Case Study: Energy Security v. Energy Independence

1
Case Study
Energy Security
v. Energy
Independence

• Alexandra Thompson --- alex5580_at_hotmail.com
• Joel Eagle --- jdeagle_at_hotmail.com
• --------------------------------------------------
  ------
• Energy Law, Spring 2007
• Chicago-Kent College of Law

2
On Energy Independence

• At ConocoPhillips, we dont believe that Energy
  Independence is practical, possible, or
  achievable. We need more research in all forms
  of potential energy. And we need to protect the
  environment in all we do.
• --John Lowe, Executive Vice President of
  Commercial

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Why?

• You cant use a quarter of the energy supply
  but only have 3 of it here. So I just answered
  why we are in Saudi Arabia, why we are in
  Venezuela, why we are in Russia. Why are we out
  in all of these far-reaching places in the world?
  Were trying to find oil, thats why. Were a
  country that consumes huge quantities of energy.
  
• -- Jim Gallogy, Executive VP, Refining,
  Marketing, and Transportation, ConocoPhillips

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Consistent Theme
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U.S Addicted to Oil

• George W. Bush, 2007 State of the Union Address

• For too long, our Nation has been dependent on
  oil. Americas dependence leaves more vulnerable
  to hostile regimes and to terrorists, who could
  cause huge disruptions of oil shipments, raise
  the price of oil, and do great harm to our
  economy.

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Dependence on Foreign Oil

• U.S. imports roughly 60 of energyliquids, oils
  and refinery productand rising
• U.S. 4 of worlds population, consumes 25 of
  worlds energy
• Independent companies own only 6-7 of world
  reserves
• 93-94 owned by government controlled companies
  or governments themselves.

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Imports, Demand and Oil Price

• DEMAND VARIES LITTLE WITH PRICE
• According to the Oct. 2006 Report of the Council
  on Foreign Affairs
• If imports decrease and demand decreases, prices
  may go down
• But if imports decrease and demand remains high,
  prices will increase and consumers will be forced
  to seek higher-priced substitutes

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World Energy Demand

• Three-fold increase in consumption
• As worldwide population grows, oil consumption
  expected to increase from 85 million barrels/day
  to 250 million barrels/day by 2030.

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Energy Independence v. Energy Security

• Independence U.S. could supply all the countrys
  energy needs without relying on foreign energy
  sources.
• Security U.S. could provide the countrys energy
  needs through a variety of energy sources both
  domestically and internationally.

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How to Reduce Energy Dependence

• If the goal is reducing dependence on Middle
  Eastern oil, the public must be willing to make
  dramatic changes
• Ethanol and biodiesel production
• Reduction in usage
• Research into new technologies
• Realism
• The choices were making today are not leading
  to energy independence -- Lou Burke,
  ConocoPhillips

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Introduction to ConocoPhillips

• The company which would eventually be known as
  Conoco was founded in 1875 as the Continental Oil
  and Transportation Co. by Isaac Elder Blake.

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Introduction to ConocoPhillips

• Blake and his company became one of the first
  petroleum marketers in the West.
• Blake thought that if kerosene was imported from
  eastern refineries by railroad and sold in bulk
  in the West, prices would drop and demand would
  rise. Many western pioneers were still using
  candles and whale oil to light their homes at
  that time.
• The company also sold
• candles and wax.

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Introduction to ConocoPhillips

• From 1885-1913 Standard Oil controlled
  Continental

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Introduction to ConocoPhillips

• Continental built the Wests first filling
  station in 1909
• Continental was top marketer of petroleum
  products in the Rocky Mountain region
• In the next 20 years, Continental built 1000
  more service stations in 15 states

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Introduction to ConocoPhillips

• In 1929 Continental Oil merged with Marland Oil,
  a petroleum company started in 1911 by E.W.
  Marland in Ponca City, OK.
• Marland had access to a steady supply of crude
  and was an innovator of drilling techniques.

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Introduction to ConocoPhillips

• New company was named Continental Oil Company and
  it owned 3,000 wells and thousands of retail
  outlets spread over 30 states.
• The company first began trading on the NYSE in
  September, 1929.

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Introduction to ConocoPhillips

• On September 30, 1981 Conoco became a wholly
• owned subsidiary of DuPont, when 100 of its
• shares were purchased in the largest merger in
  U.S.
• history at that time.
• On October 22, 1998 Conoco split from DuPont and
  had
• the largest IPO in history at that time of 4.4
  billion.

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Introduction to ConocoPhillips

• 1905 - Phillips brothers hit the first of 81
  wells in a row.
• 1917 Phillips Petroleum Company was founded.
• 1927 Phillips begins marketing
• gasoline through service stations.

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Introduction to ConocoPhillips

• 1931 Phillips builds the first long-distance
  multi-product pipeline.
• 1951 Phillips invents polypropylene plastics.
• 2001 Phillips acquires Tosco Corporation.

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Introduction to ConocoPhillips

• ConocoPhillips was formed on August 30, 2002 by
  the merger of Conoco, Inc. and Phillips Petroleum
  Company of Oklahoma.

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Introduction to ConocoPhillips

• Today ConocoPhillips has its headquarters in
• Houston, Texas and operates in more than 40
• countries.
• The company has approx. 38,400 employees
• worldwide and assets of 183.7B.

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Introduction to ConocoPhillips

• Third largest integrated energy company in the
  U.S. based on market capitalization, oil and gas
  proved reserves and production.
• Second largest refiner in the U.S.
• Has the sixth largest total of proved reserves
  worldwide of nongovernment- controlled companies.
• Fifth largest refiner based on crude oil capacity
  worldwide.

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Introduction to ConocoPhillips

• 4 Core activities worldwide
• Petroleum exploration and production
• Petroleum refining, marketing, supply and
  transportation
• Natural gas gathering, processing and marketing
• Chemicals and plastics production and
  distribution

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Introduction to ConocoPhillips

• Investing in 4 emerging businesses
• Technology solutions
• Carbons-to-liquids
• Power generation
• Alternative energy and programs

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ConocoPhillips-Sponsored Conversations on Energy

• ConocoPhillips 35 city tour
• Town Hall meetings community events
• COP representatives, state local governments,
  business and industry, and interested citizens
• PURPOSE Engage communities, invite questions and
  comments, and discuss alternative energy sources.

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Main Themes of Conversations

1. Poor Communication in Oil Industry
2. Low Credibility in Oil Industry
3. 4 Steps to Energy Security
4. Need for Education

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1. Poor Industry Communication

• ConocoPhillips reaching out overcoming oil
  companys historically poor communication
• Jim Mulva, CEO Our industry, and our company,
  have not done an acceptable job of reaching out
  to public and the American consumer.
• John Lowe, Executive VP of Commercial Our
  industry has lost touch with public. Were
  viewed as part of the problem. We want to be
  part of the solution.

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2. Distrust of Oil Industry

• American Petroleum Institute poll - Out of 25
  major industries that are polled and reviewed,
  the oil industry ranks last last in credibility
  even behind tobacco.
• High dose of reality for oil industry and COP

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3. Energy Security

• ConocoPhillips 4 Steps to Energy Security
• Energy Source Diversification
• Greater Energy Efficiency
• More Innovation and RD
• Environmental Protection

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I. Energy Source Diversification

• Ethanol
• Biodiesel
• Hydrogen
• Oil sands oil shale
• Heavy oils
• Additional liquid fuel technology (turning coal
  and natural gas into liquids)
• Carbon sequestration

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Ethanol Not a Silver Bullet

• COP remains cautious of ethanol and biodiesels,
  but still sees a future for them
• Need government help research and
  incentives/subsidies
• E85 quality control will be very important

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Ethanol

• Iowa residents concerned about rising price of
  beef dairy in response to rising corn prices
• Iowa Renewable Fuels Association Is a nickel
  more for a pork chop worth becoming more
  independent of foreign oil?

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Health Risk of Ethanol

• Is ethanol better for our health?
• Stanford University Study
• A high blend of ethanol poses an equal or greater
  risk to public health than gasoline (which
  already causes significant health damage)
• Computer modeling simulation of atmospheric
  conditions throughout U.S., especially L.A.

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Health Risk of Ethanol

• According to the study, using ethanol-based fuel
  instead of gasoline would likely increase the
  ozone-related death rate in Los Angeles by 9
  percent in 2020

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Health Risk of Ethanol

• Results E85 vehicles reduced atmospheric levels
  of two carcinogens (benzene and butadiene) but
  increased two others (formaldehyde and
  acetaldehyde)
• E85 may increase ozone, similar effects to lungs
  and immune system.
• No difference what E85 is made of corn,
  switchgrass, or other plant product.
• Alternative? Battery-electric, plug-in hybrid,
  hydrogen fuel cell vehicles, wind or solar
  powered energy

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Additional Ethanol Concerns

• Ethanol produced mainly in middle of the country
• Ethanol cannot be shipped by pipeline
• Must be shipped by truck or rail
• These sources use energy to ship

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Competitors

• BP announced in 2005 plans to invest 8 billion
  over 10 years into an alternative energy division
  focusing on wind, solar, natural gas and hydrogen
  power.
• In February of 2007 BP announced a plan to give
  500 million over 10 years to a consortium with
  UC Berkeley.
• Chevron Corp owns part of a biodiesel plant along
  the Houston Ship Channel and has earmarked 5
  billion for alternative and renewable energy
  technologies from 2002 through 2009
• Last year, Chevron Corporation pledged
  25-million to the University of California at
  Davis and 12-million to Georgia Institute of
  Technology, both awards over five years, for
  research into alternative fuels.

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Competitors

• Shell has spent more than 1 billion on biofuels,
  wind, solar and hydrogen since 2000 and
  distributed nearly 100 million gallons of
  biofuels last year.
• Stanford announced in 2002 that it would receive
  225-million over 10 years from the Exxon Mobil
  Corporation and two other sponsors for a variety
  of research on renewable research, including
  biofuels.
• Exxon Mobil Corp. isnt seeking to invest in
  renewables because they arent viable without
  subsidies. The company had unprofitable
  investments in solar and nuclear energies.

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Is Conoco Doing Enough?

• According to pro-environment investment firm
  Trillium Asset Management, a ConocoPhillips
  investor
• ConocoPhillips is ignoring zero-carbon technology
• Behind the curve
• BP, Shell, and Chevron will have market share
  before ConocoPhillips joins the market
• May 9 Shareholder meeting will consider whether
  to prepare a report on COP response to rising
  competitive and regulatory pressure to
  significantly develop renewable energy sources.

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II. Greater Energy Efficiency

• Great lifestyle changes are needed
• Must be more efficient with energy use. U.S has
  4 of worlds population but consumes 25 of
  worlds energy.
• 5-7 of electricity demand comes from Parasitic
  Load (home computers left on during the day,
  devices/chargers left plugged in, unused lights
  left on)
• ConocoPhillips U.S. refineries will improve
  efficiency by 10 by 2012.

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Greater Energy Efficiency

• ConocoPhillips Billings refinery earned EPA
  ENERGY STAR for superior energy performance
• Top 25 in country
• Based on design, operations, and maintenance -
  captures and recycles thermal energy used to make
  fuel
• heat-recovery system from crude tower for
  preheating cold crude
• intensive steam trap maintenance program to
  separate condensed water from a steam system and
  returns hot water to the boilers to generate more
  steam

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III. Increased Innovation and RD

• Increasing 2007 technology RD budget by 50 - to
  150 million.
• Employs 250 scientists, engineers, and
  researchers exploring alternative and renewable
  energy sources

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Current ConocoPhillips Projects

• 1. ConocoPhillips and Tyson Foods
• 2. Iowa State University Biodiesel Research
  Program
• 3. Controlled Hydrogen Fleet and Infrastructure
  Demonstration and Validation Project
• 4. Whitegate Refinery for renewable diesel
• 5. Freedom Car Fuel Partnership for Hydrogen
  Research
• 6. Clean coal application
• 7. LNG initiatives

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1. ConocoPhillips Tyson Foods

• On April 16, 2007 ConocoPhillips and Tyson
  Foods, Inc. announced a strategic alliance to
  produce and market renewable diesel fuel.

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ConocoPhillips Tyson Foods

• Plan to use beef, pork and poultry by-product
  fat to create a transportation fuel

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ConocoPhillips Tyson Foods

• Renewable diesel
• Similar to biodiesel in that they use similar
  feedstocks
• Different from biodiesel in that they have
  different processing methods and create
  chemically different products.
• Renewable diesel is chemically equivalent to
  conventional diesel fuel and can be shipped and
  distributed through existing pipelines to
  distribution terminals unlike other biofuels
  which must be transported by rail or trucks.

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ConocoPhillips Tyson Foods

• Benefits of renewable diesel
• Produces lower life-cycle carbon emissions.
• Increases energy security by using a domestic and
  renewable energy source.
• Can be used in todays vehicles.
• Can be produced and distributed with existing
  refineries and fuel distribution systems.
• Refinery quality control systems ensure product
  quality.

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ConocoPhillips Tyson Foods

• Tyson will make capital improvements this summer
  in order to begin pre-processing animal fat in
  some of its North American rendering facilities.
• ConocoPhillips will also be making capital
  expenditures to enable it to produce the fuel in
  several of its refineries.

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ConocoPhillips Tyson Foods

• By the fourth quarter of 2007, ConocoPhillips
  Borger refinery will be the first to process the
  renewable diesel from fat from Tysons Amarillo
  beef rendering plant about 50 miles away.

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ConocoPhillips Tyson Foods

• They will produce renewable diesel fuel mixtures
  that meet all federal standards for
  ultra-low-sulfur diesel.
• Production is expected to eventually reach as
  much as 175 million gallons (4.2 million barrels)
  per year, roughly 3 of ConocoPhillips entire
  diesel production.

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ConocoPhillips Tyson Foods

• Proprietary thermal depolymerization production
  technology.
• Animal fats will be processed with hydrocarbon
  feedstocks to produce high-quality diesel fuel
  that meets all federal standards.
• The addition of animal fat will improve the
  fuels ignition properties.
• The processing steps will improve the fuels
  storage ability and handling characteristics.

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ConocoPhillips Tyson Foods

• Thermal depolymerization technology
• Process for the reduction of complex organic
  materials into light crude oil.
• Mimics the natural geological processes.
• Under pressure and heat, long-chain polymers of
  hydrogen, oxygen and carbon are decomposed into
  short-chain hydrocarbons with a maximum length of
  around 18 carbon atoms.

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ConocoPhillips Tyson Foods

• ConocoPhillips believe the key to a secure
  energy future is the development and efficient
  use of diverse energy sources. This alliance
  will provide a new and significant contribution
  to our nations domestic renewable fuel supply.
  It also offers an excellent opportunity to use
  our companys manufacturing expertise and
  advanced technology to help increase the supply
  of renewable fuels and to reduce greenhouse gas
  emissions.
• --Jim Mulva, ConocoPhillips Chairman CEO

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ConocoPhillips Tyson Foods
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ConocoPhillips Tyson Foods

• The processing technology was developed by a
  cross-functional team at ConocoPhillips and was
  tested successfully at the companys Whitegate
  refinery in Cork, Ireland, in 2006.

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ConocoPhillips Tyson Foods

• Energy Policy Act of 2005
• - Provides tax subsidies of 51 cents per gallon
  of ethanol and 1 per gallon of biodiesel

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ConocoPhillips Tyson Foods

• Early April, 2007, IRS issued Notice 2007-37
• Ruling interprets thermal depolymerization
  generically.
• The Energy Policy Act of 2005 and its legislative
  history do not specify whether a process that
  uses catalysts is a thermal depolymerization
  process.
• IRS said it was.
• Upon this finding, ConocoPhillips and Tyson foods
  announced their co-venture.

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ConocoPhillips Tyson Foods

• Rep. Lloyd Doggett, D-TX, plans to introduce
  legislation that would repeal the Treasury
  Departments interpretation.
• There appears to be abuse that demands
  legislative correction.
• Lloyd Doggett

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ConocoPhillips Tyson Foods

• In addition, the National Biodiesel Board, which
  represents companies primarily using soybean oil
  to make fuel, does not agree with ConocoPhillips
  and Tysons ability to use the tax incentive.
• Were not opposed to refiners converting a
  portion of their capacity into renewable
  capacity. But we believe its bad public policy
  for taxpayers who are paying as much as 3 for a
  gallon of gasoline to have their taxes pay
  another dollar for this.
• --Joe Jobe, CEO of the National Biodiesel Board

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ConocoPhillips Tyson Foods

• Denying the companies the right to use the tax
  credit will only serve to limit the expansion
  and availability of alternative fuels and also
  damage the ability of livestock farmers and
  ranchers to participate in the renewable energy
  business.
• --Gary Mickelson, spokesman for Tyson Foods

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ConocoPhillips Tyson Foods

• Cost of using animal fat as a feedstock 2 per
  gallon, or about 84 per barrel.
• Crude oil futures at above 63 per barrel on the
  NYME.
• With the tax credit the cost of using animal fat
  as a feedstock
• 1 per gallon, or about 42 per barrel.

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ConocoPhillips Tyson Foods

• Without the tax credit, it wouldnt be
  commercial. With the tax credit, its just
  barely commercial.
• --Jim Mulva, CEO, ConocoPhillips

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ConocoPhillips Tyson Foods

• If were trying . . . to reduce our dependence
  on foreign oil and have more homegrown energy
  sources, every bit of flexibility we can provide
  in getting bio-mass converted to usable forms of
  transportation is absolutely needed for this
  country.
• --Cal Hodge, President of A 2nd Opinion, a fuels
  consulting firm which supports the Treasurys
  decision.

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ConocoPhillips Tyson Foods

• Several agricultural groups such as the National
  Cattlemens Beef Association, the National
  Chicken Council and the Texas Cattle Feeder
  Association support the broader interpretation.
• Subsidy for Big Oil? Or helping farmers and
  ranchers and fostering production of alternative
  fuel?

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2. ConocoPhillips Iowa State University

• April, 2007 ConocoPhillips established a 22.5
  million biofuels research program.
• Initial grant of 1.5 million in 2007.
• 3 million each year for 7 years thereafter.

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ConocoPhillips Iowa State University

• Research will include converting biomass
  to fuel through fast pyrolysis
• Process that uses heat in absence of oxygen to
  decompose biomass into a liquid product.
• This bio-oil can be used as a heating oil or can
  be converted into transportation fuel at
  petroleum refineries.

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ConocoPhillips Iowa State University

• COP will also sponsor studies of other
  thermochemical technologies that produce biofuels
• Research to understand and support
• environmental sustainability and rural
• economies
• Emphasizing crop improvement
• and production
• Harvesting and transport of
• biomass
• Impacts of biofuels on economic
• policy and rural sociology

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ConocoPhillips Iowa State University

• ConocoPhillips staff scientists will not work
  regularly on Iowa State's campus.
• The university will own the rights to any
  inventions discovered with ConocoPhillips money,
  but the company will have first rights to an
  exclusive license.
• ConocoPhillips will have a right to delay
  publication of scholarly findings for up to 45
  days to ensure that none of its proprietary
  information is inadvertently released.

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ConocoPhillips Iowa State University

• ConocoPhillips is developing long-term
  relationships with respected academic
  institutions such as Iowa State to research
  extensions of traditional energy sources that
  ultimately will benefit consumers."
• --Jim Mulva, Chairman CEO

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3. Controlled Hydrogen Fleet and Infrastructure
Demonstration and Validation Project

• 5-year program, began in 2004
• Funded in part by DOE grant
• COP, automakers, CA universities, government
  agencies
• Goal continue to demonstrate and validate
  advancements in hydrogen-based transportation
  infrastructure
• COP will provide six of 24 CA fueling stations
  and will provide hydrogen produced from natural
  gas and renewable energy sources

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4. Whitegate Refinery Cork, Ireland

• Renewable diesel production
• Uses soybeans and other vegetables to produce
  renewable diesel that meets European Union diesel
  fuel standards

• Crude oil discharging
• at Whitegate

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Whitegate Refinery (cont.)

• Tyson Project
• Process may be used to convert animal fats and
  oils to renewable diesel
• 2006 Developed the technology to co-process
  beef, pork and chicken fat with hydrocarbon
  feedstocks at Whitegate facility.

• Aerial View of Whitegate

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5. FreedomCAR and Fuel Partnership

• Began in September 2003
• Goal Research technologies for cars/light
  trucks and fueling infrastructure to reduce
  foreign oil import dependence without
  sacrificing freedom and mobility and vehicle
  choice.
• Promote hydrogen dialogue and research

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• DOE, BP America, Chevron Corporation,
  ConocoPhillips, Exxon Mobil Corporation, Shell
  Hydrogen LLC, and the United States Council for
  Automotive Research (USCAR)a legal partnership
  among DaimlerChrysler Corporation, Ford Motor
  Company, and General Motors Corporation.

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6. Clean Coal Technology

• Wabash River Coal Gasification Repowering Plant
  in Indiana has been using ConocoPhillips E-Gas
  Technology on a commercial basis since 1995.
• E-Gas Technology converts coal and petroleum
  coke, which may have a negative economic value,
  into a clean synthesis gas containing hydrogen.
  The process allows virtually all
  pollutant-forming impurities to be removed.

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Clean Coal Technology

• 2004 ConocoPhillips and Excelsior Energy
  announced plans for a technology licensing
  agreement for an IGCC facility using the E-Gas
  Technology, called the Mesaba Energy Project.
• Being built in Minnesota and is expected to be
  operational by 2012.
• Will be one of the cleanest and most efficient
  coal-fired power generating facilities in the
  world.

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7. Liquid Natural Gas (LNG)

• ConocoPhillips built the first LNG carrier used
  for international trade in 1959.
• The company also built the first successful
  commercial liquefaction facility in 1969 in
  Kenai, Alaska, which it continues to safely
  operate today.
• ConocoPhillips LNG technology is employed in
  Trinidad and planned for use in Egypt, Equatorial
  Guinea, Australia and Nigeria.
• Construction has begun on a regasification
  terminal in Freeport, Texas
• Will connect with the Texas intrastate gas
  pipeline system.
• Rights to approximately 1 billion cubic feet per
  day of the terminals capacity.
• Estimated startup 2008.

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Other COP Social Initiatives

• Kuukpikmuit Subsistence Oversight Panel Designed
  to identify and minimize conflict between COP and
  Native Alaskans
• Indonesia Workforce Program Aids in development
  of a skilled workforce

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1. Kuukpikmuit Subsistence Oversight Board (KSOB)

• ConocoPhillips operates the first production
  facility on Native Alaskan land at the Alpine
  field.
• ConocoPhillips and Nuiqsut community developed
  the KSOB to help identify and minimize conflict
  between Alpine operations and traditional
  practices.
• The KSOB consists of Nuiqsut residents and
  monitors the health of subsistence resources on
  Kuukpik lands and identifies any impact that
  exploration, development or production activities
  might have on those resources.

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2. Indonesia Workforce Program

• 1-year new engineer training program.
• Program teaching high school students about
  drilling and other skills for working in offshore
  operations.
• Joined with a group of companies to create
  vocational training workshop in Natuna.

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IV. Environmental Protection

• Ties into everything ConocoPhillips does
• Cannot operate without following all
  environmental laws regulations
• Must think about carbon emissions and climate
  change

82
ConocoPhillips and USCAP

• U.S. Climate Action Partnership (USCAP)
• April 2007 COP joined USCAP to support
  mandatory national framework to address
  greenhouse gas emissions
• Need businesses to step forward to provide
  solutions to climate change problem
• COP building potential long-term cost of carbon
  into capital spending for major projects
• Developing internal targets for GHG emissions
  from its operations

83
ConocoPhillips and USCAP

• Requirements of Carbon Reduction Framework
• Transparent
• Clearly communicate cost of carbon to consumers.
• Structured to avoid increasing energy price
  volatility
• Encourage energy efficiency
• Paced to match speed of developing technology

84
Environmental Protection

• Greater environmental responsibility (shrinking
  environmental footprint) Broader discretion in
  operations

85
Sustainable Development

• 4 As of Sustainable Development
• Affordable to end user
• Adequate returns to suppliers
• Available any time
• Acceptable impacts to society and environment

86
Sustainable Development

• No single energy source completely satisfies all
  4 As
• Must strive for as many as possible
• Leads to need for energy source diversification

87
Interdependence (a.k.a. Energy Security )

• Ways to facilitate supplies outside of U.S.
• Canadian oil sands (same size as Saudi Arabian
  fields)
• Find partnerships in countries with the remaining
  93 ownership (COP owns 20 of Russian oil co.
  LUKOIL)
• Broker peaceful relations with Iraq, Iran,
  Venezuela trade and appropriate agreements (not
  doing great job so far)
• REALITY So much reserves in foreign lands, we
  need them.

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Interdependence (a.k.a. Energy Security )

• 4. Domestic supplies in coastal fields, Alaska
  (ANWR) difficult for environmental reasons
• Need to develop new technologies
• Only 25-30 accessible, need technological
  improvements to get hard-to-reach 70-75
• No longer pursuing oil in ANWR
• Cut ties with Arctic Power

89
Interdependence (cont.)

• 5. Methane hydrates
• Natural gas trapped in ice slush at bottom of the
  ocean
• Geographically well-distributed globally
• Contain 7 more NG than in traditional source
  areas
• As oil/gas prices increase, these sources will
  become more necessary
• 6. Stranded oil/gas reserves using new
  technology to acquire new resources at old Texas
  fields

90
The Future of U.S. Oil Dependence
91
Is this the Future?
92
Some Opinions of Energy Independence

• The concept of energy independent is
  ridiculous, unachievable, and perhaps not
  desirable
• -- Mark Mathis, Responsiblenergy.org
• Energy independence is not really possible in
  the U.S., and the public needs to shift to the
  more practical goal.
• -- Jim Mulva, CEO, ConocoPhillips

93
Rocky Mountain Institute

• Winning the Oil End Game, RMI
• 4 Steps to Energy Independence
• Double the Efficiency of Using Oil
• Ultralight vehicle design
• Advanced composite or lightweight-steel materials
  can nearly double the efficiency of today's
  popular hybrid-electric cars and light trucks
  while improving safety and performance.
• The vehicle's total extra cost is repaid from
  fuel savings in about three years

94
Rocky Mountain Institute (cont.)

• 2. Apply creative business models and public
  policies to speed the profitable adoption of
  super-efficient light vehicles, heavy trucks, and
  airplanes.
• 3. Provide another one-fourth of U.S. oil needs
  through major domestic biofuels industry
• 4. Save half the projected 2025 use of natural
  gas
• a. Use the saved gas instead of oil
• b. Convert gas into hydrogen

95
The Future of the Oil Industry according to RMI

• What happens to the oil industry?
• Shell, BP, ConocoPhillips already shifting from
  Oil companies to Energy companies.
• Done right, this shift can profitably redeploy
  their skills and assets rather than lose market
  share.
• Biofuels are already becoming a new product line
  that leverages existing retail and distribution
  infrastructure and can attract another 90
  billion in biofuels and biorefining investments.
• Oil may, however, retain or even gain value as
  one of the competing sources of hydrogen.

96
IV. Educate the Youth

• Educate young children on energy efficient
  lifestyle need cultural changes
• Carpooling
• Consolidating car trips
• Living closer to work
• Utilize mass transit

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Education at ConocoPhillips

• Active in communities where there are COP
  facilities (refineries and research)
• Community Outreach at grade schools and high
  schools
• 40-50 of ConocoPhillips 38,000 employees are
  within 5 years of retirement
• Educate college students to be geo-scientists,
  project managers, all types of jobs

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Conclusion

1. Energy Source Diversification biofuels,
   hydrogen, liquid natural gas
2. Greater Energy Efficiency increasing facility
   efficiency by 10 by 2012
3. More Innovation and RD increased by 50 in
   2007, partnerships with Tyson, Iowa State
   University, DOE, car manufacturers, industry
   competitors
4. Environmental Protection at ConocoPhillips
   shrink environmental footprint, be environmental
   stewards

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QUESTIONS/COMMENTS?