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The News & Observer: Oil companies shift gears

They’re pushing other energy sources, more effective ways of producing gas

The Associated Press

HOUSTON – With dwindling oil supplies, pollution concerns and the ever-present threat of high gas prices, talk of new and better ways to fuel our cars, heat and cool our homes, and power our factories has never been greater.

What’s more, the conversation is emanating increasingly from a source that has been surprisingly quiet until recently — the oil companies themselves.

When some of the industry’s top executives gather in Houston this week to discuss global energy challenges, finding more effective ways to produce oil and gas — as well as alternatives to fossil fuels — will dominate the discussion.

And, as the year progresses, expect to see industry leaders speaking in cities across America in an unprecedented campaign to educate consumers on energy-related issues and discuss topics such as ethanol and renewable fuels. It is also an opportunity for the companies to polish their images.

Why now? The reasons are varied, but increased public and congressional scrutiny of oil companies because of up-and-down gasoline prices and record profits certainly is a factor. The companies’ own bottom lines also play a key role: The cost of finding and tapping new oil and gas is increasing while the worldwide appetite for energy is getting bigger.

“There’s never been as much effort going into technological innovation across the whole energy industry as we’re seeing today,” said Daniel Yergin, chairman of Cambridge Energy Research Associates and author of a Pulitzer Prize-winning history of the oil industry.

At CERA’s annual weeklong conference that begins today, dozens of the industry’s heaviest hitters — chairmen of Exxon Mobil and Chevron and a top OPEC official, among them — will discuss the tricky balance of supply and demand and initiatives to develop new sources of energy.

Already, the discourse is in full swing across the country, led by some unlikely figures.

John Hofmeister, head of Royal Dutch Shell’s U.S. arm, and James Mulva, ConocoPhillips’ chairman and chief executive, are taking part in separate speaking tours with others from their companies, talking and listening at town hall meetings in places such as Edwardsville, Ill., and Little Rock, Ark.

Often, consumers’ main connection with oil companies comes from filling up their cars or reading headlines of record profits.

But what people probably don’t know, Mulva said, is U.S. oil companies have invested $11 billion in North America on renewable energy in the past five years.

Still, the task of weaning Americans off fossil fuels will be monumental. Renewable energy sources supply only about 6 percent of America’s energy needs, according to the government. That figure is expected to grow only to about 7 percent in 20 years.

Mulva said all types of energy sources are needed, but market forces and consumer preferences, not federal mandates, should determine how they are used.

He called President Bush’s proposal for expanding ethanol use to reduce gas consumption “very well-motivated,” but he said industry leaders “want a seat at the table” when state and federal officials set standards for the use and development of alternative energy sources.

Oil companies already invest heavily in alternatives and new ways to get oil and gas out of the ground more easily and cheaply.

BP says it plans to spend $8 billion in the next decade developing alternative energy using wind, hydrogen and other means. Its alternative energy arm, created in 2005, is slated this year to begin building wind-powered plants that generate carbon-free electricity in California, Colorado, North Dakota and Texas.

Shell is testing technology that involves drilling holes in fields and inserting electric heaters to gradually heat rock over long periods of time, causing the trapped organic matter — kerogen, in this case — to be released as oil and gas.

Yergin said another clear indication of the rising interest in cleaner and more efficient energy is growing investment by venture capitalists. Last year, venture capital investments in industrial and energy deals doubled from the year before to $1.8 billion.

About 40 percent of that money was earmarked for alternative energy projects. “I’ve taken to calling it ‘the great bubbling,’ ” Yergin said. “Some of it is going to lead to very major changes.” 

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