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Oil industry to tackle energy questions

Top executives will meet this week to discuss supply challenges and fossil fuel alternatives.

February 12, 2007|John Porretto | The Associated Press

HOUSTON — With dwindling oil supplies, pollution concerns and the ever-present threat of gas prices soaring again, talk of new and better ways to fuel our cars, heat and cool our homes and power our factories has never been greater.

What's more, the conversation is emanating increasingly from a source that's been surprisingly quiet until recently -- the oil companies themselves.

When some of the industry's top executives gather in Houston this week to discuss global energy challenges, finding new and more effective ways to produce oil and gas -- as well as alternatives to fossil fuels -- will dominate the discussion.

And, as the year progresses, expect to see industry leaders speaking in cities across America in an unprecedented campaign to educate the public on energy-related issues and discuss such topics as ethanol and renewable fuels. It's also an opportunity for the companies to polish their images.

Why now? The reasons are varied, but increased public and congressional scrutiny of oil companies because of up-and-down gasoline prices and record profits certainly is a factor. The companies' own bottom lines also play a key role: The cost of finding and tapping new oil and gas reserves is on the rise while the worldwide appetite for energy is only getting bigger.

"There's never been as much effort going into technological innovation across the whole energy industry as we're seeing today," said Daniel Yergin, chairman of consulting firm Cambridge Energy Research Associates and author of "The Prize," the Pulitzer Prize-winning history of the oil industry.

At CERA's annual weeklong conference that begins today, dozens of the industry's heaviest hitters -- including the chairmen of Exxon Mobil Corp. and Chevron Corp. and a top official of the Organization of the Petroleum Exporting Countries -- will discuss topics such as supply and demand and initiatives to develop new sources of energy.

Already, the discourse is in full swing across the country, led by some unlikely figures.

John Hofmeister, head of Royal Dutch Shell's U.S. arm, and James Mulva, ConocoPhillips' chairman and CEO, are taking part in separate speaking tours with other representatives of their companies, talking and listening at town hall meetings in such places as Edwardsville, Ill., and Little Rock, Ark.

Outlining his company's 35-city tour recently, Mulva acknowledged that he and others have traditionally done a poor job of conveying to the public how their businesses operate, the challenges they face and the advances they're making.

Often, the public's main connection with oil companies comes from filling up cars at the gas station or, recently, reading headlines of record profits. For example, Exxon Mobil this month shattered its own record for the largest annual profit by any public company, bringing in $39.5 billion. And ConocoPhillips reported its best-ever full-year earnings, $15.5 billion for 2006.

But what is generally unknown, Mulva said, is that U.S. oil companies have invested $11 billion in North America on renewable and other forms of energy in the last five years.

The task of weaning Americans and the rest of the world off fossil fuels will be monumental and lengthy. Renewable energy sources such as wind and solar supply only about 6% of the U.S.' energy needs, according to the U.S. Energy Information Administration. That figure is expected to grow only to about 7% in the next 20 years, the agency forecasts, meaning fossil fuels will still carry the bulk of the load.

Mulva said all types of efficient energy sources are needed, but market forces and consumer preferences, not federal mandates, should determine how they're used. He called President Bush's proposal for expanding ethanol use to reduce gas consumption "very well motivated" but said industry leaders "want a seat at the table" when government officials set standards for the use and development of alternative energy sources.

"We believe very strongly the best way of meeting those metrics is to determine what they are and then let the industry ... come up with the resources and plans to meet those, [rather] than have mandates saying specifically, 'You have to do it this way and that,' " Mulva said.

Oil companies already are investing heavily in alternatives and new ways to get oil and gas out of the ground.

BP, which earned $22 billion in 2006, plans to spend $8 billion over the next decade developing alternative energy using wind, hydrogen and other means.

Shell is testing technology that involves drilling holes in fields and inserting electric heaters to gradually heat rock, causing the trapped organic matter -- kerogen, in this case -- to be released as oil and gas.

Yergin said another clear indication of the rising interest in cleaner and more efficient energy is growing investment by venture capitalists.

Last year, venture capital investments in industrial and energy deals more than doubled from the year before to $1.8 billion, according to data from Thomson Financial, the National Venture Capital Assn. and PricewaterhouseCoopers. About 40% of that money was earmarked for alternative energy.

"I've taken to calling it 'The Great Bubbling,' " Yergin said. "Some of it is going to lead to very major changes."

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