Oil remains the driving force Exxon Mobil's Tillerson says an alternative fuel is at least 30 years away
12:00 AM CDT on Tuesday, May 30, 2006 By ELIZABETH SOUDER / The Dallas Morning News
Exxon Mobil Corp. chief executive Rex Tillerson fully expects the world to switch to some form of energy other than oil.
JIM MAHONEY/DMN Rex Tillerson expects questions on alternative fuels at his first shareholder meeting as Exxon Mobil chief executive. But getting there will take at least 30 years, even if scientists come up with a breakthrough tomorrow that would make an alternative fuel financially viable.
That's why Exxon isn't investing in alternative fuels, though the company is funding research on biofuels and hydrogen energy, Mr. Tillerson said.
"What I know is, the day I die, I'll probably get driven to my funeral in something that uses hydrocarbons," Mr. Tillerson, 54, said in an interview with The Dallas Morning News.
On Wednesday, when Exxon holds its annual shareholder meeting, Mr. Tillerson will face questions from environmental groups about his choice not to invest in alternative fuels.
It will be Mr. Tillerson's first annual meeting as chief executive officer; he took the job in January.
As Americans debate ideas to cut oil use, developing countries such as China and India are demanding more fuel.
Mr. Tillerson must consider how to meet that demand and how to compete with the national oil companies in China and elsewhere that are hungry for more oil reserves.
And in some parts of the world, politics are making it more difficult for Exxon to compete for the right to develop oil fields.
Venezuela has been a particular thorn for some oil companies of late, pushing for greater financial ownership of production in the oil-rich Orinoco River basin.
With gasoline prices relatively high, are you concerned that people will stop using so much gasoline?
I think it would be a good idea if people used gasoline a little more efficiently. I'm not worried about it because you know gasoline, oil, natural gas, are so instrumental to people's lives today, both from an economic standpoint and from a quality of life standpoint.
And there is absolutely nothing out there for the next 30 years that's going to change that. ... Now, I'm not saying therefore I have a captive market and I can treat it however I want to. That's not the case either, because there are plenty of other people who want to sell gasoline into the market, too. ...
People will ... alter their habits around how to use gasoline when it gets too high ... unless people have concluded that this price is not inconvenient to them.
Some of your competitors are investing in alternative fuels. Why have you chosen not to?
So far everything I see others investing in, they're losing money. There have been huge write-offs by some of my competitors of their investments in solar energy. There have been huge write-offs by some of my competitors of their investment in wind.
This biofuels phenomenon is very recent, like in the last six months. And it took an act of Congress to mandate its use and to leave in place a subsidy to make that work.
You've talked in the past about breakthrough technologies that might push the world to a new kind of fuel. What technologies are you thinking of?
We're continuing to support research into cellulosic conversion to ethanol. ... The president's famous switch grass would be an example of that. Yes, people know how to do that today, but they do not know how to do it in a way that's economic.
When will cellulosic ethanol, or using plants to make fuel, be economically viable?
It's going to take breakthroughs in both the development of the enzymes that convert the cellulosic material to ethanol [and] how to deal with that in a large-scale way.
Because it's one thing to produce a few thousand gallons, but when the country's consuming tens of thousands of gallons a minute, that doesn't get you anywhere. ...
There are huge infrastructure requirements to replace what's here today, and that will take decades. ...
We have an obligation today to keep the economy running and to keep people supplied with energy, and what do you want to do between now and the time those breakthroughs are available?
You don't want to invest in a breakthrough or alternative technology until you feel more confident?
The point that maybe I haven't made clear enough yet: The alternatives available today, most of them are old technology. And, yes, people will continue to work on those, and they'll refine them. And if you've got $70 oil, some of those probably will make sense.
We happen to believe that the price of oil, it is a commodity, it goes up, it goes down, and as we look over the long term, we don't think those things make sense. They have niche applications that will be valuable to people, but when you are talking about the global use of energy, they're not going to replace that.
But you're working on a lot of giant oil production projects that have 30-, 40-year timelines. What about the risk that we'll move to an alternative and your oil won't be needed?
That's not going to happen. If you had a breakthrough tomorrow, how fast could you put it in the hands of every consumer? ... It will take decades. Because the current form of energy as we use it has evolved over decades.
The day will come when we'll move from oil and fossil fuels to something different. It may or may not come in my lifetime. But what I know is, the day I die, I'll probably get driven to my funeral in something that uses hydrocarbons.
Exxon faces some new areas of demand for oil and gas, like China and India. How do you adapt to growing demand in those areas?
Demand is going to grow, as you've heard us say, by about 50 percent over the next 25 years. ...
To the extent there are consumer opportunities for products in different countries, whether it be China or India or any other rapidly developing economy ... if it looks like there's a role for us, then we may enter those markets.
What portion of your revenue do you think might eventually come from China?
Over the next couple of decades, it will not be that significant. ... We have active engagement in conversations with the government as they set policy, as they set regulations. ...
As things develop, we can make further judgments on whether we expand our presence there or not. But that will be, I think, a fairly slow process.
How would you describe China's national oil company as a competitor?
There are a lot of areas of new technology ... where they clearly are going to have to partner with someone. ... You move into where the new major resource development is, whether it be arctic, deepwater, liquefied natural gas, things like that, they typically participate with others.
There are situations where they are direct competitors, and oftentimes they are willing to accept terms, economics, that we just don't find attractive to our investors.
So they may gain access to some resources due to being willing to accept a lower economic threshold.
Why does a country like Venezuela need Exxon, if other companies are willing to go along with Venezuela's demands?
What Exxon Mobil has to offer, first and foremost, is our technology and our know-how. We used to say we have our financial strength to offer, but in today's environment almost everyone can claim they've got the money to do these things. ...
While people may have the money to invest today, these developments go on for decades. ... Even when times get bad, you don't have to worry about us bailing out or walking. We'll be there.
If countries like Venezuela make it more difficult for the big technology companies to work there, does that jeopardize world oil production?
Well, it jeopardizes Venezuela's production. ... Their real national treasure is their heavy oil, the Orinoco, where there are tens of billions of recoverable barrels. But that is a very unique and difficult-to-produce resource. ... We have particular technological capabilities in dealing with that type of crude. ...
To the extent that Venezuela closes its doors to those that have the best technology and the best know-how and the best operational efficiency, then they probably jeopardize the recovery of their national resources.
Now, if they do that, then, yes, it means there is less Venezuelan crude oil that's being put into the global market place to meet future energy demand.
Is Venezuela's Orinoco oil field too big to walk away from?
Well, nothing's too big to walk away from for us. I've made the comment many times, and I don't say it to sound arrogant or cavalier in any way, because every resource is important to us. ...
Because of our global reach and our scale and our size, there's not a single opportunity or holding we have out there that jeopardizes the health of the company.
And we built it that way on purpose. It is one of the reasons that Exxon and Mobil merged.
