExxonMobil CEO Says Arctic Oil Is Needed to Meet Future Demand

ExxonMobil CEO Says Arctic Oil Is Needed to Meet Future Demand thumbnail

The Arctic is the next great frontier for oil and gas — and one of the most environmentally fragile places on Earth.

An Energy Department advisory council study adopted last week said the U.S. should start exploring for oil and gas in the Arctic soon in order to feed future demand, and that the industry is ready to safely exploit the Arctic’s huge reserves, despite recent mishaps.

In an exclusive interview with The Associated Press, ExxonMobil CEO Rex Tillerson, who led the committee that produced the report, talked about why he thinks Arctic exploration is worth the risk. Exxon has decades of experience working in that part of the world, including successful projects in Russia — but also a catastrophic oil spill in Alaska’s Prince William Sound when the Exxon Valdez oil tanker ran aground in 1989.

Below are excerpts of the interview, edited for length and clarity.

AP: Why now?

TILLERSON: There are two important elements for people to understand. One is the timelines that are required. Anytime you are dealing in these frontier areas where you are really driven by technology, these are very long time frames, multi-decade time frames.

The second element is just the enormity of the energy demand in the world. It’s between 85 (million) and 90 million barrels of oil per day today.

We are in the depletion business. There will come a time when all the resources that are supplying the world’s economies today are going to go in decline. This will be what’s needed next. If we start today, it’ll take 20, 30, 40 years for those to come on.

AP: Why the Arctic?

TILLERSON: The size of the resource prize has to be large to support the risked capital that has to be put in place. The Arctic is one of the few places left where we believe those opportunities exist.

AP: Environmentalists would also say that it’s one of the last few places left that are unspoiled. Why not leave it alone?

TILLERSON: Because eventually we are going to need it. It’s back to that insatiable appetite that the world has for energy. Oil demand is going to ­continue to grow as population grows. If you look out 25 years from now we are going to have another couple of billion people on the planet, we’re going to be at 9 billion people. Something like 3 billion people are going to move from poverty into middle class status. When they do that, the energy demand goes up enormously.

As we move out into the middle of this century our outlook shows you are going to need those resources even with a lot of other alternative forms of energy continuing at a fairly aggressive growth rate.

AP: Why put your company’s reputation at risk, especially after Valdez?

TILLERSON: Valdez was a devastating experience for our corporation. What emerged from that was a commitment to develop a systematic approach to managing risk in advance.

Since Valdez, we have gone into some very challenging environments and we have been very successful in developing those using this approach, which identifies the risk, takes steps to mitigate that risk but then recognizes importantly that you cannot eliminate that risk.

None of us live in a zero risk world. We don’t think it’s appropriate nor do we think it’s what our shareholders want for us to walk away from something because we had a bad experience. Rather, we choose to take that challenge on, and we have.

AP: Shell thought it understood the risk of drilling offshore in the Arctic, but then almost immediately had problems when it began work in 2012. How can we be sure the industry is really ready?

TILLERSON: We can develop all of the best technologies and we can prove their efficacy, but at the end of it, it always comes down to execution.

Almost always — and you can look at all of the catastrophes that the industry has experienced — it was never a failure of the technology, it was a failure of people to execute.

We are always dealing with the human element. And that’s probably the most challenging element for us. But I would also say it is not unique to the oil and gas industry. Airlines have human competency problems. Railroads have human competency problems. Everyone has human competency problems.

AP: Given these inescapable human factors, is the Arctic too fragile to expose to this kind of risk?

TILLERSON: Well you could say that about, pick another environment that’s important to people, the Gulf Coast estuary environment. We have that challenge anywhere and everywhere. But pick another activity and I could ask the same question. Do you get on an airplane? You are subjecting yourself to human error. Why do you get in your automobile every day?

There’s been Arctic development since the 1920s. Imperial Oil, our affiliate in Canada, was the first, in Norman Wells. There’s been a lot that we have already done and demonstrated we can do.

AP: You can look for oil almost anywhere in the world. How does the U.S. Arctic compare to other opportunities you have?

TILLERSON: The U.S. is important to us but we’re not the ones deciding how to go about that. The leasing plan dictates that, the regulatory framework dictates it, and today we find it very difficult to work in the U.S. arctic because of those two factors. Other countries are taking a different view and they are moving ahead.

AP: How can you try to convince people that this is the right thing to do?

TILLERSON: First, we try to work at a very broad context so the American people understand this is important to them.

Obviously, we’ve got a huge economy here that has to be fed. If we stopped today, everybody’s lights would be going off before not too long because there wouldn’t be anything to fuel that.

When we’re trying to influence policy and regulation, it’s really around how do we get the right regulatory and fiscal regime in place that allows us to continually do what we need to do, which is replace all of this, and sustain it, and grow it for the future economic growth and demand that we know is coming.

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13 Comments on "ExxonMobil CEO Says Arctic Oil Is Needed to Meet Future Demand"

  1. Rodster on Sat, 4th Apr 2015 9:31 am 

    All you read from this is BAU. They have zero plans to move to alternative energy until it’s way too late. He’s giving a timeline of 40 years max with more than 9 billion on this planet with absolutely NO exit strategy.

  2. Kenz300 on Sat, 4th Apr 2015 9:45 am 

    Exxon Mobile is out of touch…………

    It is time for OIL companies to transition to “ENERGY” companies by moving away from fossil fuels and to safer, cleaner and cheaper alternative energy sources.

    Climate Change will impact all of us…… even the top 1%

  3. paulo1 on Sat, 4th Apr 2015 9:53 am 

    Would this energy even be affordable? Shale is marginal as is Oil Sands. Arctic produced in this century? Not likely.

    The cheap stuff is gone. We know we need to get off the drip, anyway. Time to transition.

  4. dave thompson on Sat, 4th Apr 2015 10:20 am 

    Arctic oil is the end.

  5. Nony on Sat, 4th Apr 2015 10:24 am 

    Drill, baby, drill.


    Hey…it worked. Peakers got their butts kicked.

  6. Plantagenet on Sat, 4th Apr 2015 11:07 am 

    People who are upset that the head of ExxonMobil isn’t advocating for alternative energy don’t understand that the job of the head of ExxonMobil is to find and sell oil.

    There clearly is a lot of oil in the Arctic. If Exxon and BP and Total and Husky and Shell etc. don’t get it, then Russia will.

  7. Apneaman on Sat, 4th Apr 2015 1:20 pm 

    Good ole Rex Swindlescum knows folks need a strong economy and jobs to pay their ever increasing bills. Especially the ones that are a result of burning fossil fuels.

    Flood Insurance Rates To Increase April 1 for Thousands of Homes Along U.S. Coastline

    “How much could they increase? In some areas where flood maps show maximum risk, premiums that were previously $500 could be raised to as much as $20,000 a year or more, according to estimates released in 2013.”

  8. Perk Earl on Sat, 4th Apr 2015 2:00 pm 

    “We are in the depletion business. There will come a time when all the resources that are supplying the world’s economies today are going to go in decline. This will be what’s needed next. If we start today, it’ll take 20, 30, 40 years for those to come on.”

    You know what he’s doing? He’s admitting peak oil and distancing the oil business from responsibility for providing sufficient oil in the future, by disclosing time requirements needed in the Arctic to meet those demands.

    He’s covering his ass, but he’s also covering the entire oil businesses ass.

    Trouble is, if oil price cannot rise to support such an undertaking then Arctic oil will remain undisturbed. Disclose all he wants, but ultimately it’s what the consumer can afford that dictates what resources are a viable pursuit.

  9. Apneaman on Sat, 4th Apr 2015 2:39 pm 

    King Rexxon and CO might be able to start exploring in the Antarctic too… a matter of decades. Were going to need lots of liquid fuels to move all the coastal cities inland. Not an if – a when.

  10. Davy on Sat, 4th Apr 2015 3:53 pm 

    Perk, he is using a indirect watered down version of PO to pitch his marketing plan to the general sheeples investor. His job is not to tell the truth. His job is to tell his version of the truth. These guys are not going to waste their time on anything but maximizing there bottom line especially when they reach the big boy size.

    At the big boy size it is truly predatory capitalism. They have the power at that size to be corrupted by power. They are a highly competitive bunch that love a battle among themselves. Yet, all of them will protect each other unless cornered like congress did during the BP debacle. The sooner these parasites diminish the better.

  11. shortonoil on Sat, 4th Apr 2015 5:21 pm 

    Tillerson is appealing to his stockholders, the investment community, and Washington. The petroleum industry has had first call on the world’s capital inventory for over a 100 years. That is changing faster than the industry ever imaged it could happen. Exxon will not be producing Arctic oil at $50/ barrel. No one will be producing that oil at $50/ barrel.

    To maintain their preferred position, the industry is deferring to the fantastic. Oil can not be produced out of the Arctic that the economy can afford to buy. With conventional fields depleting out, shale a dead man walking, and reserves falling the industry is desperate to preserve the illusion that it can continue to power the world into the future.

    The industry will not be able to do that, it is not the industry that will be at fault. It will be oil itself that can no longer supply the world with the energy that it needs. Tillerson admitted it himself, “We are in the depletion business.” When the depletion is concluded, so also will be the business. That day is arriving faster than the industry ever imaged it could happen.

  12. shortonoil on Sat, 4th Apr 2015 5:36 pm 

    Hey…it worked. Peakers got their butts kicked.

    It wasn’t the Peakers who got their butts kicked, it was the investors who lost $1 trillion. They are going to feel the shoe print of shale for the next century. If they had listened to us they would still have their pension plans, and life savings.

  13. AWB on Sun, 5th Apr 2015 4:27 pm 

    Incredibly, Tillerson is not a climate change denier. But his take on the results of climate change is “We’ll adapt.”

    Talking to Rex about Arctic oil exploitation is like talking to Charles Manson about child care.

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