 And then another dimension which we'll also talk about today is cross-border trade flows which are critical to supply world energy markets. Now, I'll start with this high-level summary to kind of give you an overview before we get into the details. And this helps to emphasize the links to the most fundamental drivers of energy demand, which is shown here with population on the left and economic activity on the right. And notice that for all these charts we're using 2040 as the horizon year. Now, global population is expected to grow to nearly nine billion people, and essentially all this growth you can see is the non-OECD world which is shown here in red. And by the way, we're going to be showing this OECD versus non-OECD grouping throughout the presentation as it conveniently separates the developed from the developing world. And you're going to see that the energy needs and the outlooks are very different for these two groups. Now, the middle chart shows economic output. Global GDP is expected to increase at about 2.8% a year, led by the expanding developing economies. And basically the world economy more than doubles over this period. Now, this is a good place to pause and highlight one of the key themes of our outlook, which is that GDP growth is not just about economic statistics, but to people in every country it's about human standards of living. Growth in Indian China, for example, means that huge numbers of people have been lifted out of poverty. As examples, moving from cooking with wood and charcoal to having modern cooking fuels, 2.6 billion people today are still cooking with some form of biomass. Graduating from animal power to modern vehicles for farming and for transportation. And from rudimentary lighting or no lighting at all to modern electricity, it's estimated today that 1.3 billion people have no access to electricity whatsoever. And, of course, this isn't a complicated message. Everywhere in the world, people want the same things. They want a warm home, they want a refrigerator, they want a TV, someday they'd like to have a car and they all want cell phones. And, of course, with all this progress, all these things require energy. Now, going back to our overview chart, the key question now is with this expanding global economy, how much more energy does the world need in the future? And the right panel shows that energy demand is expected to increase by 35%. And you can see that the growth in energy here, comparing with economic activity, is much slower than the growth in the expansion of the economy. And this is because of improvements in energy efficiency. Now, to highlight this efficiency point, this line shows how much more energy the world would need if we did not have improved efficiencies. It amounts to 500 quads. You see the units here are quadrillion BTUs or quads. And this is three times the level of growth in energy over this period. And this is why we say the greatest source of energy for the future is learning how to use it more efficiently, which is fundamentally a technology story. Now, another dramatic trend here is the very different outlooks for the developed versus developing countries. In the OECD world, which you can see here in blue, even as these economies continue to expand, their demand for energy remains flat. This is really quite an accomplishment. And again, this is possible because of efficiency improvements. All of the growth in demand is in the developing world. Their energy needs grow by 67%. So we step back, before we get into the details, the overall storyline here as world populations expand and as living standards continue to improve, the world needs more energy even as we use energy more efficiently. Now, one important trend in the outlook this year is urbanization. So I want to say a few things about that. This map shows urbanization levels in the base year of 2010. The darker blue regions show countries with over 75% urbanization. And the yellow dots show major cities with more than 10 million people. Urbanization is important because income levels, living standards, and energy use per capita are all higher in urban areas. And just to give you an example in China, energy use per capita in cities is three times that of rural areas. And also, manufacturing and other industries tend to cluster around cities. Now, looking ahead to the year 2040, non-OECD urban levels rise significantly. Also, we expect there'll be 31 new major cities shown by the red dots. And this is an important trend for energy because expansion of urban infrastructure creates huge demand for iron, steel, cement, and other industrial goods and all of which require energy to produce. Now, as we go into the demand side of the outlook, we're going to talk about these four categories of demand that we use. Power generation, industrial, transportation, and residential commercial. Now, I'm going to cover most of these later, so I'm just going to make two points on this chart. First, note that transportation, which is in green, grows by 40%. This is a particularly important sector for oil demand because liquid fuels are expected to remain dominant for transportation. But secondly, I want you to notice electricity generation is not only the largest sector today, but it's the one that has the most growth. So electricity becomes even more important in the future. I'll start with the industrial sector, which is a major consumer of energy, and this is intuitive when you consider all the material structures and products in our modern world today, and all of these require energy to take raw materials and transform them into finished structures and products. Now, rising living standards and growing middle-class populations in developing countries will increase demand for consumer goods, appliances, apparel, and electronics and again, all these require energy. You can see here industrial demand is expected to rise by 35%, and again, all of the growth is in the non-OECD. Now, the circles to the right show demand expansion by sub-sector in the industrial sector, but I really want to, this is just the percent for each with the outer circle representing the future year of 2040. But I want to focus on the types of energy that will be needed, that will be needed, which are shown here. And note that industrial fuel demand is moving away from coal and towards greater use of both natural gas and electricity. In North America, for example, the abundant natural gas supplies is leading to a resurgence in the chemical industry as well as in manufacturing. Now, the next sector I want to talk about is transportation. It's one of the most familiar and prominent sectors, and it's the one that has the biggest influence on oil demand. And that's because right now nearly all of the world's transportation is powered by oil products. Liquid fuels are prevalent because they concentrate so much energy in small volumes and in convenient liquid form, which makes them easy for transportation, distribution, and storage. And just to highlight this energy density point, if you consider the energy in just one gallon of gasoline, it's enough to power your smartphone for 3,000 days. Now, everyone's interested in what kind of cars we're going to be driving in the future, and this chart shows projections for the global vehicle fleet. And you'll see the growing blue wedge. This is for hybrids emerging as the dominant vehicle. Now, by hybrids, we mean cars like the Toyota Prius, which has on board both a conventional internal combustion engine as well as an electric motor with a small battery. Its only fuel, however, is conventional liquid fuels such as gasoline or diesel. These hybrids allow for much higher gasoline mileage, but with only modest added cost to consumers. Now, at the top, you can see that we show growth also in other types of new cars, such as electric cars, plug-in hybrids, and even natural gas vehicles. And while electric cars are growing over this period, we believe that electric vehicles will remain limited unless there are technical breakthroughs in battery technology. And note also that the number of cars over this period doubles, and this evolving mix of vehicles has a big impact on the efficiency of the fleet. So we'll look at that next on the right side. The changing fleet changes the average vehicle efficiency that begins at about 24 miles per gallon and will nearly double by the year 2040. And most of this is actually driven by government mandates in vehicle efficiencies. And the shaded area here shows you the wide range of vehicle efficiencies that we project. Gives you some idea of the wide bands of performance that we consider as we look at this country by country. And I want you just to step back and think here. We have two big things going on here, but they tend to cancel each other when you think of the fuel demand. You have the number of cars doubling, and you have the efficiency doubling. So actually the demand for fuel is relatively flat, which we're going to show you on the next page. This is us looking at total transportation fuel, which is growing, but I want you to notice at the bottom, light duty, which is mainly cars, is relatively flat. And now you can understand why it's relatively flat, even though the number of cars is doubling over this period because of the increase in efficiencies. So the growth here in total is 40% increase in transportation fuels, but all of the growth here comes from the commercial sub-sectors. This is heavy duty, which is mainly trucks, aviation, marine, and rail. Now these, the way to think about these is this sector more closely tracks economic activity, which is expanding across this period. As economies expand and produce more goods, all these goods and raw materials need to be transported locally, regionally, and internationally. Now on the right, we're going to look at the growth and the commercial transportation demand by region. This is starting in our base year of 2010, but I want to fast forward to show you where it all goes in 2040. And you can see that growth will be most prominent in Asia Pacific, again reflecting rapid economic growth, as well as increased movement of people and goods as incomes grow in these countries. Now last of the demand sectors, and surely not least, is electricity generation. You'll recall that this is both the largest and the fastest growing sector. Electricity is a modern and very popular form of energy with its convenience and ease of use, and most people don't think so much about what fuels are used to make all this electricity, so we'll be talking about that. Also in looking at electricity demand, it's clear that overall consumption levels are very dramatically around the world. And just to set up this chart, you can see that the left scale is a kilowatt hour is used per person, and on the bottom scale is population. And you can see that North America, for example, has the highest per capita use of electricity, followed by Europe, and this is directly linked, of course, to standards of living, high standards of living in these countries. Now again, looking out to the year 2040, we project strong growth in electricity use per capita in other regions, particularly Asia Pacific, where per capita electricity demand is expected to double. The large growth in electricity use in these developing countries, again, reflects improved standards of living and expanded access to electricity for billions of people. Globally, electricity demand grows 90%, so it almost doubles. So with electricity demand almost doubling over this period, the key question is, okay, what fuels are we going to use to generate all this electricity? And the next chart will try to answer that. Now this chart allows you to kind of step into the shoes from the perspective of a power generation company who needs to build a new power plant. And the bars show total costs for making electricity in cents per kilowatt hour. This includes capital costs of the upfront investment, fuel and operating costs. And you can see traditionally, coal and gas are the lowest cost fuel choices. Now, however, even today, governments have established policies which effectively put a price on carbon emissions. So we add a notional $60 per ton as a cost of carbon for this analysis. And please note that we are not saying that there'll be a carbon tax. What this means is it's a proxy for the cost of carbon based on our expectation that governments around the world will continue to establish policies which effectively put a price on carbon. So you can see here when you add the cost of carbon, coal becomes much less competitive. It moves up in cost, but not as much because gas has less than half the CO2 emissions compared to coal. Nuclear, which is not impacted by carbon cost, is competitive with coal, but more expensive than natural gas. However, nuclear plants, as you know, come with very high price tags. They're difficult to site. And now, particularly post Fukushima, they face opposition by people concerned about worst case operational risks. Now, we also show here the cost to deploy CCS or carbon capture and sequestration. Normally, you hear about this for coal-fired power plants, but actually, as you can see, the economics are much better for gas-fired plants. And this is not a surprise when you think about you just have a lot less CO2 to capture with natural gas. And while gas CCS seems almost competitive, still, there's many technical and regulatory issues which we need, which we believe need to be addressed before this can really be made practical at scale. And lastly, we talk about renewables, wind and solar, which appear increasingly competitive with when CO2 costs are included. However, the cost for renewables, critically, must also include the cost for backup power. As you can see with the arrows at the top, we highlight that these are intermittent supplies of energy with, obviously, the wind not always blowing and the sun not always shining. Now, to compare costs on a fair basis, we really have to look at this cost for backup power. We call this reliability cost, which increase the cost for renewables. And of course, this is because for power generation networks, it's not just the average cost of power that they look at, but it's also the cost of providing power at peak demand moments. And for those of us who live in Texas, this is clearly hot summer afternoons in Texas when everybody has their air conditioning cranked up, and designed to have capacity at that point in time. Now, whoops, I didn't want to go forward. Now, as you step back and consider again that the world needs almost twice as much electricity, consider your options. Coal is facing environmental constraints in just about all developed countries and even developing countries. Nuclear seems attractive, but it faces serious constraints to expansion. Solar and wind are very popular in concept, but they involve high costs and face practical issues associated with the fact that they produce power only intermittently. So with all these constraints, natural gas emerges as an easy and practical choice. Natural gas requires no new technology. We already have these very efficient combined cycle power turbines. The cost to build a new plant is reasonable, and they can be built quickly. And from an operation standpoint, they're particularly flexible as they can be ramped up and down in response to real-time demand. And now we know the world has this very robust outlook for providing supplies of natural gas at competitive prices. So whatever your agenda, as a power generation company or as a policymaker, natural gas will always be a competitive and practical option. Now, global demand for electricity again is expected to increase 90%, and you can basically see here, looking at the sectors, you see growth in all of the sectors. But I want to focus on the fuels required to make all this power, which we show on the right side here. Coal is currently the number one fuel used to generate electricity, but that's changing, mainly driven by policies on CO2 emissions. And a few of our discussion on the last chart about the particular attractiveness of natural gas, you'll not be surprised to see that we show the demand for natural gas in power generation to rise by close to 80%. And we'll pass coal as the world's largest source of electricity. Nuclear and renewable fuels also will gain share over this period, growing in significance. Now, I'm going to do, on this chart, I'm going to wrap up the demand side of the outlook before we move to supply. Here we show for each major fuel the demand in the year 2040 in an order of size from left to right. The dotted lines in each bar show where we are in the base year of 2010, so you can see how much growth there is over this period. And the percent number at the top of each bar is the average annual growth rate for that fuel over this period. Just a few observations. Oil is expected to remain in the number one position, increasing about 25%. Oil remains uniquely attractive for transportation as liquid fuels continue to set the standard for convenience and for energy density, again storing large amounts of energy in a small volume. I would like to make this point when you think about just one tank of gasoline with 100 pounds of fuel, you can power a 3,000-pound car at 70 miles an hour for 350 miles with three or four passengers with air conditioner running and a 10-speaker sound system blaring. And then you can stop and refuel in five minutes. It sets a very high bar for performance for competitive transportation systems. Also here you can see that natural gas has the largest absolute growth with demand rising 65%. And it passes coal into the number two position. Gas is a prime fuel for power generation as we discussed, but gas is also used in all the other sectors. Second from the right, I want you to notice we do show modern renewables of solar, wind and biofuels. And I want you to note that they actually have the fastest growth rate compared to any other fuel. So when you read about renewables growing quickly, that in fact is true. But at the same time, even by the year 2040, they still contribute only a small share, amounts to about 4% to the global energy picture. So now we've finished the demand side of the outlook. And before we move to the supply side, I have just one chart to cover the greenhouse gas outlook. Now as a global society, we need to consider climate risk associated with greenhouse gas emissions. Although climate policies remain highly uncertain, we assume that governments will continue to adopt a wide variety of policies that will try to stem greenhouse gas emissions. Worldwide energy related CO2 emissions you can see here will plateau around 2030 and then begin to decline through 2040. And the number one reason for the fall off in emissions is a reduction of coal use, mainly being replaced with natural gas, although renewables and nuclear also play a role. And note also here again that emissions are already declining in developed countries. We expect them to decline almost 25%. So all the growth in emissions is in the developing world. You can see here pretty clearly. However, it's important to look at emissions per capita, which we show on the right. And here you get a very different impression. And it highlights also going back to our theme about standards of living. The people in the developing world are increasing their emissions only because they're pursuing a higher standard of living. We expect that OECD nations will reduce emissions per capita over the outlook, but still will be much higher than those per capita emissions in the developing world. And just shifting back a minute to the left side of the chart, it's a vivid reminder of why it's important to take a global view and consider greenhouse gas mitigation strategies. Okay, so now we've finished the demand side and we're going to move to the supply side for energy. And we'll start with the supply outlook for liquid fuels, which we expect to grow, the demand for them to grow by 27%. Now the bottom area in green shows a relatively flat outlook for conventional crude oil production. So the real story here is the dramatic impact of new technologies deployed today to produce growing volumes of liquids in new ways, specifically deep water drilling, tight oil production, oil sands extraction, and natural gas liquids, which we show here as NGLs. All of these new sources have robust growth rates. Now biofuels, you can see, as in yellow are shown, but they remain limited, mainly by their high costs. But you can see here, the outlook is clearly a technology story. Now the bar on the right shows the size of the global resource base. The IEA currently estimates this to be 5.6 trillion barrels. The darker bar on the bottom shows how much of this will be consumed through the forward year of 2040. And if you do the math, you can see looking forward, the world has well over 100 years of supply. And I want to also note that the estimates of the size of this resource, this 5.6 trillion, continues to grow as new technologies allow us to tap ever larger resources. And this is a positive and consistent trend over many years, as human innovation and new technology continues to find new ways to access the world's resources. Now we'll move to the gas supply. As you saw on the demand side, natural gas will play an increasingly important role in meeting future global energy needs. And here when you do the math, the world has over 200 years of supply. Estimates of recoverable gas have doubled even in the last 10 to 15 years as hydraulic fracturing and horizontal drilling technologies have unlocked huge reserves of natural gas. Unconventional gas accounts now for 40% of the global resource base. Natural gas resources are geographically diverse. Production through 2040 will reflect this diversity with strong growth in most regions. And the last panel here shows growth in both conventional and unconventional gas. The safe and economic supply of gas from these unconventional resources is one of the most significant developments for our energy future and made possible, as you know, by technical breakthroughs developed right here in the United States. These unconventional resources will account for 65% of the growth in global gas production led by North America. Now we have one slide to talk about the expansion of the market for LNG. This is liquefied natural gas. This is gas that's cooled to minus 260 degrees Fahrenheit at which point it turns into a liquid and which also means that it shrinks its volume by a factor of 600. And in this liquid state then it can be easily shipped by especially equipped tankers. Think of kind of a giant thermos bottle turned on its side. Then its destination, it's turned back into gas. And like oil natural gas is often found far from the demand centers so it's very, this LNG technology is very important to allow us to move the gas to where it's needed. So all around the world from the highlands of Papua New Guinea to the deep waters off of East Africa and now even to our very own US Gulf Coast LNG projects are in various stages of planning and development to produce gas destined for these demand centers. These projects will bring jobs and economic opportunity to gas rich regions while supplying much needed cleaner energy to the burgeoning cities and demand centers all around the world. You can see here that LNG volume is expected to triple by 2040 and many regions will be suppliers of LNG including the United States but you can see that the demand for LNG will be concentrated in Asia Pacific. Now the last topic I want to address today is the importance of international trade and energy. Trade has always been important as the location of resources has always been different than the location of the demand. So it's very important that oil and gas trades freely across international markets but the theme in the outlook is that our outlook shows that trade will become even more important in the future. Now we'll start with the trade and liquids and just to set up the chart here we're going to show the net imports for each region and we're going to show imports below the line in red and exports above the line in green if you look at the little legend at the bottom left. In the Americas we expect North America will shift from a significant importer to a fairly balanced position by 2030 as production grows significantly. Europe is and will remain a significant importer. Russia, Caspian will remain an exporter. The Middle East and Africa are both important exporters today and we expect the Middle East will become even more significant as production increases. Now as we highlighted last year Asia Pacific is already dependent on imports and will likely be even more dependent as demand grows. Net imports to Asia Pacific are likely to increase by 75%. In all regions however stand to benefit from participation in trade opportunities and participating in the global market for energy. You know the great thing about trade and economics it's the ultimate win-win both the importing country and the exporting country benefit from trade as Adam Smith explained 200 years ago. Now turning to natural gas trade even more so than for oil international trade of gas will become increasingly important as traded volumes are expected to be two and a half times. Whoops, yeah I'm sorry. Let's just go right to North America here. I just want to make the point that total trade and energy globally will be up by a factor of 2.5 and most of this will be LNG and North America will shift from a net imported to a net exporter by 2020 as production gains outpace demand. Europe imports are expected to increase to about 60% of total consumption as production declines. Russia casping continues to be a significant exporter with flows likely to grow by 170%. The Middle East and Africa will continue to be exporters and again lastly we see that Asia Pacific will become much more dependent on imports which are likely to grow by about 500%. So notice that for both oil and for gas Europe and Asia remain the two key importing regions and the Middle East and Russia are the two largest exporters to world markets. Now I know that's a pretty quick version of the energy outlook. I'd be happy to provide any further details we're trying to keep it short for today and you remember that I said at the beginning that we consider this a good news story and I hope now you can see why we feel this way. If there's any one theme I'd want you to take away from the presentation today it's the power of human innovation. Innovation has driven our ability through technology both to find new ways to produce new sources of energy but also to find new ways to use energy more efficiently and to improve our standards of living. Now at the same time we do admit we face challenges as a society we face challenges in educating the next generation of innovators challenges in balancing the costs and benefits for the policy choices that we need to make and challenges in working across national borders to ensure that any one country's success is part of a global success story but personally I'm very optimistic we'll meet these challenges successfully as we stand on the shoulders as they say of many prior generations who have faced equal challenges quite successfully to take this to where we are today with our modern standard of living. So with that I'll close and turn it back over to Ken for questions. And my job now is easy because I'm turning it over to Sarah to lead the Q&A. Thank you Bill. We'll play a little bit of hot mic. Please identify yourself and your affiliation and wait for the mic because of the webcast. If we don't have any media questions off the bat I'm going to take the sort of prerogative of maybe asking the first one if you don't mind. Sure. One of the challenges every single year of trying to explain any outlook to people who as you said very rightly don't necessarily spend their days thinking about energy systems is explaining scale. Right. And most of the common day discussion that we're having in the energy sector these days is about the remarkable pace and scale of big things happening on the natural gas side or the light-tide oil side here in the United States. But in your outlook, the world does seem in 2040 to look fairly similar to the way that it works today but you did highlight some very specific changes for an energy company doing this outlook. What are some of the real magnitudes and scale and difference that you see in this outlook as being a particular challenge for you as you look forward towards investment and those types of things? You know, Sarah, that's a great question. I'm glad you brought that up because one of the points we often like to make is to reinforce that the main reason we do this work is to guide our business strategies and plans because we're making billion-dollar investment decisions and the horizon for these projects a typical project of ours will last easily 50 years so we have to keep a strong focus on what's going to happen in the future. I have a team of about 10 people that work with me in our corporate headquarters developing this outlook each year and we're kind of walled off from the business because our focus is looking at future consumers and what makes sense for them because the last thing we want to do is delude ourselves about the future as we're making these investments. I know it may seem we're an energy company we're going to be pushing oil and gas for instance but again we want to make sure that our investments are going to meet our consumers so the outlook is really driven by that and then the business plans follow and I would say the challenges for us scales in fact the biggest challenge the fact is the world of energy is a huge industry and so we need to make billion-dollar investments everywhere in the world we need to be able to get access to resources we need to be able to deploy engineers and scientists around the world to develop these very large projects we need to work with governments to get deals that make sense for both the developer and the developing country and of course I would say this has been part and parcel of our business for many many years and I think our ability to engage internationally is really a key part of the challenge. I would underscore since we're in Washington and being hosted again thankfully and your new facility here at CSIS many of you working in policy the policy side is a critical piece of all this and the understanding of the scale and the time frame that it takes for new energy technologies to work their way through the system and without a good understanding of technology and cost associated with energy all options seem feasible practical and let's let's just get started on it and it's a we find that it's very important to start good policies that can only be built upon a good understanding of what the facts are and so we constantly try to bring the discussion well wait a minute let's look at what our facts are what options do we have and then let's be involved in a policy discussion. Hi I'm Frank Donatelli from McGuire Woods Consulting and first of all thank you very much for an excellent presentation I'd like to follow up on the policy question for a second what were your assumptions for US government policies when you put together your demand and supply outlook for North America and the United States specifically with regard to restrictions on hydraulic fracturing and offshore oil drilling did your assumptions assume that those would be relatively open and if not what would that do to your projections for 2040. Go ahead Frank thanks for that question I would say that clearly it's just a perfect example of how policies become very important as we develop the outlook because we have to kind of handicap what we think is really going to happen and I would say that our outlook for the US is not so different than where we are today which we do assume will have continued access to unconventional resources there's so much opportunity for unconventional resources we don't see any significant constraints in those areas we're operating today but there are opportunities as I think everyone knows to expand that access which would be a good thing for the industry and more importantly for consumers same thing with offshore drilling we have lots of offshore drilling going on right now as you know it's an issue in the industry that we should get more access there's still a very tiny share of resources owned by the US government that are really open for development and I think that's an ongoing discussion and we would like to think that we'll continue to make progress in that area and so we do assume that we'll expand it offshore drilling but it doesn't mean it's all going to be open in a short period why is it that it's North America that has experienced this wonderful renaissance in shale casts and unconventional development it's because of the rule of law and the fact that mineral ownership here is possible by private interests individuals like George Mitchell and the pioneers and the hydraulic fracturing were able to negotiate for access to the resource and then take a decade or two to prove it up and allowing market forces to operate and if you look the technology is applicable we're going to find out whether shales around the world behave the same way as North American shales but let's be quite I think we need to sit back and recognize that it's because of the unique legal situation in the United States that we're we're facing this era of abundance in both unconventional natural gas and now oil so that factors into it as my team and I talk quite a bit it's the fact is what we've discovered with the huge technology gains and improvements what we've discovered as an industry is that people have put cities on top of perfectly good oil and gas fields and so what you're seeing is that we are negotiating now it's like a zoning discussion you know we are negotiating for industrial permits in areas in urban areas where you know 20 years ago not really the case isolated instances but now more and more that's the situation that we're as an industry and we're working through that as an industry kind of a follow-up on that I'm Don Nichols so Nichols group Bill and Ken did you have assumptions that the shell explosion will transfer and you'll see growth in countries utilizing the technologies that we've developed in China and Mexico and other places that obviously have significant deposits Yes absolutely and I'm glad you are reinforcing that point that unconventional resources do exist in lots of other places around the world and we and many other communities are working with these countries to help develop those resources and yet in the outlook though what you'll see is most of those tend to come in later in the outlook because for lots of reasons including the legal structure that Ken talked about it's going to take time to develop those in other places and it's going to be very country specific so if you look at our outlook you do see significant growth and unconventional resources everywhere in the world but it comes in later as they kind of follow North America Other questions in the room back there approximately I have one Chase Hutto with Clearview Energy Partners last week there was a story in the New York Times that noted that several companies including Exxon had been incorporating a long-term price of carbon into their planning efforts but the time seemed to take it a little bit further than that and although it wasn't a direct quote from Exxon representative it put Exxon in the same position as Al Gore on the issue of carbon taxation and so it was a little surprising to see that but I wondered if you might have some comments on that one Thanks for that question I think you'll notice when Bill hit that point in his overview he was very careful to state that as any business and consequence that as Bill mentioned operating on the scale that we operate the size of the investments that we're making you can imagine when we live with the economics once we put the steel in the ground we are living with that basic cost through decades and different political regimes and controls and regulations of course we do scenario planning and in those scenario planning we assume given the fact that the climate change risks are real and the comprehensive strategies are required to address that risk we assume that a whole array of policies are going to be put into effect at various timeframes that are going to impact the business of production and use of traditional forms of energy so yes investments against various risk scenarios from a policy site that is not saying that we are anticipating that a specific carbon tax will be put in but certainly we're anticipating the cumulative impact of various regulations are going to raise the cost of our operations and the cost of the use of various forms of fuel and again remember we're really driven by our practical outlook again we're asked and tasked with coming up with what do we think is really going to happen and we know governments are going to do things to try to mitigate emissions and we just have to look at the economics from a practical standpoint to say well how much is that going to cost society and does that make sense and just to give you an example people don't think so much about cost of carbon but think of today in the US the EPA has set standards and we know because we're quite familiar with those economics that it cost about $80 per ton to do that so with that policy they've imposed an $80 per ton cost of carbon for that sector so that's just one example how we use this as a kind of imputed cost of carbon based on things governments are actually doing I think we'll go with Frank and then maybe take a couple questions from the webcast as I know we have several Thanks sir and Bill and Ken terrific I want to go back to the sensitivity question you talked about scale and a lot of countries have this potential on supply in fact more diverse supply changing demand structures when you start looking at things like technology price policy can you give us a sense of the scale of investment and the leads and lags how long it takes to implement this what kind of a lift it is to get there and what doesn't happen what the world looks like how much different this is all part of the scale of the energy business it's not uncommon to talk about for instance an LNG project of being over $10 billion sometimes even much more than that and that's when you start spending money after you've located the resource negotiated a contract all this takes years you start doing work which takes more years and then you begin construction in the field so it can be many many years before that project finally starts up and of course you have to come up with a funding for these billions of dollars often working with other investors for instance other co-ventures and many of the energy projects and so this is why talking about a 40 and 50 year horizon is pretty typical frankly for our business and as you point out it involves trillions of dollars of investment which is why perhaps to policy makers they feel like they hear this more than they want to from us but it's all about providing transparency rule of law, stability what's the deal for us this is not complicated when we go to a country including the US is before we make this $10 billion decision what's the deal going to be we just want to know and we'll make a decision whether that sounds fair or not but then we're looking for economic stability this is why in our industry we always have a very long term view on the area of getting back to combining a couple of the questions on carbon policy because and remember Bill's slide that showed both on the population growth and economic growth all of the growth is in the developing part of the world societies that are all of the citizens want what we in this room take for granted it's the beneficial uses of energy and the alternative technologies to what we are currently using to power the world are more expensive and if these societies are going to be underwriting subsidizing the introduction of these new forms of energy you can understand why governments around the world are very careful in their selection of policies and are carefully studying it because of the impact of that cost on other competing risks we all recognize that climate risk is substantial requires a comprehensive response, policy response at multiple levels but we also have to recognize that it competes with other pressing demands within society couple of questions from the webcast just because I know that there's a queue building up there does your forecast for North American tight oil production in 2015 and beyond assume Mexico would open its industry to foreign explorers or is that based on an assumption that Mexican output would remain on its current downward trajectory and if Mexico opens its oil sector to international companies what impact would that have on the North American supply situation? Okay it's pretty easy to answer that our estimate for a 2015 tight oil production does not include a significant amount of oil from Mexico that's the first part of the question the second part is opening of Mexico's markets to put it bluntly we believe that would be very good for the people of Mexico everywhere in the world to use energy so we think that would be a win-win if ever there was one but that's obviously up to the people of Mexico have to decide what they're going to do yeah what is the timeframe for Exxon to become a significant exporter of natural gas? we need to the answer to that question isn't in this room it's over at the department of energy we are ready to go thanks for that question the great thing about natural gas is that it sells itself it's a very practical fuel that's already reducing CO2 emissions it's a very convenient fuel for people to use we're not forecasting gas that's growing because that's what we want to sell that's what makes sense for consumers again that's the way we do the outlook and by the way, as you probably know we're not the only forecasters who are saying this look to what the IEA just came out with their new energy outlook it's hard to find much of a difference in terms of overall themes with the IEA which is another independent, credible body forecasting what makes sense for future consumers balancing all these considerations we've got actually a cue in the room as well why don't we take one question here and then Lisa you had your hand up before and I skipped over you thanks it's Jennifer Deloy with the Houston Chronicle just following up on the exports issue what are your estimates rather your assumptions on U.S. exports of liquids, of oil and natural gas both levels and policy well certainly from a policy standpoint I probably should let Ken talk about this more too but you know it's a hard when you answer we believe that free trade is good and I say this it sounds like perhaps a simple thing to say but it gets lost in the discussions I always may recall I even said you know Adam Smith explained the economics of trade over 200 years ago which is that both importing countries and exporting countries win it's the ultimate win-win at the same time it was even back then it was clear that whenever you try to expand trade there's always the protectionist views come out that try to put back pressure on that it's so predictable you should always expect that but most countries kind of get past that and understand that's all part of economic competitiveness it's like any other economic issue if you have the rule of law and you have the right principles you're going to get maximum economic output so there's no question that expanded trade is good for the economy of course all the studies that have been done like I think of the nearest study for the DOE that showed yes you know further exports at any level and the more the export the better it is for the economy should not really be a surprise to anyone it would have been I think a surprise for anyone to be able to show that more trade is not good so there's no question there in terms of the level of exports like everything in our outlook we tend to do at very high level supply demand kind of level and you look at the kind of numbers that the DOE has talked about I think they have a 6 and a 12 BCFD case and we would say you know that's kind of the right range I mean that's not an unreasonable range for what US exports could be but again we also look at all of North America so you have Canada versus US so we tend to focus more on all of North America which would be larger still than that and I'll go back to my comment about the why is it that it's the United States and North America that is home to this fantastic development in shale gas it's the power of markets and the incentive was there for the independent producers to go take the risk and produce and prove up the technology it wasn't government policy it was the power of markets and risking capital thank you Lisa Biffani with the law from Van Ness Feldman wanted to ask about your slide on liquid energy and the exports from North America did that include finished products and NGLs and also several of your slides indicated a very dismal future for coal so I wanted to ask what is the price band that natural gas has to stay in so that it remains in that winning spot yeah he's going to stop me I can't he used to be a lawyer they took my card away but you cannot talk about price the one thing I'm not allowed to talk about is price for perhaps obvious reasons in an open forum like this but in any case to answer your questions is first of all when you talk about coal again we're not the first forecaster to say that coal may be becoming less important in terms of its share in energy but notice that I don't show coal going away I mean there's still a lot of coal that's going to be used in the world even by the year 2040 it's a matter of kind of relative attractiveness and of course if you look at the evolution of the energy industry going back over 100 years it's always been evolving towards a different and cleaner mix of fuels and so that really shouldn't be a surprise and your question about imports and did it include products it really was all liquids I'm glad you mentioned this because it shows that the US is pretty much in balance until after about 2030 but remember we always like to emphasize that's the net number when you look at the actual market a healthy market should have imports and exports on an ongoing basis so you can have for instance some imports coming into the east coast and exports from the the Gulf Coast and they can net to zero but you still have lots of trade and you see that today today the US is exporting products from the US and that's a very healthy market so you know again what you want to have is no constraints on trade which will optimize the economics for the US and so what you're seeing there are just the net numbers but we would like to hope that even in the year 2040 there'd be a very robust trade of both crude and products imports and exports whatever the net number is because that's what's going to make the most sense for the US economy. The only thing I would add well two quick comments the only when you compare our outlook with the IEAs for example the one area where there is a bit of differences the IEA is more bullish on coal than we are the other is that back on price we'll not talk about price but I find I'm going to talk about markets I find it interesting that there are some in Washington in policy making roles who talk about finding the sweet the so called sweet spot where everyone is happy we're not that smart policy makers aren't that smart markets are over time just the ruthless power of markets will determine what the spot is but not policy I'm Matt Leggett with the Senate Republican Policy Committee we've seen reports that the US shale oil and gas revolution is putting pressure on OPEC potentially will reverse oil flows to send them towards the east instead of towards the west and that natural gas prices may begin to become decoupled from oil prices overseas I'm curious if you guys have any comments about the US energy export capacity going forward and what it means for our foreign policy for our economic relationships overseas well first of all in your question of OPEC you're absolutely right as markets continue to evolve over time the world trade market is really great at rebalancing the directions of which way the barrels flow and because the growth in liquid demand is still robust it's going up 27% you're still going to need the oil from all of these sources but OPEC will remain a very important part of the overall mix and in fact if you look at the mix of OPEC it doesn't really change so much over time do those barrels get redirected? absolutely that's a day to day thing the oils always flow to where they make the most economic sense so there's no question there that OPEC volumes will remain very important to the world market in fact you know sometimes in the US people talk about well how do we feel if we have more energy in the US and I like to think as part of the global economy we still care whether our friends in Japan have access to energy so again the global view is very important when you look at energy markets on the issue of pricing again I can't really say too much about natural gas pricing although I will say remember that as we talk about exporting gas from the US it costs a lot of money to convert gas to LNG and so the US still has a structural advantage versus Asia Pacific I think the number is you know at least $7 higher just to because you have to build these liquefaction plants and then you have to ship it overseas and so if you add $7 to whatever the cost is in the US that's the cost in Asia Pacific they're still very happy by the way to get that gas because they need it to fuel their expanding economy so even with that the US will have a structural advantage in terms of gas pricing being very conscious of time I think we could have time for one more question and maybe one more from the web audience if we're able to do that quickly if not I can fill in with what I have we've got one right back over there yep Hi Madeline Glee the Center for Global Development there's been a lot of discoveries in off the coast of East Africa and West Africa recently and over the past several years of large deposits of oil and natural gas and each time in the press and it seems from those country governments there's been a large swell of optimism surrounding those discoveries but many of them have taken decades to produce anything or haven't yet produced anything at all how optimistic are you in your outlook concerning those sorts of deposits and also how optimistic do you feel those governments are in sort of their plans for their economies and looking forward well I would say first of all you're absolutely right again coming back to this comment it's a huge undertaking to develop these projects in new countries maybe that don't have the experience of dealing with natural gas resource development on the other hand that's always been true in our industry you know the countries that we're working on today I think of a place like Malaysia for instance when they first started to develop oil resources it was a new thing for them now you know Malaysia is a great producer investors like ExxonMobil are happy to be working with the Malaysians but it takes time to develop these things and so in the outlook we again we have a very practical view so we always have to say what you know we have to put in reasonable amounts of time for these things to develop one of the aspects of the LNG markets for instance because a lot of those resources are gas resources off eastern Africa is that the LNG world is a very competitive marketplace and so you have all these customers in Asia Pacific but you also have a lot of LNG who are trying to access those markets and so we try to remind people too as they're developing these projects and talking with countries that it is a competition we have to get in there and we have to get on with it if you don't develop these projects there'll be another LNG producer who'll be happy to step in and take that market one last one this one comes in from Twitter does your forecast include potential production from the Asia Pacific region the answer is yes we absolutely show production from Asia Pacific and that is embedded in our numbers and I think if you look at our book and by the way you're all going to get a copy of our book as you leave today I hope you enjoy it I know you'll read it cover to cover and so yes and again we do this on a country by country basis frankly on the supply side we do it on a even within each country on a field by field and basin by basin basis to make sure we feel that we have incredible numbers in the outlook well now that we've had a final tweet I think we'll bring the session to end and let everybody get on to the next thing Ken Bill I want to thank you very much once again for coming for a wonderful excellent discussion and as Bill said you can pick up your outlook right by the coat rack on the way out