 us on behalf of the energy program here as well as the Sumitro Chair for Southeast Asia Studies. I'd like to welcome you to this, which is the inaugural session of the U.S.-Australia Speaker Series. This is a series we're really pleased to present. It will focus on a whole host of issues that are really important to the deep and abiding and growing relationship between U.S. and Australia, including issues of investment, trade, security and other issues. Throughout the series, we hope to focus on a wide range of perspectives coming from the private sector, the government, civil society, and we know that there's a great interest in this topic throughout Washington in addition to our viewers around the world, so we're really excited and pleased to be able to kick off this series. This speaker series is made possible through a partnership between CSIS and BHP Billiton. As many of you know, one of the world's largest global resource companies. We're very pleased and privileged today to have Andrew McKenzie, the CEO of BHP Billiton here to talk about some of his views on a series and kick off this series in a proper fashion. Andrew, thanks so much for being here. I'm going to hand it over to Frank Ferrestro, who is the Senior Vice President here and Slussinger Chair for Energy and Geopolitics at CSIS. Thanks, sir. I think I'm okay. Thank you. Okay. Let me add my welcome to Sarah's as a Senior VP here. It's our pleasure to welcome Andrew. I had the pleasure of actually seeing Andrew down in Houston during Sarah Week and found both his remarks insightful, but he's also the perfect person to kick off this US-Australia speaker series because he not only has the company, and I think the Wall Street Journal has described BHP Billiton as the mining titan, but they're actually more than that. On a personal level, the stuff that he has done in terms of organizing this, it's really a more diversified conglomerate now. They do oil, natural gas, coal, uranium, metals and materials that are supplied for both infrastructure and for renewable energy. As a mining company, they may be on the forefront of doing work on CCS for climate change. So this whole notion, especially in this town, when we look for energy companies that have the full portfolio and certainly look at energy from every aspect, I would say that BHP Billiton certainly equals that description. They are all of the above company. Andrew himself, and it's a pleasure to have him here as our keynote speaker, but Andrew is a geologist and a geochemist, so near and dear to my heart. He hosts his PhD in chemistry from the University of Bristol. He's published over 50 research papers as a scientist, which is unusual for a CEO. As a businessman, he joined BP's research division in 1983. He moved his way up into finance and capital markets and later into petrochemicals. In 2004, Dr. Mackenzie joined Rio Tinto as chief executive of the Industrial Minerals Group. In 2007, he joined BHP as chief executive of nonferrous. And in May of last year, he was selected as the CEO of BHP Billiton. He speaks five languages, and in his spare time, he currently serves as the chair of the B20. And we're going to ask a little bit about that, and one of the reasons he's in Washington is yesterday he co-chaired the second meeting of the Business 20 Roundtable. We've asked Andrew to offer some preparatory marks to start us off, and then we're going to settle in for a more relaxed Q&A. And then we want to open it up to questions from the audience, and that's why we're all glad you've come. So ladies and gentlemen, please join me in welcoming Andrew Billiton. Andrew Mackenzie. Welcome. Thank you, Frank. Yeah, as Frank said, I did give a speech earlier in the week, and I'm going to cover some of the similar themes at which I covered in a perhaps more detailed way with energy specialists down at CERA. But Washington plays a key role. It shapes global policy and influences the world's economic development. So I'm absolutely delighted to be here to launch this US-Australian speaker series with CIS, which we consider a preeminent thought leader on geopolitical trends important to both nations, I would say, important to the world. As Frank said, we are the world's largest diversified resources company. Our portfolio, as he covered, is special. It spans just to repeat steel-making materials, metals generally, energy, and potash for fertilizing. We're the only company that supplies all of oil, gas, coal, and uranium, as well as the metals that are critical for energy infrastructure and renewables. I like to think that makes us semi-objective in some of our choices about how the energy portfolio will evolve, because many, of course, have called for all of the above approach to energy. In fact, that was something that I think President Obama mentioned in one of his more recent speeches. And our uniquely diversified portfolio delivers this. It gives us a powerful perspective on the influence of geology, technology, and trade on supply, and how demand changes when countries develop as their people secure better housing, better transport, and better food. And today there's no better example of this than China. When Deng Xiaoping launched his market-based reforms over 30 years ago now, he and envisaged the industrialized and urbanized society that we see today in China. And certainly myself personally and many members of our team are regular visitors to China as our most important customer. Takes about 30% of our revenue. And this has caused investment-driven growth in demand for iron ore and metallurgical coal, which is required for steel, and that's the steel that they needed to build factories, apartment blocks, and infrastructure. And then coal and natural gas, increasingly important as they generate electricity and consume more energy as they move towards a consumer society. And for us, very importantly, copper, which really has one use primarily and that's to transport electricity. So in the process, certainly in the past 20 years as Deng Xiaoping's reforms got going, this has lifted more than 650 million people in China alone out of poverty. And that's more than the population of Latin America, and most of you can do the math and know that's double the population here in the US. Globally, what's happened in the last 20 years is more than a billion people have been lifted out of poverty, but clearly two-thirds of them in China alone, which is extraordinary progress and progress that we at BHP Building have been really privileged to support. Because the commodities that we supply and questionably are critical as building blocks for modern societies. Energy is crucial though, at all stages of economic development. And as developed economies like this one become more efficient, their demand is plateauing, in some cases even reversing. So the real area of growth in energy demand, and therefore for which supply is being increased, is in emerging economies. So people gain access to electricity and living standards improve as countries modernize. It's kind of interesting to reflect that more than 100 years, way back in the past, since Edison built the first power station, a fifth of the world's population still lacked access to modern reliable energy. We had a lot of talk about switching between coal and gas and renewables and so on. But we still have over 700 million people in the world relying on burning wood, or charcoal or coal to, wood or charcoal to keep their homes. And a lot of their time is actually just spent collecting that. But thankfully this is changing. So in the next 20 years we expect 1.7 billion people to gain access to electricity for the very first time. A large percentage of the population in China now and probably many of the other developing East Asian economies are already connected to the grid. And this is unquestionably heralded in the development of their industry. It's created a rise in incomes and further increased the demand for energy. As more people can buy consumer goods such as cars and fridges. The growth of the resources industry is fundamentally tied to the alleviation of poverty, abject poverty, as well as to the further successful development of emerging economies. So demand for energy is likely to increase. We think by 30% in the next 20 years, my co-speaker when I was done at CERA, John Watson from Chevron said it was 40%. So it's a big deal and two thirds of this new demand is going to come from Asia in about half from China and India. But the fastest growth will be in Africa. And the way these regions meet their energy needs will significantly influence the commodity demand amounts and pattern, as well as the health and stability of the global economy. In practice, every nation will choose a different mix. And it's very important not to generalize, for example, the experiences here in the US, because each nation has to balance affordability, security of supply, and public preferences to fill their demand. And by the way, you see similar variations even between US states. So in the next few decades, we believe, however, that fossil fuels will remain central to the energy mix. Their affordability and the scale of existing infrastructure make them extremely hard to replace. So while renewables may be a rapidly growing source of energy, which we absolutely encourage as we strive to reduce carbon, we will only really be able to rely on them when a large scale and cost effective storage of energy is truly available. Nuclear, it does provide a low carbon base load. And as you've heard it as a uranium producer, we are keen to encourage that as well. But post Fukushima, it does face strong public resistance in many countries, which is likely to slow or even reverse its growth for some time, maybe not forever, because many countries still have quite ambitious nuclear programs on their books, just kind of waiting to see how public opinion evolves. So as we look to 2030, we anticipate that 70%, only down from 80% of the world's energy will come from oil, gas, and coal. Gas, of course, is expected to see the strongest growth through its wider use in power and transportation. But I would say, as I said, Sarah, that I don't believe the shale gas revolution that you've seen here is unlikely to go global quickly. Despite what many have claimed, we're unlikely to see gas replace coal elsewhere, anything like at the scale and pace that you've seen here in the US. Costs and security of supply that mean most places will favor the use of their local resources to meet their energy requirements. And the fastest growing Asian economies have much easier access to large coal reserves than they have to cheap gas. Cost of generating electricity today from gas is more than double, often a lot more than that, than the cost of generating it from coal. And so coal will remain the region's primary source of affordable energy for some time, and the basis of its energy security. Every form of energy relies on the resources that we extract from the earth, and whether that's oil, gas, coal, uranium, or indeed the fertilizers that you need to promote the growth of biofuels and biomass, or even the copper, a very important business for us that's used in wind and hydro turbines or to connect solar panels. A renewable future is extremely good for that business, since it uses about seven times as much copper on average relative to the traditional fossil fuel industries. That's where our, if you like, our objectiveness comes, I think, in from. So, but however, as our understanding of the earth crust improves, and it does, I'll talk in a moment about some of the big advances in my own base science of geology, we are getting better at securing the resources for the future and can remain extremely optimistic about that. Of course, in some commodities we do face more complex geology, fuel decline, or even lower grades. But history shows we do substitute, we do innovate, and we do improve efficiency and overcome and meet those challenges. So take our experience in oil and gas. The era of easy oil came to the end in the 70s, you know, partly exaggerated by the Arab actions at that time, but fortunately that was the time when an understanding of plate tectonics emerged. And for those of you who followed that science, that's what actually got me hooked on geology as a school student and why I chose to study it at university. I actually had the privilege later on in my research career in working with one of the, if you like, the co-identifiers, I don't do the you, of plate tectonics in some of my research, which was very nice. But carrying on, in the 80s, advances in drilling allowed us to move into deeper water. And in the 80s and 90s, 3D seismic technology, which always gets the credit, but also geochemistry, significantly improved exploration success. And over the last decade, everybody's heard how the combination of pre-existing skills and horizontal drilling, and just as an aside, the first big long horizontal well was drilled at Witchfarn in the south coast of England while I was looking after technology at BP. And I remember those days in 1995 when we were trying to drill two miles horizontally under Pool Harbor so we could protect an area of natural beauty. Well, that combined with hydraulic fracturing that's been around since the 40s has actually enabled the shale gas revolution to occur. The energy historian and chair, if you like, of Sarah and actually a good friend of mine, Dan Yergin has noted that there have been at least five occasions when the world thought it would run out of oil. But in practice, continuous innovation has meant that world oil reserves have continued to keep pace with demand. And they've grown by around 30 billion barrels a year. So what's true for oil and gas, and that story often gets rehearsed, is actually true for almost every other commodity that we're in. So come back to copper, power lines, wind farms, and the devices that increasingly turn waste heap more efficiently into energy rely on copper. Copper is also an energy efficiency story. It's the best conducting metal you have. The quicker you can get your energy in the form of electrons in a copper wire, the more efficient you will be. So it's critical. But despite average copper grades falling from 4% to 1%, over the last 100 years, production has increased 16 fold. So as I like to say on many occasions, energy security is a matter of governance, not geology. What's above ground usually matters a lot more than what's below. And that's why right now, close to 90% of investment in resources, old and new, is still made in more developed countries, which have more of the correct governance to allow those developments and investments to occur. So at BHP Billiton, we firmly believe that open market society and free trade in goods and services and ideas create the right conditions for development. Shareholders, host nations, and consumers all benefit from the competition it follows. Between countries for investment and between companies for the privilege to invest. And if this occurs in more places, supply will become more diversified, and the pace of innovation will quicken and quicken. As it is today, as we connect more and more, the big brain of mankind, of 7 billion and increasing people working together, hopefully trading goods, services, and ideas. Asia's continued development does depend, as you can imagine from my remarks, on its access to affordable energy and resources with half of the world's population in the region and global growth depending on its progress, much as its stake. And the debate here in the US regarding energy exports, which is all over the newspapers again today, I believe is very important. I kind of don't want to count my chickens, but my sense is that even before some of the new spice added by what's happening in Ukraine, the argument has more or less been one, that exports of gas is the right thing to do. But still, I hear some have argued and continue to argue that the US should not export gas, and that exports will lead to much higher prices for domestic consumers. Curiously to us, they use the difference between Australian and US gas prices, in some case, to substantiate their claims. Well, I can tell you as a very large consumer of gas, the largest consumer of gas in Western Australia, through all of our operations here, as well as being a major gas producer, perhaps what's not known is that we are a very major oil and gas company worldwide. You know, we're the biggest foreign investor, a very large investor on any scale in US shale, and we have a huge operation in the Gulf of Mexico, but we also have big exposures to LNG in Australia. Well, that kind of perspective means that we know the price difference due to the, is not down to exports. It's simply due to the higher costs of offshore production in Australia compared to shale costs in the United States, not exports. So I would put it to you, an extremely open market and one that we stand very strongly alongside our government with has enabled the development of Australia's reserves. It's made it one of the world's leading gas exporters and bolster their own economy. Exports I put to you can benefit both the US and its partners, and US customers will continue to enjoy, however, much lower gas prices in the nations that choose to import their gas. And the country will gain a lot more jobs at home. Frankly, the transportation costs and financing constraints and global competition will limit the volume of US exports. However, these exports will help US allies diversify their supply and, particularly important at this time, send a strong signal to the world on the importance of open markets and geopolitical stability. I believe, we believe very strongly that successful transition of the world's most populous nations into vibrant consumer economies both relies on and is crucial to geopolitical stability. US leadership therefore can encourage the development of a global market that supports this process improves the resilience of supply and advances free trade policy around the world. And over the long term, open markets will also help countries reduce their emissions, and very importantly, next part of my talk, adapt to climate change. Diversifying the supply of resources and making technology more widely available will make it easier to switch fuels and become more efficient, but more action is needed. We have to acknowledge, particularly as producers of large amounts of fossil fuels, that unless we control emissions, the most likely energy mix that I've pointed to will have negative consequences for the broader environment. There's a lot of disputes about it, and many of those disputes center on how accurate the forward forecasts of temperature changes or conditions in the oceans. Those predictions are incredibly fraught. We've just spent a lot of time running reservoir models. The range of these sorts of things or climate models, as we know, just looking six days forward at a weather forecast, are tough. And using discrepancies around these sort of things that I find is not entirely helpful to the debate of what's really going on with the climate. As a geologist, I like to go back to the geological record and look what's going on there. And I'm not gonna bore you with all the scientific details, but I am 100% convinced, when you look at it, that substantial variation in CO2 and other greenhouse gases does result in temperature changes, which has potential and generally not good implications for life on earth. Warming of the climate is real. This epidot sort of warming is unquestionably down to human influence and physical impacts are now unavoidable. But the solutions that we must choose must address both the issues of energy poverty, I've already spoken to you about, and climate change. You can't solve one without the other. Almost certainly if you do that, then either objective is destined to fail because the world will continue to rely on fossil fuels over the longer term. Their continued growth in supply is vital and is critical to drive the economic growth I've spoken about and probably even more important, the huge environmental benefit which will come from huge reductions in abject poverty. But also, we need it to increase all our living standards. As an industry, we have to work with government and other shareholders to pursue long-term solutions to reduce emissions that actually have a lasting impact. As Jim Yong Kim, president of the World Bank said recently, we have to focus on the good that we can do now. We should be confident about the future. And in relation to this, while resources security offers so much opportunity for many, there still is out there the risk that corruption, real and perceived can stifle this kind of opportunity. So for us too, revenue transparency is important. BHP Billiton was a founding member of the extractive, still is by the way, extractive industries transparency initiative. And we are pleased that transparency and international recently recognized our efforts and ranked us third in transparency across companies around the world. Transparency, we would say unquestionably, is good for business. It's good for shareholders. It's good for communities and the communities in which we operate. So with innovation, good governance and open markets, we can supply the resources the world needs, deliver returns to our owners, address energy poverty and improve the world's ability to solve complex global issues like climate change. Clearly, I feel the circle can be squared, resource security for the planet and its people compatible with environmental responsibility is achievable. And that's a prize worth having. Thank you. Excellent, Andrew. Not surprisingly, thank you so much for a content rich presentation. There's a number of avenues we can go down. And for the day traders in the room, I think they walk away with copper futures as a primary takeaway. I want to start with your role as CEO. So you've been in the CEO role now for a little less than a year. You're credited with focusing the company back on the four kind of core areas, but still needing to maintain a global strategy. And you've got a long history of bringing projects in like on time and under budget, which is so critical. How do you select with the diversity, with the changing landscape going on in the world and rising costs, how do you select where you want to put your assets and the finances to back them up? Well, you talk about the four pillars that we concentrate on. I mean, our company, it was an old adage from management advice back in the 80s that you should stick to your knitting. And in our case, our knitting is petroleum engineering, mining engineering and geology. And we need to find things where those skills will give us the maximum return to our shareholder. We've been very conscious that the patterns of demand are shifting. The bulk of our profitability in the recent past has come from making things that get turned into steel by others, but we see that shifting, particularly driven by China, as it kind of starts to slow its infrastructure building phase and moves so far so good into something based more on consumption. And that's why I spent more of my talking on energy because as we go forward, the bulk of our investments are likely to be concentrated on increasing our ability to supply energy, particularly to Asia. But very long-term, we do think that a hopefully stabilizing world population will want to eat better and will want to run its agriculture better and be more efficient. And that will lead us to use opportunities on our skillset to work on fertilizers and things like potash. But I have to say, you address the day traders, I address our investors, they know full well that although we create the options, the selection of projects that go forward are exclusively based on a competition based on returns and the net present value that we can add to create the highest level portfolio that we can. And some of the things you've done that you referred to, the focus on the four pillars, has already led, in my view, to big savings and costs. We've announced that we've cut our unit cost by $5.5 billion in a two-year period as a result of that focus and a big increase in capital efficiency. So even though we're cutting our capital by about 25%, by promoting higher returns, we believe that we can actually add as much volume or value from, let's say, about $16 or $15 billion of capital that previously took over 20. Excellent. So one of the primary reasons that we put together this speaker series is to be able to draw the fact that Australia and the US have different perspectives on the world. And Ernie tells us all the time that from the Washington perspective, we actually really need to look at regionally what's going on. From the window that you see on China from Australia, how do you view developing Asia? What's changed over the last five years? Where's it going? I mean, part of it, just to very quickly add, is that they are moving towards a consumption-driven economy. And the sense that I have is that there's strong alignment from top to bottom in the country to do that. I'm very fortunate to serve on a group of 13 CEOs, foreign CEOs who advise Li Keqiang, the prime minister of China, and the way he lays things out. And the way that things happen is actually quite inspiring, to be honest. But what's perhaps more encouraging to us is that when we talk to the CEOs of state-owned enterprises who are major customers in the steel mills and the copper mills of China, or at high level, in my case, or at lower level, we find real strong alignment on this message. And they are now trying to use things like credit controls and so on to increase the efficiency of their industry. And they are desperately concerned about the environment and how they can restructure and improve the environment around things. And it's gonna be tough, and it's gonna be hard. But I think we have to be a little bit mindful of some of the lessons of history. I mean, I didn't take the job in the end, but I remember flying in for a job interview in 1979 in LA. And I can tell you, flying into LA in 79 is no different than being in Beijing today. Beijing today, exactly. Well, you've opened the door on the climate change argument. People would talk, and you addressed it in your remarks, about how you reconcile coal production and climate change and energy poverty, because these are all their difficult problems to solve. But I love the fact that from a mining perspective and a geological perspective, you look at things like whether it's carbon capture and sequestration, or developing new resources to get a more sustainable future. But in your own mind, what are the responsibilities of companies to both make a profit, but also help the next generation? Yeah, so, yeah, I mean, first of all, on perhaps on coal, you know, as I've hinted for many people, it is the lowest cost source of power and electricity. And that doesn't matter whether you live in China or you live in West Virginia. In both places, they choose 95% of their generation to be made of coal. So it's very important that we understand that local resources will be critical. I don't think the oil and, sorry, the energy industry has been well-served by trying to demonize one version of fossil fuel energy versus the others. You know, and so whilst I do see in time the trend will be moving more towards gas, if we're gonna do everything I said long-term, it's gonna require a lot of coal. But the good news or challenging news is, as I say, with so much electricity and power dependent on fossil fuels, there's an even greater obligation on the industry to do something directly about what they might do. And there's two areas. I mean, one of them is clearly dealing with the emissions in our own operations. And we've reduced our intensity by 16%. We've invested $430 million in that process over the last five years. But I think, and that's a very full-sale 100% accountability, non-negotiable. Then we move into the 90% of the emissions that to some extent we affect by providing fossil fuels. And therefore it's a much more shared responsibility. But where we have the skills, we should be lending them more clearly. And therefore I think it's important, given that the big challenge, in the same way that there's a huge challenge to store electricity, to make renewables more viable, there's a huge challenge as to how you would have bulk storage of carbon, if we're going to make carbon capture and storage work. There's lots of good ideas there, and they're based in my core science geology. I was chief reservoir engineer at BP. And we just should lend our thinking about that. Because if we can actually make real progress there and create large-scale opportunities to capture carbon underneath major power stations, it might mean that fossil fuels not only can alleviate poverty and do things in an environmentally responsible way. Because I know the resources are there for another 100 or 200 years, they could be much longer in terms of their use of a fuel source. And we should work as one industry to do that. Because even you have to take a bit more carbon out for a unit of energy out of coal burning than you do gas. They're all producing carbon. And if we get a solution, it makes gas even better. So I will draw you back into the policy debate since we are in Washington now. So this whole notion of being able to use multiple fuels and not pick the flavor of the day so that we discount coal or put it aside. My first thought was that going to see Secretary Moniz or Senator Manchin would be high on the list of things to do when you talk about coal. And when you look at poverty around the world and whether it's for cooking or basic energy that the role of coal needs to stay but needs to be improved, how do you sell that policy message to policymakers like don't move so like we have from nuclear, don't move away from that and then neglect it, lose the capability to try to bring that fuel back? Well, I think you start from the basis that we accept the mainstream science and we want to do something about the creation of energy that makes its impact, if you like, less negative towards the general environment. And then you say, but there is no one solution. You need a raft of measures. It's great that we have a number of choices of fuels that we can select from as we see which makes the more progress in squaring the circle of poverty, alleviation and environmental responsibility. But then in addition to that, you obviously need a range of technologies. I've spoken about the ones that I think the resources industry can make the best contribution to but there's others where other industries have to contribute and then you need to think about a range of policy measures and those policy measures, again, there isn't one solution and it's particularly hard to think of one solution when we're not going to get a global solution quickly. And part of it can be a little bit of government funding, R&D or whatever, and we have some direct action in Australia. Part of it can be regulation but I think it's hard to avoid the sound form of appropriate carbon pricing policy or carbon pricing mechanism is in there because that then will drive the incentives to make the right choices of fuels and to make the right choices of technology and to cause them to be developed in a way that would make me much more excited about progress and I'd wrap all around of that free trade and in good services and ideas that creates the flow of possibility and means it will move forward more quickly as well as growing quicker economically. Excellent. So we want to give the opportunity for you all to ask questions too. I have two more that I need to have addressed immediately and what is the resource, the super cycle and you talked a little bit about this in Houston. Can you explain what's going on and how we view the world differently now? Yeah, the super cycle was a once-off and it was a once-off caused by the massive acceleration of China as a result of Deng Xiaoping's reforms. It didn't really take off in terms of demand until the late 90s and then really accelerated through the 90s. The resources industry was not well prepared for it. The mining industry was a bit better prepared because it saw the steel demand coming through and so it moved a little quicker. But right until about 2003, 2004 all companies were still forecasting $20 oil. That's how caught out they were and we were probably not much better than the mining side in our price forecast. That happened because you saw particularly in steel. The steel growth in China through that phase was at some points more than 20% per annum and the industry, because China didn't actually have enough of its own domestic production had not fully built the infrastructure and developed the mines and the additional oil fields to cope with that demand. So the next thing that happened is that everybody ran around trying to build things very quickly, often quite inefficiently. Money was definitely wasted. Not all companies perform well, despite very high prices on behalf of their shareholders. But now we're in a different phase. China is moving through to more stable growth. It's moving to more of a consumption phase. It's going to grow around 6%, 7%, 8% for a while and the metals intensity of that growth is going to be much lower. It's going to be more energy based. We've built all the infrastructure now and so it's capable of being expanded rather than in big chunks but in small increments. And so we can look to, with reasonable optimism, that supply will be able to be adjusted to demand without these kind of dislocations. And as a consequence, we're looking at a period of probably flat to falling prices. So companies like us have to become more efficient while we're not going to hold on to our margins. We've been so far successful despite flat to falling prices, our return on capital is rising. And I think that's an agenda the whole industry will share as we go forward. I don't think when you look beyond China, there's another China waiting to happen. I'm a bit more optimistic than some about other Asia and so on and sometimes we're very hard on India which is still a long way behind. It's just not gonna happen the way that China happened and so it's lower prices, more on efficiency. But I think in doing that, people will perhaps become a little bit more sanguine about the resources picture because the high prices and their fall off created a little bit of a strange response. So our investors were worried about super abundance and the fact that they weren't making enough money and everybody else worried about everything running out. Whereas in fact, now we're more in the middle and we have a sense that there is enough resources to go around and we can actually use it to make good choices. Now it's timing and deliverability. I can't let you escape without talking about the B20, the business 20, which is one of the reasons that you're in Washington. So talk about your role in the business 20. Yeah, well, I mean, those of you who know about G20, I mean, there's a B20, actually there's an alphabet, soup 20, but I have C20, L20, F20 and so on. I've lost touch but I knew about B20 and B20 have chosen as their way of putting their input to the G20 deliberations. They've chosen sort of four themes that they're gonna run global task forces of business leaders all chaired by Australian CEOs. And I've been given the privilege of looking after trade just so you're interested. The other three are finance of course, because it's such a subject of G20 but also infrastructure and human capital. You've seen the announcement from the finance ministers which talked about trying to get more than an additional 2% of annual growth above what is a currently forecast. And the reason they come to that is everyone is very worried about zero job growth. And indeed, the things I've talked about about the progress and productivity we have in our company is perfectly possible we can get the growth that is forecast without actually adding much to employment. So to get employment, you have to add a lot more. Part of it is upskilling certain jobs and compensating for the digitization and automation of lower skilled jobs. We think trade can make a big difference. Its track record is strong. There has been good progress since 2008 and the moratorium on if you like tariff restrictions and protectionism seems to have held but the volume and the growth in world trade has slowed over the recent past. Maybe not in the emerging economies as much as the developed economies. So I'm more a bit more optimistic that better things are happening. But we believe if we have a few measures there is a possibility by liberalizing trade as we say of adding another Germany to the world which is another 50 to 100 million jobs and possibly as much as $5 trillion of aggregate GDP. And we've picked on three things that we want to work on. It's really attacking non-tariff barriers to trade which is how hard it is to get through customs and so on and so forth. One, and I said this in my speech, spending a lot more time and see what it takes to create a lot more trade and services. It's more than 50% of world GDP but it's only about 10 to 20%. We don't have great data on global trade. And the third area is while we like some of the multilateral or bilateral agreements that are happening, clearly keen to see the TPP happen and the T-TIP happen as well. Our new government in Australia is doing a lot of bilaterals. They're on the whole boot but the problem is if you've already got a trading relationship with somebody who has then pulled into one of those agreements and you're not in it, it can actually create complexity. And so we'd like to see some way in which we can come down to some simple rules that make sure that those bilateral multilateral agreements ultimately coalesce and will raise the standards and the possibility of something like WTO. But G20 is not WTO. It's not got any great executive power. So what we have to do is to take some of those things and break them down to individual actions that each country in G20 can commit to, even just one in a matrix of three by 20 that they say they're gonna do something about before Turkey and so that we can see measurable progress. Excellent. Okay, so for questions from the audience, we actually have a few rules, ground rules here. One is that you identify yourself and your affiliation, probably wait for a microphone since the group is a little bit larger and then to the extent you can, pose your question in the form of a question and that would be really helpful. So we're gonna start over here and I'll work my way back. Thank you. Jeff Hopkins with the Center for Climate and Energy Solutions. Given your, I guess, entry into all areas of energy, I was wondering, kind of a technological question, do you have an opinion on carbon capture and storage combined with enhanced oil recovery? Any thoughts on that? Yeah, I mean, I think it's a great way of proving it because basically you get the oil credits to pay for some of the development of the costs of the storage. But there is no way that you're gonna get the volume of storage through using EOR. And equally, I don't think you're gonna find a practical way of storing if you depend on conventional oil and gas reservoirs, even if they're only filled with water. You have to find a way that any old rock underneath a power station can actually be a significant sink for CO2. And there are a lot of ideas around that. It's how CO2 is very corrosive. It's the problem of pumping it, but it also means it actually etches the rock and so it actually can create additional space. It can create ways that you can precipitate it as carbonate and that's where we think, we've pledged quite a bit of money to get that research going. It's not really going, but ultimately it's great to prove things through EOR, but the long run solution has to work under a Chinese power station. Sir. Andrew, thanks very much. Fantastic comments. One of the things I wanted to bring it back to was obviously one of the things we're trying to do here is talk a little bit about the importance of the US-Australia relationship as well and you gave some really helpful perspective on the issue of LNG exports and sort of Australia's perspective. I just wondered if you could talk a little bit more about what you see as being shared values or shared perspective from the two countries that is sort of an interesting thing for you as BHP hugely important company in Australia, a huge investor here in the United States, global reach, what are some of those shared values that we could be talking about? Yeah. I mean, the shared values are obviously the things I talked about, clearly everything that goes with a modern Western economy, respect for the law, transparent processes and a real spirit of entrepreneurism. The oil and gas part of BHP will have got started because of joint ventures between us and Exxon now Exxon mobile in the bar straight. And so we've been strongly linked. I mean, there are obviously very important differences between the two countries. In many ways, the resource endowment of Australia is comparable, perhaps even better than the United States, but the United States has great resources as we know, but actually more than 10 times the population. So the bulk of the US resources will be used in the US, even if you agree to export everything, which I think you should by the way, because I'm obviously a free trader now. And that's the way that Australia handles things, but obviously with such a small population, the vast bulk of its resources are exported. But that export flow, whether it's gas to Japan or it's still making materials to China and Korea, it's absolutely critical for geopolitical stability in the circum-Pacific. And many of the allies of Australia and the US are dependent on those flow of commodities out of Australia, much less so than they are in the US, but that also will build manufacturing in those places. I think we have a lot to do together. Australia is a small nation. Sometimes it's talked about it, but not being a member of G20 because of its relatively small economy. But I think the resource, if you look at it as a resource economy, absolutely needs to be in G20 and needs to be a fundamental player in particularly in APEC, which to some extent was kicked off by an Australian Paul Keating. And I think we should continue to build on that. And obviously in so many walks of life, Australia, and the US have been shoulder to shoulder, both in peace and in war. A little wide here. Hi, thanks for the comments. Jeff Epping with Energy Cell, we'll see. In China, well, in the US, gas shales have obviously been very successful. China has a good endowment for gas shales. How do you see that playing out in the next couple of decades? Do you think they'll be successful? That'll be a significant portion of their energy market? I think I would just sign a big note of caution, as I said in my speech about the shale gas revolution, if you could call it then, here in the US going global quickly. And I make that point on a number of levels. I think this is new technology. The geological habitat of those hydrocarbons is not well understood. And until people have decent well tests, and they can show me, sorry, technical term here, the decline curves and the likely recovery from individual wells, I remain a little bit skeptical at just looking at an in-place estimate and applying an average recovery. So first of all, we need to get that. And I would say that to any nation who thinks they've got a shale gas endowment. Don't hype it, but do go and drill it and do proper tests, and then we can have a proper debate about the next thing is, the reason it's gone so well in the US is not just because it's an endowment and it's got access to technology, is that only for a very brief period at the back end of the last decade was there any question markers to whether the US would be sufficient in low-cost gas, self-sufficient. So it has a enormous industry based on gas, the distribution of it, chemical industry raising power from it, that is all up and firing. So as gas comes up, you can quickly back out coal and generate more gas. Most countries in the world haven't got that. You know, their history is using coal or they're less developed. So they don't have a distribution system. They don't have lots of gas for our power stations waiting to be filled up. And a gas-based industry. And of course they don't have, they haven't evolved the regulatory way of doing things and the laws that promote its development. And so I think when you talk about shale gas, particularly in terms of geopolitics, I would aim off quite a bit, even in China for quite a few years. And you have to think as well about the remaining power balance that exists within conventional gas. We are again, sorry, I'm not totally wanting to be a champion for coal, but the availability of conventional gas is quite restricted in the world and more restricted than the availability in oil. As many of you know here, if gas-pec existed, absent shale gas, it would be a much more concentrated set of countries than OPEC. Just staying on that topic because I think that's really important. So we've gone almost whipsawed from the peak oil phase and totally running out to in some ways hyperbole and wildly optimistic assessments of how much, how long, all over the world at the same time. So you agree that we ought to reign some of the enthusiasm in until we see some results, right? I do, I mean, I wouldn't give up hope. No, no, no, no. I mean, I am optimistic, I mean, sorry, but when you drop organic matter into the earth, it's thermodynamically it wants to exist in two forms, carbon and methane, coal and gas. So there's bags of it around and we know there's lots of coal that we can get after. I think extracting that more difficult gas, the tight gas requires a lot of things to happen and it won't always be low cost, in which case people will have to turn to coal. So I'm very optimistic about supply. I just think the sense that the US change, as I said, will happen quickly in a matter of 20 or 30 years, I think is on the optimistic side. Okay, great. Jan, we'll keep the microphone there and then move back. I'm Jan Meyers with Resources for the Future. You commented about the potential desirability of putting a price on carbon as a way to reduce broad emissions. Almost every economist in the world agrees that if we wanted to change the emissions of carbon, we should put a price on it. Your country did this for a while and as soon, I think, gonna move away from that. Could you give us any insights, speculations as to what's required for a country to be willing to adopt a carbon price? Yeah, I can. I mean, and we've actually supported the repeal of the carbon tax as it's called in Australia because it ultimately was a tax that was designed in a way that was actually very injurious of Australia's competitiveness. And I think you have to balance how that tax, I don't really like, how that price works with your own competitiveness and not simply penalize local industry without removing one molecule of CO2 going into the atmosphere. And the chances are that what would have happened there is the coal industry would have invested less and as a result of that, more coal would be developed elsewhere, possibly less efficient in many senses than the operations that would have existed in Australia. You've got to understand when you put something in on carbon, what does the impact of competitiveness and what other nations are doing. And I think for a resources rich nation to think it might prejudice, it's some of its most successful industries is a tough call. We have to keep talking as much as possible to get global but realistically, we're not going to get there easily and we have to keep thinking carbon price on its own is not going to get there. You need a raft of measures and each country will probably have to do different things, regulations, some subsidies of R&D, making sure the energy mix is there, making sure you're developing the technology. But I do think it's something we have to keep working on and ultimately an appropriate carbon pricing mechanism applied in many countries will, I'm sure, speed the progress to finding a proper solution that squares the circle between poverty alleviation and environmental responsibility. Okay, in a democratic manner, we're going to move to this side of the room. Little D Democrat, we're bipartisan, nonpartisan. We'll start in this side. Hi, Andrew, it's John Keough here from the Australian Financial Review. Thanks very much for a very good speech. I just wanted to ask, is what happening in Ukraine at the moment bolster the case for the US to lift their export ban for energy? And second, BHP seems to be expanding its presence and profile and trying to be more influential in the US. Could you just talk a little bit about the thinking behind the strategy on that? Okay, I'm probably not going to answer your questions directly. I think the case for US gas exports is already well made without adding additional cases for it. And I think in terms of the US, as I say, we are a very large investor in US shale. We're a big investor in the Gulf of Mexico outside of Australia. It's our biggest set of businesses. Number three is Chile. It seems appropriate that because of that, people like myself spend a bit of time here and a bit of time in other places to be part of the debates we're having today. Okay, I'm going to take two more questions all the way in the back. And then we'll come back to this side. Bill Holland with Plats. I heard a talk by Australia's largest petrochemical manufacturer and dynamite maker. The name of the company escapes me, I think I knew. Then you're probably ready for what's coming next. He's convinced that the United States should limit natural gas exports that his experiences in Australian companies destroyed his manufacturing advantage because domestic prices tripled. And to the point where their new plants are all opening in Louisiana, not Australia. How would you respond to that? I think you may have already said it's a cost difference, not an import-export thing, but could you put some more detail on it? He was very convinced that it was the wrong move. Well, I mean, look, an economy like Australia has to balance what's good for the whole economy rather than select individual industries for what I might call sort of select favoritism. And I leave that to the politicians to make those choices. You can't look at one industry in isolation from the vibrancy of the whole economy. Australia earns enormous amounts from exporting resources. You know, it is a fundamental industry for the country. I'm not saying it's enough to be diversified, but if it violates the principles of free trade and goes down the road of protectionism, it goes against everything I think that Australia has stood for in terms of resources. The issue in Australia with gas prices is that you need to stimulate the supply. There's plenty of gas around in Australia. And if we stimulate the supply, then some of the concerns that are being voiced there may be a bit easier to deal with. But ultimately, you're right. People are paying the market price for the gas and I don't think you should interfere with that. Okay. Do you have a question? So right-hand side about the middle. Could you raise your hand? Thank you. Sheldon Ray, I'm a portfolio manager at Morgan Stanley and BHP is a sizable position in my portfolio. It was full disclosure. I knew they were here. You mentioned Africa briefly. Over the next five years, how would you see your overall revenue in Asia versus the continent of Africa in Middle East developing? Revenue, so sales to Africa. I don't have the detailed figures in my head, but Africa is, there's a lot of things happening in Africa, there's a lot of growth, but the bulk of the growth is already in the consumer base rather than in a lot of construction and infrastructure. So I think it will become slightly more important, but it will be completely overshadowed by what we supply to Asia. So typically when we get folks of Andrew's caliber, part of the agreement is that we let them go in a timeframe so that they can get onto other business and we try to carve out a section where we can get them to come to CSIS only if we release them on time. He has agreed to take a few questions from the press and we'll do a kind of press scrum immediately following this, but if the rest of you will join me in thanking Andrew McKenzie for joining us today, terrific opportunity, nice job. Thank you so much. Thank you. Thank you.