HEARING ExxonMobil’s chief espouse the virtues of capitalism at the World Gas Conference yesterday was hardly surprising – he is, after all, a Texas oil man. Be that as it may, he did make some salutary points that should provide food for thought for those federal and state governments in Australia currently grappling with energy policy. By Paul Garvey in Kuala Lumpur*

ExxonMobil CEO Rex Tillerson

Tillerson held up the North American gas market as a shining example of what can happen when an industry is left to evolve on its own in a comparatively free market.

The result has been the incredible rise of the unconventional oil and gas industry, which has turned the supply situation in the US on its head. The country is now awash with gas, prices have collapsed and the country is poised to enjoy an industrial advantage over rival nations on the back of its cheap and plentiful gas supply.

It has not been without its controversies, and the perceived risks associated with the controversial fraccing process have led to pockets of resistance from a number of communities in North America. The Canadian province of Quebec, for example, has called a moratorium on shale and coal seam gas exploration, and the Greens in Australia are calling for similar action.

Addressing the World Gas Forum in Kuala Lumpur yesterday, Tillerson said governments risked seeing their countries’ economies go backwards if they stifled innovation and investment in the oil and gas sector.

“The regulatory pathway in each nation should provide certainty and understanding between government officials and business leaders,” he said.

“Regulations should provide a clear efficient roadmap for how to get things done, not a complex tangle of rules that are used to stop things from getting things done.”

The companies working to progress their projects through Australia’s multi-layered approvals process – particularly those caught up in the debate about the merits of coal seam gas extraction – would no doubt support Tillerson’s comments.

He also warned that governments shouldn’t get into the business of “picking winners” when looking for new sources of energy.

In free market USA, gas prices had risen to record levels as companies studied the construction of LNG import terminals. Those high prices also inspired the unlocking of the shale gas and coal seam gas reserves that had previously been uneconomic, working far more effectively than any government mandated energy subsidy has ever done.

It’s a lesson worth remembering as the federal government begins allocating money from its carbon tax to renewable energy projects.

Tillerson was also particularly excited about the potential to replicate the unconventional oil and gas successes elsewhere around the world.

“Here in Asia, there are promising formations that await detailed studies in nations across the continent. There are also areas for potential development outside Asia, such as Latin America, northern Africa and Europe,” he said.

While Exxon and Tillerson have come under fire for their $41 billion acquisition of unconventional oil and gas producer XTO Energy at what looks like it was the top of the market, the Texan was adamant that demand for gas is at the start of an incredible global growth spurt.

“The world needs affordable supplies of energy on a scale unprecedented in human history,” he said.

“Expanded economic output and 2 billion new consumers by 2040 will mean global energy demand will likely grow by more than 30 per cent. This 30 per cent increase by the year 2040 is more than the current energy demand of Russia, India, all of the nations of Africa, Latin America, the Middle East and the Caspian region combined.”

Tillerson also took something of a swipe at the analysts critical of the XTO deal and the short-term outlook for the unconventional gas business in North America, saying their concerns missed the bigger global picture.

“Some market analysts focus on the short term and at current prices worry about oversupply. Some even see an expanding LNG trade as a concern.

“But for those of us focused on the long term our concern is making certain the global economy has reliable and affordable supplies of energy for the robust growth and demand ahead.”

*First published in sister publication EnergyNewsPremium.net on Wednesday.

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