Remarks by Rex W. Tillerson1
Chairman and CEO, Exxon Mobil Corporation
The Executives’ Club of Chicago, Chicago, Illinois
December 11, 2008

http://www.exxonmobil.com/corporate/...

"Americans consume the equivalent of about 50 million barrels of oil every day from all sources — and it is the energy industry that delivers this vital commodity. To do so, America’s energy producers must manage risk carefully — often decades in advance."

"The importance of risk management has never been more evident than in recent months, as critical sectors of our economy have experienced significant challenges stemming from the failure to assess and handle risk wisely."


"Energy involves more than economics, of course. Concerns about energy security and the environment also factor into the discussion about energy"

"One of the most important insights to follow from this fact is that meeting the growing demand for energy — in this country and around the world — will require developing all economic energy sources."

"Another defining characteristic of the energy industry is its commitment to long-term thinking. The timeframes involved in the energy industry are enormous. While politicians think in terms of two-, four-, or six-year election cycles, we in the energy business must think in terms of two, four, or six decades, based on the lifecycles of our capital-intensive investment projects.
To take just one example, the resources ExxonMobil is currently producing from Sakhalin Island in Russia were first discovered in the 1970s, and production will likely continue through mid-century — all told, about 75 years. Seventy-five years ago, Franklin D. Roosevelt was serving his first term as president.
These long-term projects require massive, long-term investments. And such investments will require stable, long-term energy policies. The International Energy Agency estimates that the world’s energy producers will need to invest close to $500 billion per year through 2030 to meet the growing demand for oil and natural gas."

"In the energy sector, there is currently no single theoretical breakthrough awaiting technological implementation. Instead, we find several incremental technological advancements across a range of energy sources — including improved ways to produce and use oil and natural gas. In the energy field, there simply is no one silver bullet."


"The access challenge we face is not just a domestic challenge. It is a global challenge. In the years ahead, access to energy resources around the world will affect America’s energy security."

Michael Lynch Commentary

Analysis: Mr. Tillerson’s speech before a gathering of the Executives’ Club of Chicago covered the waterfront in its discussion of the challenges not only before XOM but indeed the entire industry as well as the nation and the world at large. The text of the speech covered six and a half pages and can be read in full on the XOM website. The thrust of his address was that today’s downturn is but an incident in the long, steady growth of the international oil and gas business. The reason for its growth is that people need energy and each year more and more people exist. Limits to growth of the industry cannot be seen. The theme of the message was that cooperation between industry and government is necessary to provide inexpensive, reliable energy. Confrontation lead to ineffiencies and higher prices as well as ill will. Citizens should understand the fundamental role of energy companies in society. XOM tries to get that message across and plans to do its part. The company is famous for its Spartan approach to oil field exploration and development as well as extreme penny-pinching in downstream and petrochemical operations. XOM believes in simplicity in all of its endeavors. The motivating force behind all this is the philosophy that shareholders should be rewarded as richly as possible, good times and bad times. Long term shareholders realize this and have complete confidence in the top management of the company. Mr. Tillerson knows that downturns come and go and the only constant in the oil and gas business is that only rarely is there what can pass for “normal” conditions. The nature of the business is that there is a crisis right around the corner all the time. But people must have transportation fuel and heating oil and petrochemical products. When crude oil sells for $20/bbl, ExxonMobil can make money. When it sells for more, they make more. In the year 1998, the average price of West Texas Intermediate was $14.39/bbl. That year XOM earned $6.4 billion, the 4th highest earnings in the history of the company. CEO Lee R. Raymond noted in the 1998 letter to shareholders that the company avoids “stop-and-go” capital spending because it is inefficient. With plenty of cash on hand plus a “triple A” credit rating, XOM can pursue the vitally important projects year after year with the knowledge that the price of crude oil, whatever it may be, will be high enough to guarantee a good profit and a healthy rate of return. The year 2008, even with a slow fourth quarter, will at least equal the profitability of 2007 and may well exceed it. As for 2009, the company will continue to prosper and reinvest profits to ensure a long era of growth not only for the company but for the world’s economy. The incoming administration so far, has shown no overt hostility to the industry in general or XOM in particular. Facing many daunting challenges, hopefully it will work with and not against the oil and gas industry to find the several answers to questions addressed by CEO Tillerson.

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