 Well good afternoon. I'm Mark Zobac and I'm happy to be moderating this session on natural gas in the energy transition We're going to start with a question on the role of natural gas today and the future of natural gas in a Decarbonizing energy world and we have an absolutely wonderful panel with diverse backgrounds from a disciplinary point of view and also diverse sort of geographic perspective We have Sarah Ortweing the CEO of XTO one of the the major producers of unconventional Natural gas in both North America and Argentina. We have Frank Mele from azimuth cap capital in in Calgary and we have David Carroll president of the Gas Technology Institute and the immediate past president of the International Gas Union So I want to tackle this question sort of Geographically first so I like to start in the United States and then we'll sort of expand out from there So Sarah could you sort of give us a perspective on where you see natural gas today and where is it going? Well first off. Thank you mark. It's great to to be here ExxonMobil and XTO have had a long partnership some 15 years or more With Stafford University first as part of GCEP and most recently as a founding member of the Stanford Strategic Energy Alliance So we've worked together for many years on on research That's that's really critical for what we're talking about here and that's that's growing energy resources To be able to meet the growing demand, but also at the same time Deal with the dual challenge of protecting our environment as we grow those resources. So Appreciate being here to be able to talk about this You know, I think all of us that are here today realize that there's a trans an energy transition that's underway and Whether you're representing the oil and gas industry the nuclear industry or renewables whether you're part of industry academia NGOs all of us have a very important role that we play in making sure that we're developing solutions for the future We're focused on solutions that are affordable and that are scalable And that's I think where natural gas really comes in and plays a strong role for us. It has a critical role to play the abundance of Affordable very versatile and reliable natural gas brings a lot of benefit for both consumers and For the environment here in the US, but also around the world So I'll just start with the economic benefits You know that we're seeing as a direct result of natural gas growth Many of you know over the past decade the shale revolution here in the US has really unlocked huge supplies of energy that we originally thought was was inaccessible and And it really hasn't been very distant past where we were having a lot of conversation about scarcity and shortages of energy, but the growth in unconventionals and an unconventional gas has really shifted Shifted that paradigm dramatically and now, you know, I would say that natural gas is really a pillar of US economic growth and strength Jobs are being created The manufacturing domestic manufacturing industry is flourishing and energy costs for consumers are quite low a lot of that because of the growth in natural gas for example low-cost shale gas is spurred over 200 billion dollars in chemical manufacturing investments and Ultimately, that's going to support a growth in jobs of probably about 785,000 jobs Average energy costs fell 34 percent between 2008 and 2016 from a record high To a record low energy expenditure share in less than a decade so significant Benefits that we're seeing and it hasn't been very long where we were talking about LNG import terminals and now we're talking about LNG export terminals and in fact in 2017 we became a net exporter of natural gas So a lot has has changed the environmental benefits are also substantial and You know just replacing coal with natural gas and power generation is is really the most significant And typically the lowest-cost option that we've got today to reduce greenhouse gas emissions in fact when you look at natural gas and power generation it emits up to 60 percent fewer greenhouse gas emissions than coal When it's used for power generation so I know that there's a lot of folks here and in many of you all in the audience that are probably focused on renewables and Clearly we agree that renewables are going to play a key role and a growing role as we look to to Natural gas is very clear and necessary partner that complements the intermittent Renewables such as wind and solar as we're looking towards generating reliable power It's it's also an effective supplement to battery storage and that's currently cost prohibitive But clearly this is an area where a lot of research is going on and we're all monitoring that research So so as we look forward, you know, I think it's important to to look at at natural gas is really helping us bridge to the future and And provide that that reliable energy source that is is becoming part of the the important growth Growth engine for the future Thank you Frank Canada is both similar to and different from the United States. Can you? give us your view from your perspective as as someone in finance as well as Representing all of Alberta and all of Canada. You bet. So Thank you I'm also pleased and very honored to be here today on behalf of as myth capital I've been here two weeks ago. We're sponsors of the natural gas initiative. So we're very honored to be associated with the university here So I'm going to provide my comments both from a Canadian perspective and then from an Alberta perspective The province that I currently live in before getting into that I want to set some context here Canada as you may know We're the 38th largest country with a population of about 37 million that compares to the American America here Third largest with a population nine times larger at around 377 million Notwithstanding that a small population base. Canada is actually the sixth consumer largest consumer of natural gas More importantly, we're the fourth largest producer of natural gas We are very blessed with respect to the abundance of natural gas in Canada as a whole Having said that what's somewhat unique about Canada relative to the states and in particular Alberta is that we're also blessed with hydro You may not know that we're actually the second largest hydro electricity producer in the world only behind China We currently produce about four hundred terawatt hours of electricity Versus China 1200 So with that large resource when you look at Canada in effect We've actually been decarbonizing our fuel source with a renewable For century for yeah centuries given the fact that we're we have hydro So right now hydro plays a predominant role with respect to Providing us hydro electricity Having said that we all we also realize the abundance of natural gas and this will play a key role with respect to Canada going forward Now let's look at Alberta. Alberta is a little more typical to many other developing worlds Right now 50% of our hydro of our electricity is actually fueled by coal followed closely by natural gas at 40% and From a hydro perspective, it's actually only 3% so relatively speaking hydro is not a big fuel source in Alberta As it is for the balance of the country With this abundance of natural gas in Alberta Alberta has taken an initiative very recently with respect to phasing out coal fire power plants in the province a couple of years ago the current government Institute a new legislation called climate leadership plan and you'll hear that often when you come to Canada and Alberta We are leaders when it comes to Regulation not only of natural gas but with all resources. So under this climate leadership Program one of one of the main mandates under there is the phasing out of coal fire power plants by 2030 phasing out coal for natural gas and Renewables the renewable component is going to be upwards of 30% Now we've got abundance of natural gas the renewable component is going to be a challenge no different than a lot of other jurisdictions countries when they're looking to move to renewables The main renewable source in Alberta is actually wind so when you think of wind relative to Providing us power. There are the three challenges primarily our geography Timing and economics so from a geography perspective the wind farms in Alberta are located in southern Alberta hydro primary source of primary user of hydroelectric or of electricity Is the industrial is an industrial and so industrials primarily located central and northern Alberta So we've got the wind located in southern Alberta But unfortunately the use of that is located central and northern Alberta. So we've got a geography challenge that faces Alberta We also have a timing challenge that faces Alberta and that deals with the notion that peak demand is generally during the day industrial users are generally on during the day Peak supply of wind in Alberta in the southern corridor is actually at night So we've got this timing disconnect and then of course the economics with this abundance natural gas is actually Cheaper than then wind right now so as we look to the future from a national perspective in my view We have actually been ahead of the curve with respect to Decarbonizing our fuel source given the abundance of hydro we have in Alberta We have now legislation that effectively will look to use this abundance of natural gas to phase out coal plants The renewable component will have some challenges and the reality is it'll be a hybrid model as we move forward Looking to blend renewables with some storage and natural gas Thanks Frank. Well, I can't think of anyone Better qualified to kind of give us a global perspective We talked a lot about fuel switching yesterday, especially from from coal to natural gas and the fact that in fact Not as much fuel switching is happening as we might like and David's got a tremendous perspective both both as the CEO of GTI and and your service as the president of the international gas union so Can you sort of broaden the spectrum? broaden our perspective globally and then perhaps also You know comment on this this challenge of Fuel switching when the evaluation is done narrowly on a dollar per BTU basis in much of the developing world sure be happy to mark and Pleased to be with all of you this afternoon and to share the stage with my distinguished colleagues and Your self mark of course and as as GTI we're we're proud members of Stanford's natural gas initiative and Look forward to continuing to work with you and in many of you in the audience to help prepare the companies of today to meet The energy challenges of the future I'll speak for a few moments from the perspective of my Recently concluded role of the president of the international gas union Which is a 91-country global Association. It's really dedicated to promoting the economic and technical Advancement of the global gas industry in my term ended at the world gas conference Which took place in Washington DC at the end of June and There's there was a report that was put together by IGU by SNAM which is an Italian energy company and BCG Boston Consulting Group that took a look at the global dynamics of Gas and perhaps I'll just cite a few Takeaways from that I think a lot of that supports what we've heard the last couple days But also some of it might run counter to some of the rhetoric that we've heard with some of the speakers so three takeaway themes from the from the report high-level number one Substantial global gas growth and I'll get to that in a minute The second is that the production growth really came from established players the US of the world the Australia's the Russia's and so forth not so much the emerging countries over the last year and The last key takeaway was this phenomenal growth of liquefied natural gas or LNG continues so first of all Year over year 2017 last year natural gas grew 3.7% more than double its average over the last decade So something's going on out there that there's an uptake of gas. I'm going to give you three other numbers somebody grew at 15% some region grew at six and some some region lost a little ground and and shrunk by a percent and a half in terms of their consumption China 15% In fact, it represented one third of the global growth last year in terms of natural gas and fully 50% of all the increased LNG driven by policies Driven certainly by the desire to clean their air which I'll get to in a moment and and Really just a substantial commitment to natural gas. I just came back from Shanghai Just two days ago at the gas X conference And I know our gentlemen from China said that the they're a partner or not a competitor But let me tell you they're really competitive in natural gas. They put a list up there They're now number three in the world for consumption They've already targeted when they're going to pass Russia in Consumption and they're thinking about when they're going to pass the US in consumption That's a stat that they want to try to Try to take advantage of The six percent growth was Europe Despite all the rhetoric about companies running away from gas and and so forth Europe's demand actually increased substantially and Driven by a couple things one colder weather second an economic recovery and third a little bit of cold of gas switching So I think what Europe is finding is the economy recovers that you can't really run your industrial plants on wind and You can't warm yourself during the winters with the Sun so we've seen substantial growth in Year-over-year growth in Europe and frankly that continues a three-year trend of growth I'll get to your point about cold switching. It was the US that actually declined last year by a percent and a half affected really by there's a little blip in pricing of natural gas and it caused a Some reversion back to coal electricity generation instead of natural gas. So again China continues to lead the pack Europe substantial growth which by the way was completely supplied all that increase by Russian pipeline gas Which is interesting given some of the rhetoric about that Do I have another minute yep, okay I told you I wouldn't filibuster, but I think I'm doing it China and India back in 2000 had the same consumption of gas 27 billion cubic meters the same China is now four times larger than India in terms of its consumption and ten times greater than it was back in 2000 and and really it was their policy to establishing targets to providing preferential pricing to Cities to build out their infrastructures for distribution Within cities and opening their markets to new investments. So policies mattered a great deal in that case and I think will continue to do so and Cities are important because 90% of all projected gas growth globally in the coming 25 years It's going to take place in urban environments so in order for this to to take place we're going to need to continue to focus on safe and liable operations cost reductions enhancing access to gas in a variety of ways and And of course working to minimize the environmental footprint of gas as well. So I think maybe I'll stop there and and We're getting some good questions from the audience and we'll turn to those in a moment I'd like to take a couple minutes to let each of the panelists comment on the issue of the environmental impacts of natural gas Obviously at the development level, there's sort of a fear of fracking Proposition on the ballot in Colorado Next Tuesday that made largely shut down operations and what 85% of the available areas for development and You know public concern about development is really Very You know intense in some places and and more generally there's also a concern about methane leakage through the natural gas distribution system and Whether or not some of the benefit of fuel switching is being Offset by methane leakage, which is a very potent greenhouse gas so Sarah starting with you could you just sort of comment on these issues and and what steps are being taken where you think you know The attention really needs to be you know Paid to to to address the the most important aspects of those problems Yeah, thank you Mark and and I I think these are very fundamental and important questions And there's certainly ones that at ExxonMobil and XTO We're very focused on and as we've all talked about there's a lot of benefits to natural gas but we also believe that those benefits can be expanded and You know, it's it's important our products are gonna provide the foundation They have provided the foundation for the necessities that we have in modern life They support the rising populations around the world and and really a growing middle class And so we've got to continue to provide affordable energy And as I said before and I think we've all said natural gas is a key Key role in that and it's also a pathway to lower co2 emissions and overall ambient air pollution But but there is additional work that we can do and it's all part of the dual challenge of providing that affordable resource That energy resource but also improving on and minimizing the environmental impact that we've got So we we've chosen and I can tell you what we're doing and what we're encouraging others in our industry to do We've chosen to face that head-on And we've we've made commitments to continue our long-standing commitment to minimize Emissions but but made further commitments From that standpoint in September of 2017 last year We announced a an enhanced methane emissions reduction program and quite comprehensive It's underpinned by research by testing new technology And that really is the backbone of a of a broader more comprehensive initiative that includes training it includes equipment phase out and probably most importantly new design improvements in facilities both Existing facility retrofits as well as as new facilities and specifically Just a few things that we're doing. We're phasing out all of our high-bleed pneumatic devices across all of our Operations over a three-year period and and I'm really pleased to say that already within a year We've we've phased out two-thirds of those. So, you know, that's a that's a step. We're taking We've implemented an enhanced leak detection and repair program that's helping us in identifying components that have a potential for leakage and and then we we are also at the same time implementing new technology which shows great promise for making that the task of identifying doing the leak detection and repair more robust more rapid more cost-effective and and working on things like the mobile methane challenge that that That Stanford has led to identify what some of those technologies can be Yeah, these are voluntary efforts. We're taking those along with other operational improvements and just just the steps we've taken to date have resulted since 2016 in an overall reduction of about four percent in methane emissions or or about 7200 metric tons of methane across the XTO energy Operations to date we're high-grading facilities in April We started up a new facility and in in the Delaware Basin in New Mexico that incorporates low emissions Technologies and it's going to serve as a model that we can build upon for our future future Developments and in May we went further and announced Exxon mobile announced further greenhouse gas reduction measures We've committed to a 15 percent reduction in methane emissions and a 25 percent Reduction and flaring by 2020 all of these are steps that we feel like are necessary and important in moving forward with natural gas and and doing our part in making sure that we're reducing our Environmental footprint but beyond that we're partnering with our industry peers We're working with policymakers to make sure that we are advocating for sound Environmental policies that can one generate sustainable results But also without stifling in an innovation and without hampering development And I think those are very important points as an example of that Exxon mobiles one of eight global energy companies That supported that are supporting guiding principles on methane reduction We joined our industry peers and NGOs like the Environmental Defense Fund To design those Principles to really do three things one continue continually reduce methane emissions to improve the accuracy of Data that's that's collected on methane emissions and three to advocate for sound policy and regulation on Methane emissions, which we think is important as well Another example in September we joined the oil and gas climate initiative, which is a voluntary initiative that is and involves 13 of the largest oil and gas producers in the world and We're working collaboratively with this group towards solutions to mitigate the risks of climate change And we're also a founding member of API's environmental partnership and again Focused on reducing emissions from methane emissions as well as VOC Emissions so one of the things one of the key roles that we're taking on across all these initiatives is to encourage others In the industry to do the same It's going to take all of us to make a difference and to continue to make the difference That we've been moving forward to so that's just a few examples of how I think we can take natural gas and and actually make it even more Even less impactful to the environment than it is today as we move forward Frank in Canada, you know, we we see Alberta as a Place with a rather robust regulatory system as has this been dictated. Is it happening? Spontaneously by industry what's what's happening there? It's it's a combination of both mark again, both Canada and Alberta are leaders when it comes to regulation of natural gas You know it starts with Canada. We are a signature to the Paris Accord You know and we are actually following through with the Paris Accord unlike some other countries that have either pulled out or Effectively are ignoring the Paris Accord so with respect to that We have implemented carbon taxes both federally and provincially as Peter McKay referenced yesterday It is a controversial issue, but from a provincial perspective. We do have Carbon taxes in place. They've been in place for the last couple of years Currently we are imposing a $30 per ton tax on on carbon emissions when it comes to Fugitive gases again, we have very tight legislation currently we have legislation that actually requires us to Reduce the fugitive gases by 45% by the year 2025 in Alberta, we actually have Draft legislation in place right now. It's known as directive 60 which effectively mandates Companies and depending on what facilities they have an infrastructure. They're required to do a survey of that equipment Either once or three times a year, so that's that's pretty frequent, but more importantly to the extent that they actually Detect any methane leakage. They actually have to Remediate that leakage within 30 days so tight time lock tight timeline with respect to Frequencies a survey, but then even tighter 30 days from which to remediate any detection of that leakage so that's legislation in terms of The industry itself very similar to what's happening here in the US. There's been associations That have effectively volunteered to get together the main one in Canada as known as PTAC petroleum technology Association of Canada and effectively this is an association that Combines industry participants some of the largest producers in Canada It has individuals from the regulatory bodies both federally and provincially within this organization It has academia We have some very bright researchers from the University of Calgary one of the one of the one of the biggest universities in Alberta that focuses on on energy per se and then we also it's also Complimented by talented bright individuals that have expertise in this area and two of the mandates that they're doing Specific to methane leakage is they're they're doing a fair amount of research with respect to remote censoring of Methane leakage and I know there's a lot of research dollars going into this and I understand even stand for me Has some research with respect to remote censoring so that's also being done up in Canada from an collaboration perspective in addition p-tax also focusing on Mounting sensors on trucks They'll effectively monitor they'll be driving up the highway secondary highways and essentially looking for methane leakage So we have the legislation in place. That's very tight And then we actually have industry trying to complement that legislation by effectively putting research dollars on Effectively sensors associated with that So a lot of legislation looking at this issue The one thing that I just kind of want to bring to the audience's attention is generally when people think of Legislation regulations They they perceive it as a burden on on the company, you know, you got a higher accountants You got a higher engineers, you know, worst of all, you got to hire lawyers to ensure that you're complying with this With this legislation But the thing you need to understand and we at asmith capital private equity firm When you take a look at this, it's actually positive for the company For instance, we have looked at studies sg environment social and governance And if companies actually pay attention to this regulation, they can actually there's a direct correlation to an alpha Alpha generation ie stock performance upwards of four and a half percent if you look at methane leakage The studies indicate that if you actually focus on this you potentially have an Alpha generation of a four percent was associated with this So if you're a multi-billion-dollar company generating a four percent incremental return Will actually pay for accountants, you know the engineers well, maybe a few lawyers, but the bottom line is endorsing legislation is actually positive benefit to producers that actually follow through with respect to ensuring that they're complying with it because it it actually benefits their own stock performance relative to You know this perception that maybe they're benefiting the environment which they are but you can be selfish too and benefit the company and your shareholders as well That's an interesting message which I hope Gets out to the to the operator community David. Let me let me change the question a little bit for you In terms of the meeting the Paris Accords countries around the world have signed these accords some countries India for example said well, yeah, we've signed the Paris Accords and we're not building any more coal plants after 2030 and They were very kind of proud of that and I thought That's nothing to be proud of that's another 12 years of building coal burning power plants Have you seen any enhanced utilization of natural gas? Globally tied to the commitments Countries have made to abide by the Paris Accords. Yeah, the short answer is yes Although it was surprising when you look at the INDCs the individual commitments if you will the countries are making That it was a minority of those reports that actually Reference natural gas as part of their solution even though in practice that's what's happening in many many cases and You know we've talked a lot about the the role of gas and role renewables in the energy electricity generation Which is very important, but we also have to realize that natural gas fuels an entire economy, right? from chemicals manufacturing to fertilizer to Heating homes and providing heat for industrial processes and so forth which is a big part of this There was a reference yesterday to the University of Chicago Back to China again, but it failed to deliver the punchline and it was I'll go back to Beijing again But they've dashed to gas in Beijing. They have Shut down coal plants and converted to the natural gas and the punchline is that the U of C study Now projects that the average Beijing citizen will live two and a half years longer Because the cleaner air So you take 22 million people times two and a half years and it's more than 50 million years of productive Life that we'll get from that city and I think it's very powerful and especially in the developing world That's I think natural gas is playing a key role to both address environmental concerns But also to improve quality of life I was once talking about the enhanced use of gas in China and someone said well, they're not it's not for co2 It's for public health and air pollution, and I said so what you know if they're doing the right thing The order of their priorities is really unimportant, and it's good to see they're doing the right thing We're seeing coal switching, you know across fuel fuel switching from cold across the way I want to ask a short question To Frank and that is what has been the impact of the of the carbon tax on the natural gas industry in Alberta? At least so far, and then I have a question for the entire panel, but Frank What's what's happened there? Well, I'll say when it was first introduced it's a tax Most people don't react positively to taxes So I would say there was a reluctance the fact that it was a tax having said that the industry has Effectively incorporated this in all their economics today. It has not slowed down the industry at all It has effectively been welcomed to this point in time reluctantly, but In terms of it having an impact it has it's had a marginal impact I would say commodities have had a bigger impact with respect to the pace of drilling versus this carbon tax There's a question from someone in the audience that I think speaks to an issue that everyone's Concerned with and that is as we switch from a dirty fossil fuel to a clean fossil fuel We're still using fossil fuels and by is the enhanced You know so is natural gas going to be a transitional fuel or is it going to remain a foundational fuel that's still contributing? greenhouse gases and so and there's you know, there's a Sense that you know, we're we're doing the right thing But we may be locked in to not doing the best thing. So would you share your perspectives on sort of you know? the the use of natural gas at you know in decarbonization from you know from really a global perspective Are we eventually going to be you know capturing the CO2 from natural gas and making natural gas carbon-free? Where are things going? I'll take a start here. All right From our perspective generally speaking It's going to be the economics that dictate what happens with respect to natural gas cool renewables It it fundamentally does go down to costs So as we look at today as we look at the medium term as we look at the long term It is our view that natural gas will continue to play a role with respect to being a fuel of Choice as the population grows and as a standard of living in developing countries Increases so from our perspective, we do see natural gas potentially tapering off Going forward, but until renewables can be stable until renewables can be delivered on a cost-efficient basis as natural gas Governments are forced to provide for their citizens They're going to be forced to provide it in a cost-efficient manner and you know at least now to medium term Natural gas will continue to play a prominent role with respect to that You know and I'd add to that You know as you look out for the foreseeable future Demand for energy is going to continue to grow and in our perspective would be we're going to need all kinds of energy We're going to need growth and renewables. We're going to need Natural gas and we're going to continue to need Need oil as well and coal but but natural gas is going to gradually replace Coal because it's cleaner burning because it's abundant because it's affordable, but we're going to need all kinds of energy and And it's going to be important that we continue to develop the technology to minimize the environmental impact But bring energy in all forms forward in an affordable manner So that so that we can continue to see the benefits around the world that we've seen here from the abundance of energy that we have David will give you the last word. I I think I Think it's part of the energy mix today and also part of the energy energy mix in the future It's got to be but You know energy companies are going to have to change their stripes a bit and change their product mix And one thing I'll just put out there is that gas has a renewable story as well There's the biomass generated gas from biomethane or other biomass sources There's power to gas by spinning wind mills to produce hydrogen and so forth and by doing that you still give yourself that resiliency in an energy system the ability to respond to peaks and valleys and demand and It really helps to make a robust secure and resilient system So there's an element even in the gas sector that has a very large renewable piece as well Thank you. Well, please join me in thanking the panel