GRAPEVINE, Texas Oct 25, 2006 (AP)
Exxon Mobil Corp. (XOM) Senior Vice President Stuart McGill would not mince words on Tuesday when he said the nation's ability to foster domestic oil and gas production is in "short supply."
McGill spoke to oil producers at the Independent Petroleum Association of America and the Associated Press about ongoing concerns with energy policy that has divided lawmakers and stifled domestic production.
"The political will, based on a realistic energy outlook, to allow further development of these and other energy resources in the United States has been in short supply," McGill told the group. "It is hard to expect to be taken seriously when calling on other countries to increase their supplies when so much of our own resource endowment is off-limits."
With midterm elections looming, McGill refused to get drawn into any kind of political blame game. He's leaving that to the politicians.
He's calling for a lawmaker consensus, or something close, that would enable companies to take advantage of untapped resources in areas in Alaska, the Rocky Mountains and the Outer Continental Shelf.
Access has been a divisive topic among lawmakers who remain far apart on whether companies should be developing certain oil and natural gas fields.
McGill's concern can be illustrated by examining disparate House and Senate bills.
The Senate recently voted to open 8.3 million acres of federal waters in the central Gulf of Mexico to oil and gas drilling, but that's too limited for the members of the House.
The House would permit companies access to waters beyond the Gulf by removing a quarter century old moratorium on the Outer Continental Shelf of the Atlantic and Pacific oceans.
"We need to minimize those areas that are not accessible and we need to maximize the diversity of supplies and recognize that as we do all that, it means interdependency, not dependency," McGill told the Associated Press. "I'm not suggesting that I see utopia, that there is no such place that is off limits."
There are other areas such as Alaska's arctic refuge. Opponents say drilling in the Arctic National Wildlife Refuge would jeopardize the wild ecosystem that characterizes the refuge's coastal plain where polar bears, caribou, migratory birds and other wildlife thrive.
McGill, however, says technological advances such as less disruptive drilling measures are working. It's being done overseas and can be done domestically just as safely, he said.
McGill points to successful drilling off Russia's Sakhalin Island.
Exxon began production last fall with plans to be at peak production of 250,000 barrels per day by year's end. Initially the oil was sold locally.
But with more production coming online and the completion of a 140-mile pipe to an export terminal on Russia's mainland, Exxon Mobil can sell oil globally. It will be sold primarily to the Asian and Pacific markets.
The Sakhalin project joins seven others scattered in the North Sea, Malaysia, Qatar and in West Africa driving the company's growth.
In the second quarter, Exxon Mobil announced a 6% production increase as a driver to a quarterly profit exceeding $10 billion. The company announces third-quarter earnings on Thursday.
McGill said prospects for responsible and significant development in North America still hold promise.
"You improve security supply by creating policy environments where companies are encouraged to invest in additional supplies using this technology and for which there is a market," he said.
"The technology developed over the last many, many years has driven the footprint of the industry to a much, much greater scale," he said. "The most important thing to emphasize is that the policy has to be based on a solid foundation of realism of the energy picture in North America."
Copyright (c) 2006 Dow Jones & Company, Inc.
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