Mulva touts natural gas as sustainable, abundant

Natural gas is the key to fueling global energy demands and fostering economic growth, outgoing ConocoPhillips CEO Jim Mulva told the World Petroleum Congress this morning.

But in a speech before the 20th annual gathering in Doha, Qatar, Mulva also warned that government policies favoring renewable energy or hindering natural gas extraction could stifle production and use of the fossil fuel.

“Nature has given mankind the gift of natural gas,” Mulva said, according to prepared remarks. “Our hope now is: Please don’t let government mess it up.”

Mulva’s message today echoes the themes of a nationwide advertising campaign ConocoPhillips launched in September to convince policymakers and consumers that expanded natural gas production can provide low-cost energy and high-paying jobs. Companies such as Exxon Mobil and industry trade groups, including America’s Natural Gas Alliance, have launched similar initiatives, as U.S. energy producers with big natural gas portfolios struggle to deal with a relatively low price for the hydrocarbon.

Mulva used his presentation in Qatar to urge government regulators to foster development of natural gas, which he described as a sustainable, environmentally friendly option compared to alternatives such as coal.

“Our ability to deliver benefits offered by natural gas depends greatly on government policy,” Mulva said. “There are countries such as Qatar where government is supportive of development, but there are others in which government does little to help — or even discourages the use of gas.”

Mulva blamed policies to exclusively promote renewable energy and the “hostility” of some policymakers toward fossil fuels amid concerns about global warming.

“There are legitimate reasons to seek reductions in greenhouse gas concentrations in the atmosphere,” Mulva said. “But we must also recognize reality. Using natural gas instead of more carbon-intensive fuels is the fastest, lowest-cost way to reduce emissions.”

The World Petroleum Congress began Sunday in Qatar, marking the first time the event has been held in the Middle East, even as turmoil in the region threatens further disruptions of oil supplies. It continues through Dec. 8.


Below, read the full text of Mulva’s speech, as prepared for delivery.

Deputy Minister Dupont, ladies and gentlemen, I appreciate the opportunity to serve on
this distinguished panel. I always enjoy visiting Qatar. ConocoPhillips holds substantial
interests in the Qatargas 3 LNG and Q-Chem ventures. So I’ve been here many times.

It has been exciting to see Qatar become one of the world’s most vital energy-producing
countries. And production of natural gas and LNG has truly benefitted its people.
They’ve realized economic growth, job creation and sustainable industrial and social
development.

So in pondering our moderator’s points – the need for energy security, economic
opportunity and sustainability – natural gas immediately comes to mind. It addresses all
three. Whether it comes from LNG in Qatar, shale in the U.S., or even hydrates from the
ocean, gas in all its forms is needed to supply world energy. For both the short and long
terms.

Let’s start with energy security. You probably know of the North American shale gas
revolution. A mature industry was reborn through technology. By using horizontal
drilling and hydraulic fracturing, production is now possible from source rock. As a
result, U.S. gas reserves are up 65% since the mid-1990s, and still rising. We now
estimate more than a 100-year supply in North America.

Well, technology has no borders. Dozens of countries are now finding potential for shale
gas. As well as for unconventional gas from tight sands and coal seams.

Consider the implications. The world uses about 110 trillion cubic feet of gas a year.
Recoverable conventional resources of 14,000 trillion cubic feet represent at least a 120-
year supply. Adding the recoverable unconventional gas doubles that, to nearly 250
years. Even this could rise with new technology.

Further, thanks to growing LNG transportation, neither supplies nor users remain
stranded any longer. Natural gas found almost anywhere can find markets. And
consuming countries can gain access to the gas they need.

Beyond that, there are massive methane hydrate resources under the ocean floor and in
the Arctic. This is gas trapped in a matrix that resembles ice. Hydrates have never been
produced commercially. But they could potentially add more centuries of supply. Even
without them, shale gas and other unconventional resources are transforming the energy
market.

So natural gas can certainly ease today’s energy security concerns. And hydrates may one
day contribute as well.

Next is economic opportunity. Qatar’s experience demonstrates the economic benefits of
encouraging natural gas production. It has helped give Qatar the world’s highest gross
domestic product per capita. As well a 19.4% economic growth rate last year – the
world’s highest.

We’re also seeing the benefits of natural gas production growth in the United States,
Canada and Australia. Last year, U.S. production was 22.6 trillion cubic feet, or one-fifth
of the world’s total. Its wellhead value was nearly 100 billion U.S. dollars – certainly a
substantial economic contribution. Had this production occurred in Europe or Asia, its
value would have been even higher.

But this is only part of the total benefit. It is estimated that natural gas helps sustain 2.8
million jobs in the United States. These include more than 600,000 direct jobs in field
operations, drilling, distribution, pipeline construction, equipment manufacturing, site
preparation and others. Next come 700,000 indirect jobs. These are people who work for
companies that supply products to service industries. And finally, 1.5 million more jobs
are induced, when the direct and indirect employees buy goods and services. Add it up,
and the annual value-added benefit of these jobs approaches 390 billion U.S. dollars.

Those familiar with the U.S. might say these benefits stem from unique factors. Such as
the long U.S. producing history, legacy fields, and established producing and
transportation infrastructures. True, these are advantages.

But the shale gas revolution is creating new jobs, by the thousands, from new resources.
For example, we’ve seen one shale trend create 140,000 jobs in a few years. Another
added 100,000 jobs in a decade. And there are drilling booms in a number of areas.

The shale revolution is now spreading to Western Canada, adding to job creation and
economic opportunity there. Meanwhile, in Australia, coal seam gas is creating thousands
of jobs in producing fields and LNG projects.

So natural gas can contribute enormously to economic opportunity. Given the geological
resources and favorable conditions, our industry can create thousands of jobs – quickly.

Further, the availability of abundant and reasonably priced energy and feedstock drives
job creation in other industries. Such as petrochemicals. Again, Qatar is a good example.

Now, let’s consider sustainability. Here too, natural gas represents an excellent solution.
It offers real and attainable environmental and climate benefits. For example, natural gas
produces little of the nitrogen, sulfur compounds and particulates that cause acid rain and
smog. So it’s particularly attractive in areas suffering from air pollution.

When used for power generation, gas produces only half the carbon dioxide of coal – a
vital climate benefit. Its production requires only 1/20th the land footprint of equivalent
wind energy. Electric generation plants fueled by gas use 60% less water than coal plants
of equal capacity. And they do it without producing soot or fly ash.

Also, natural gas can facilitate the use of renewable energy, by providing backup power.
Gas-fired plants are very flexible. They can ramp up quickly when the wind doesn’t
blow, or the sun doesn’t shine. And if electric vehicles really catch on in the future, we
could recharge them with power from gas-fired generators – cleanly and efficiently.

Further, there is a tantalizing possible breakthrough ahead. ConocoPhillips has patented a
theoretical approach to producing hydrates. It would inject carbon dioxide into the target
formation to free the methane, while permanently storing carbon. This addresses both
energy and climate concerns. We are in the early stages of testing. It will be a while
before we know if it works.

So sustainability is the third solution provided by natural gas, after energy security and
economic opportunity.

However, in attaining these solutions, the role of government must always be considered.
That role can vary, from support and encouragement, to frustration.

During the 1980s, after the first great energy boom ended, times were tough. There was a
saying back then. “Please give us just one more energy boom, and we promise not to
mess it up.” Today, we realize that nature has given mankind the gift of natural gas. But
our hope now is, “Please don’t let government mess it up.”

Our ability to deliver the benefits offered by natural gas depends greatly on government
policy. There are countries such as Qatar where government is supportive of
development. But there are others in which government does little to help, or even
discourages the use of gas. There are two core reasons.

The first is the mistaken belief that world gas resources cannot meet long-term needs.

Those holding this belief assert that renewable energy is therefore the only viable path
forward. As I’ve said, the world holds centuries of potential gas supply. Enough for
multiple generations. Also, with a world population headed toward 10 billion people,
clearly all energy sources, including natural gas, will be needed.

The second reason that some governments discourage the use of gas is their hostility
toward fossil fuels. This is based on concern over global climate change. There are
legitimate reasons to seek reductions in greenhouse gas concentrations in the atmosphere.
But we must also recognize reality. Using natural gas instead of more carbon-intensive
fuels is the fastest, lowest-cost way to reduce emissions. In fact, switching from coal to
gas brings greater reductions than you can achieve by switching from gas to renewable
sources.

But by mandating the use of renewable energy, governments cause unintended
consequences. When utilities are forced to incorporate renewable power, in many cases
they must shut down other sources. For technical and economic reasons, they don’t shut
down coal-fired power. Instead, they shut down gas-fired plants. As a result, renewable
energy mandates tend to back out natural gas – a clean fuel – rather than coal. So the
desired reductions in emissions are not materializing in the manner that governments
intend.

Keep in mind, too, a potential decline in nuclear power use. After the Fukushima disaster,
about 3/4ths of Japan’s nuclear power-generation capacity was down. Fortunately, LNG
assumed much of the load. This proves the capability and flexibility of the world LNG
market. We see the same potential for Europe, if some countries scale back their nuclear
power use.

Obviously, we oppose governmental mandates that pick technology winners by forcing
the use of renewable energy. These sources are typically more expensive than natural gas,
so they drive up consumer costs. They also retard demand for gas – itself a clean energy
source.

Our industry faces some daunting challenges. First is dealing with opposition to fossil
fuels that is all too common in the developed countries. We hear repeated calls to replace
nuclear and coal, to alleviate safety and climate-change concerns. But we also hear
assertions that any fossil fuel is unacceptable. This sends mixed signals on security of
demand – both to gas producing countries such as Qatar, and to companies seeking to
invest for the long term. So we must continually point out the benefits of natural gas.

Our second challenge is preserving our ability to make the financial investments required
to supply the energy society needs. Too many governments are deep in debt. And they
regard our industry as “deep pockets” to target for new taxes. This despite the fact that
our industry’s effective global tax rates already far exceed those of other industries.

And third, we face difficulties in gaining access to resources. Sometimes, we face
opposition best characterized as “NIMBY,” or “not in my back yard.” Also, resource-rich
countries face the challenge of deciding the best way to develop their resources.
We believe that Qatar has chosen an ideal path. They invite in foreign companies, and
benefit from the resulting financial investments and sharing of technology. Not all
countries follow this approach.

To overcome these challenges, we have work to do. We’re going to have to take greater
responsibility for communicating with key stakeholders. And for ensuring that the
industry operates with the highest standards.

We have a great success story to tell with natural gas – a clean fuel with abundant long-
term supply. Further, we don’t need new technological miracles. The miracles have
already occurred – horizontal drilling, hydraulic fracturing, liquefaction and
regasification, global LNG transportation, combined-cycle power plants, shale gas, coal
seam gas and many others.

Thanks to LNG, we have a rapidly developing global infrastructure, with redundancy of
suppliers and markets. This improves demand security for producers, and supply security
for consumers. Given time and further development, it also offers a path to shared
economic prosperity, political stability and peace.

For all these reasons, ConocoPhillips is conducting a public information campaign on
natural gas. Some of our peer companies are doing the same. Regardless of what
countries we call home, we must all engage in a global effort to earn the trust of the
public and government.

Natural gas offers solutions to energy security, economic opportunity and sustainability
for the entire world. It’s our responsibility to not only supply natural gas, but serve as its
advocate.

Thank you.

4 Comments

  1. hgnis

    I always find it funny when a snake in a suit climbs to the top and starts spouting philosophies about the future, vision, hope, integrity and kumbayah.

    #1
  2. Bob_R_Roberts

    Sustainable would mean that new sources were being produced as fast as the current sources are being consumed. Are methane hydrates being formed at that rate?

    #2
  3. Trail Tramp

    @hgnis, Obama was never mentioned specifically in the article, but I understand your sentiment.

    #3
  4. Sean

    Mulva–that was the name Jerry Seinfeld gave one of his girlfriends because he couldn’t remember her name.

    #4