Exxon mobil

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ExxonMobil Response to the European Commission Green Paper
"A European Strategy for Sustainable, Competitive and Secure Energy".
ExxonMobil1
recognizes the European Commission's strategic objective to meet Europe's need for
secure long-term, competitively priced energy while minimizing environmental impacts. We believe
that an open, competitive market for energy both inside Europe and globally, operating on a level
playing field within a transparent and stable fiscal and regulatory framework, will best meet this
challenge. In addition, open markets will attract and retain the necessary long-term capital investment
required to meet future energy needs.
ExxonMobil's detailed response to the Commission's Energy Green Paper is provided against the
background of the global energy outlook that the company undertakes on an annual basis. The
attached brochure "Tomorrow's Energy" provides a summary of our latest outlook. Further charts are
also included in the annex.
Introduction: The Energy Outlook for the next twenty-five years
ExxonMobil's latest outlook shows energy supply/demand trends globally and for Europe that
generally coincide with the European Commission's views.
KEY POINTS:
• Future energy demand will continue to grow despite energy efficiency improvements and reduced
energy intensity (Expected average energy demand growth for Europe: 0.8% per year between
2000 and 2030) [Annex Chart 1].
• Future energy policy must recognize the importance of oil and gas as they will remain the primary
energy sources for at least the next two decades providing approximately 60% of Europe’s
energy requirement in 2030 [Annex Chart 1].
• Fortunately, the European Economic Area is home to the fourth largest oil and gas production
area in the world, exceeded only by Russia, the US and Saudi Arabia. The EU & Norway
represent the fourth largest producing area in the world (after the US and Russia) in terms of
accessibility to the international oil companies [Annex Chart 2].
• The overall oil and gas resource base will be sufficient to meet the increase in oil and gas
demand, assuming that investments in developments are made in a timely fashion. Access to
resources, not existence of resources is the key point.
• The International Energy Agency estimates that approximately $6 trillion in oil and gas investment
will be needed for the period 2004 through 2030 to meet the world's growing energy demand. To
help meet this need, ExxonMobil is investing at record levels. Over the last five years, we have
invested $74 billion. Of this amount $14 billion has been invested in Europe alone, which is about
as much as our investments in Africa, and twice as much as in Russia and the Caspian, even
though the latter are more prolific upstream provinces.
• Nevertheless, meeting future energy needs will require a broad range of energy types. Wind and
solar energy are expected to have a double-digit annual growth, although they are likely to
provide only about 2% of Europe’s primary energy requirements by 2030, up from ~0.1% in 2000
[Annex Chart 1].
• The best guarantee of energy security over time is an effectively functioning open and competitive
free market which provides appropriate incentives to attract diverse supplies, supported by
providing a stable fiscal and regulatory regime
• Long-term energy self-sufficiency for Europe is neither realistically attainable nor a necessary
objective for an effective energy policy. Of Europe’s total demand for natural gas in 2030, more
than 75% will come from imported supplies; however, 70% of proved global gas reserves lie
within economically transportable distance of Europe2
. Geographical flexibility for importing
regions like Europe will increase as discoveries in Norway, Qatar, Russia and offshore West
Africa have widened the range of potential suppliers. Furthermore, the oil and gas industry’s
investment in technology has reduced both the cost of moving gas by pipeline over long distances
and the cost of converting gas to liquefied natural gas (LNG) and shipping it over long distances.
To help meet future European supply requirements, we expect that up to 20 billion cubic feet per
1
The term ExxonMobil is used in this submission for convenience and simplicity and as an abbreviated reference
to specific affiliates and subsidiaries of Exxon Mobil Corporation.
2
“World Energy Outlook” International Energy Agency, 2001

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day (BCFD) of new LNG is needed in Europe [Annex Chart 3]. Most of this LNG is expected to
come from the Middle East, North Africa, and West Africa. Significant new supplies of Russian
pipeline gas are also required. We expect this Russian gas will come from new developments in
West Siberia (Yamal) and the Russian Barents Sea.
• Diversity of supply, in terms of various fuels and geographies, is fundamental to security.
Enacting the Energy Charter Treaty could augment security of supply for Europe.
Against this background we wish to make the following observations with regard to the "Six Priority
Areas" in the Commission's Green Paper.
Priority Area 1. Energy for growth and jobs in Europe: completing the internal European
electricity and gas markets
KEY POINTS:
• Europe requires a transparent, stable and predictable regulatory and fiscal regime to attract the
levels of investment required. This can only be achieved through independent and competent
national regulators working together within a clear framework supported by the rule of law.
• Strong, competitive markets are required that are based on the principles of freedom to
participate in the market and freedom to negotiate appropriate market solutions.
• Long term contracts are essential to secure the large investments needed to bring additional
energy supplies to Europe because of the long payback periods of the projects involved. Policy
changes that may impact long term contract may have negative unintended consequences on
such future investment decisions.
• ExxonMobil welcomes the call for improved framework conditions for infrastructure investments,
accelerated authorization procedures, and favorable investment conditions.
• Strong, competent and independent national regulators with the capacity to act coherently across
adjacent markets is preferred to the addition of a new single European Regulator.
• Overall we see that the European gas market is developing on the right track.
• The challenge is to ensure that the requirements of the Second Gas Directive are fully and
effectively implemented and the investment environment is not inadvertently affected adversely.
• Development of liquid markets is important, nevertheless, gas suppliers need assurance that their
gas will have access to the market through the life of their project.
• Gas prices in the near and long term will be influenced by oil prices due to the overlap in the
broader energy market; unwarranted regulatory intervention during periods of volatile prices may
have unintended consequences introducing price caps which will distort market signals for
investment in additional gas supplies and/or infrastructure.
Regulation of the Internal Gas Market
To encourage investment, a stable and predictable regulatory regime is essential for potential
investors to evaluate the level of risk and return that their long term projects are likely to experience.
The Commission's and Regulators' roles in these markets are crucial since their actions, or inactions,
are viewed with importance by the potential future investors in Europe. Regulators should be
independent and operate within a clear framework which is objectively based to facilitate the function
of the law and avoids a prescriptive, explicit process based mandate. We support the Commission in
considering both the internal European market and its position in a global environment. However, we
would encourage awareness of the potential pitfalls of developing an excessive regulatory or
bureaucratic regime which may actually deter investors and suppliers who may see diminishing
opportunities within Europe compared to those offered in more favorable business environments
elsewhere. Legislative and regulatory changes should only be developed and adopted based on a
good understanding of their costs and benefits to the market and the impact on potential and existing
investors, taking into account any potential unintended consequences. It is important to recognise
that many projects for which investment is sought take several years to develop and can be in
operation for 20+ years, new regulatory initiatives should be weighed carefully, recognizing the
progress of existing legislation towards achieving its intended results, whilst maintaining a long term
investment horizon.

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Achieving a coherent regulatory framework both within the EU and at its borders is of great
importance. We are of the opinion that care is required when trying to develop a coherent framework
such that development is carried out without undermining the principle that there should be regulatory
stability and predictability allowing for long-term planning of infrastructure and supplies. ExxonMobil
welcomes the call for improved framework conditions for infrastructure investments, accelerated
authorization procedures, and favorable investment conditions.
The existence of strong, competent and independent national regulators with the capacity to act
coherently and in coordination across adjacent markets then becomes an important feature in
creating the necessary conditions for investment and supplies. In this context, it is worth noting that
regulatory gaps may be as problematic as regulatory overlaps when it comes to creating uncertainty,
confusion and additional costs.
To this effect we support the two step approach in which the Commission plans to review the powers
and independence of national regulators and in a second phase reviews an improved cooperation
among national regulators.
With regard to the described regional approach, ExxonMobil sees the need for a more holistic and
harmonized approach to avoid fragmentation of policy and regulatory developments. With the current
lack of integration between national markets identified by the Commission as a shortcoming of the
market, an identification of individual regions across Member States subject to particular regulatory
focus may even perpetuate market segmentation. The challenge is to ensure that the requirements of
the Second Gas Directive are fully and effectively implemented.
European Gas Market Development
Overall we see that the European gas market is developing on the right track. One of the ways of
measuring this is the development of liquid gas markets. We believe the key indicators for liquidity
development are volume to trade, the number of buyers and sellers and access to infrastructure which
are all fundamental. We see information access, standard products and financial instruments as
liquidity accelerators. Most of these indicators are showing an increasing trend, supporting our view
that the market is developing and that the existing regulatory framework is appropriate.
Development of liquid markets is important, however, gas suppliers need assurance that their gas will
have access to the market through the life of their project. Restricting capacity reservations or
contract durations to the short term does not allow for this. Instead it may undermine the sanctity of
existing contracts and increases perceived risk to investors, stifling the large investments required to
develop new competitive gas resources.
We agree with the Commission that a liberalized and competitive market is conducive to security of
supply and is essential for providing timely investment signals to industry participants. Some of these
investment signals are provided through price movement and there are many factors that have a
legitimate influence on prices.
Price movements through the introduction of liberalization provide the signals necessary to balance
supply and demand and ultimately facilitate the development of a strong liquid market – liberalization
does not provide low prices all of the time. The natural gas market remains subject to the effects of
potential for substitution. Multiple end users and multiple suppliers seek to optimize their own cost
and risk of energy supply. In doing this the end-users make choices, sometimes short-term choices,
sometimes longer term choices, among the competing fuels they select for their particular application.
Gas and oil are substitutable energy sources in the majority of applications in the long term; because
of this connection the price of oil is a significant factor impacting gas prices. Often we hear that the
prevalence of oil-indexation in long-term gas supply contracts in Continental Europe is the reason for
the higher gas prices seen recently. The inference is that in the absence of these contracts and the
direct contractual link to oil prices, gas prices would no longer be influenced by oil prices. We believe
that this hypothesis is fundamentally incorrect.
Suppliers and end users should be open to negotiate which pricing mechanism and duration of supply
they prefer, whether that be indexation to gas, where sufficient pricing information is available, or to
competing oil products in the absence of adequate gas price information.

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Role of Long-term Contracts
ExxonMobil has engaged intensively in the debate on long-term contracts and appreciates that both
the Gas Directive and the Security of Supply Directive acknowledge the importance of such contracts.
The fact that elements of long term gas contracts are again being questioned is undermining
investment confidence and is a matter of concern for ExxonMobil.
Long-term contracts exist to manage investment risk and are contributing to security of supply. As
new more distant supplies are needed the capital investments required are likely to grow, long-term
contracts are viewed as a mechanism to add certainty to the returns expected on the large capital
sums provided by the investment community. If circumstances allow, other forms of contracts could
be considered and do exist. Taking Europe's increasing import dependence into account, however,
we believe that a major part of gas supplies for Europe will continue to be based on long-term
contracts.
In line with this, financial institutions predict that long-term contracts will continue to be necessary in
the future to secure non-recourse financing of gas development, storage and/or pipeline and LNG
projects. Apart from supporting security of supply, the option to enter into long-term contracts
provides additional choice to buyers. In an effective market, buyers should have a range of supply
options, whether they are long-term, short-term or spot purchases. By entering into a mix of
commercial arrangements the buyers are able to set their own level of supply security.
Priority Area 2. An Internal Energy Market that guarantees security of supply: solidarity
between Member States
KEY POINTS:
• In our view markets will experience greater transparency and thus predictability as they mature.
We believe that the development of a European Energy Supply Observatory to monitor short and
long-term developments is not a requirement for markets to mature.
• We do not support the development of a European Centre for Energy Networks to focus on a
single segment of the supply chain.
• A competitive single European gas market would be further supported by a single European gas
grid, within a framework of harmonized regulatory regimes.
• ExxonMobil believes that interoperability can continue to be improved through joint discussions
with stakeholders in existing forums without the creation of additional bodies. New inter-
connections can develop when the appropriate market conditions exist for price signals,
investment environment and permits and authorization procedures.
• There should be no mandatory requirement for gas storage reserves. Security of gas supply is
best left for the market to determine the most efficient supply and demand alternatives or physical
infrastructure investment required.
• The establishment and use of strategic oil stocks should be transparent to the market place, and
strictly limited to use as a shield against serious public harm in the event of a severe supply
disruption, and not as a price-management tool.
Interoperability
ExxonMobil stresses the importance of interconnections in establishing a functioning internal market
for gas. Such interconnections are also important with respect to security of supply inside the EU 25.
Interoperability of existing interconnections may improve with the application of a common framework
across Europe which can be introduced through discussion in the existing Madrid Forum with all
stakeholders. In this context, we do not support the development of a European Centre for Energy
Networks to focus on a single segment of the supply chain.
A competitive single European gas market would be further supported by a single European gas grid,
within a framework of harmonized regulatory regimes. Additionally, a range of technical activities such
as those initiated by the Madrid Forum and currently being worked by EASEE gas will serve to identify
and relieve constraints in the interconnections and improve interoperability.

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Under the existing regulatory initiatives, market transparency will develop and predictability will
increase as market participants analyze the available information. We therefore do not see the
requirement for development of an additional European Energy Supply Observatory to monitor short
and long-term developments.
Multiple fora, i.e. the Madrid, Florence and Berlin, currently exist where interoperability is jointly
discussed between Member States, Regulators and European trade associations which represent all
the stakeholders. Attention to improving the effectiveness of these existing forums is likely to produce
quicker results in preference to establishment of additional bodies. New interconnections will develop
as market players identify the need and a legislative framework exists that provides the correct
conditions for price signals, investment environment and permits, and authorization procedures to
facilitate their development
Strategic Oil Stocks
Inter-governmental cooperation is appropriate for the establishment and use of strategic oil stocks as
a shield against serious national harm in the event of a severe supply disruption, with decisions to
establish strategic stocks based on cost/benefit analysis. Governments should fund and be
accountable for the stock management, which should minimize market distortions. Use of public
stocks should be transparent to the market place, and strictly limited to use as a shield against serious
public harm in the event of a severe supply disruption, and not as a price-management tool.
The International Energy Agency has established procedures for holding strategic stocks and
dispensing them in the event of a disruption. Any stock holding or release mechanisms identified by
the EU should be communicated to and coordinated with the IEA rather than through a separate
system that might come in conflict with IEA actions during an emergency.
If a government chooses to establish a stock requirement for the general public interest, it is important
that equal treatment applies to all the companies. Crude plays the key role in supply continuity and
therefore should be considered the most effective component, located in the refinery center, of stock
security. This avoids degradation of product stocks, reduces complexity and allows refineries to meet
to needed type of product demands at the time of the supply disruption. The complexity of record
keeping associated with the ticket system is also considerably reduced. Moreover, EU should ensure
flexibility across Europe on where the crude stocks are held. This would reduce operating costs and
build flexibility in meeting emergency requirements with common rules for release.
Gas Storage Obligations
Historically, and as has been seen through recent events, Europe’s gas transmission system has
demonstrated its capability of handling shorter term supply disruptions through the flexibility inherent
in the physical infrastructure (including pipelines, storages and commercial arrangements). In our
view, any renewed consideration of additional strategic gas stocks should build on existing legislation
in this field (Directive 2004/67/ EC concerning measures to safeguard security of natural gas supply).
This Directive requires Member States to take provisions in the case of partial disruptions of gas
supply, extremely cold temperatures etc. Assuming all Member States’ comply with this Directive,
and taking into account the positive effect of increasing diversification of supply sources through more
LNG terminals and increasing interoperability, the need for more strategic storage will diminish. We
are of the view that the market should be left to decide on how demand, including peak winter
demand, should be met and with which tools, i.e. contracted supply, interruption, demand
management, fuel switching etc. as well as storage should be used. There is no requirement for
mandatory storage levels.
The costs for developing a European strategic gas reserve of between one and two months
consumption should be measured against the above mentioned supply alternatives/diversifications.
Any new initiative in proposing strategic gas stocks need to take into account cost effective options
and should be based on thorough economic and probability analyses. There is a significant risk that
such an initiative would be counterproductive to establishing a competitive market. It is also unlikely
that building strategic gas stocks (or not producing gas from existing reservoirs) consisting of two
winter month’s consumption would be a cost effective solution to achieve more security of supply.

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Priority Area 3. Tackling security and competitiveness of energy supply: towards a more
sustainable, efficient and diverse energy mix.
ExxonMobil welcomes the opportunity to comment on the Commission proposal to create a Strategic
EU Review process, as a tool towards achieving a secure and competitive energy supply.
KEY POINTS:
• Diversity of supply sources is fundamental to security of supply, and a healthy oil industry
provides the diversity of supply in gas and liquid fuels that underpins European supply security.
• Ultimately the best guarantee of supply security is establishing an effective market framework
providing open competition, market pricing and adequate investment incentives for attracting
diverse supplies. Essential to this market framework is a stable and predictable fiscal, regulatory
and legal system.
• A strategic EU energy review can contribute to achieving a diversified and optimized energy mix if
its recommendations are based on market economics.
• A Strategic EU Energy Review must provide the correct framework in which alternative supply
sources in terms of fuel type and geography are able to compete on a level playing field.
Governments have a vital role to play in providing access to acreage, opening markets, reducing
barriers to trade and avoiding harmful policies, such as subsidies, mandates, and regulations, that
can weaken or distort energy markets. Given the enormous investments involved, potential
investors need to be confident of the sanctity of their contacts, the recognition of intellectual
property rights and support for the rule of law.
• Future energy policy must recognize the importance of oil and gas as they will remain the primary
energy sources for at least the next two decades providing approximately 60% of Europe’s energy
requirements by 2030.
• Fortunately, the European Economic Area is home to the fourth largest oil and gas production
area in the world, exceeded only by Russia, the US and Saudi Arabia. The EU & Norway
represent the third largest producing area in the world (after the US and Russia) in terms of
accessibility to the international oil companies.
• Meeting future energy needs will require a diverse range of energy sources and technologies.
Over and above the technical challenges, the scale of the energy business means that
widespread global deployment of new technologies, however promising, will take decades before
the cumulative effect of investments makes a substantive contribution to overall supply.
• As concerns transport fuels, a continued improvement in the Internal Combustion Engine
performance, including gasoline hybrids, diesels, and advanced ICE technologies, offer the
potential for significant improvements in both their efficiency and CO2 emissions compared to
today’s technology. Given the promise of various Advanced Vehicle and fuel technologies it is
premature to pick winners and losers. A ‘Well to wheels’ analysis - which means that in order to
determine the true efficiency and environmental impact of a fuel, you have to consider every
aspect of the development chain from the point you take an energy source like oil, natural gas or
coal out of the ground, or capture it via wind or sun, to the way it is refined or processed into a
fuel to the manner in which it is distributed and finally consumed by the end user - is critical in
assessing the options.
• In looking at lowering CO2 emissions, the lowest cost route may be outside the transport sector.
Reductions in other sectors, such as power generation, may be lower cost and have a greater
near term impact. A unit of wind or solar energy that is used to displace coal in power generation
saves 2.5 times more carbon dioxide than using the same unit of wind or solar energy to replace
gasoline with hydrogen.
Energy Mix Diversification
• Wind is currently the most competitive emerging renewable energy source. While growing
rapidly, its impact on the overall energy supply mix is limited. In some applications, wind-
generated electricity can be cost-competitive with that generated from natural gas, but it generally
relies on government subsidies to be economical.

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• Solar energy remains far more costly, except in limited applications. Existing solar photovoltaic
technology is significantly more costly than conventional electricity generation. Breakthrough
technology is needed to create fundamentally new photovoltaic materials that will allow power
generation at competitive costs. A key issue in the ability of wind and solar technologies to
contribute to electric power supply is intermittence. Stable electric grids require traditional
generating facilities or costly backup systems to ensure uninterrupted supply to consumers on
cloudy days, at night or at times the winds fail. Without a breakthrough in energy storage
technology, intermittency limits the ability of wind and solar energy to contribute to electricity
supplies and increases the overall costs of integrated power systems.
• Gasification, a technology that was developed decades ago, may see increased use in the
future. Gasification can process any carbon containing feedstock such as coal, biomass or heavy
oil and convert it into a “synthesis gas” that can be used to produce electricity, liquid fuels,
hydrogen or chemicals. Gasification is also better suited to use with carbon capture and
sequestration than other processes that can use the same feeds.
• Advanced Nuclear energy has the potential to become an increasingly important option for
meeting a growing portion of our long term energy needs, specifically in the area of power
generation. Key barriers to increased use of nuclear today are perceived safety risks and the lack
of an acceptable solution to the long-term management of radioactive waste.
• Biofuels may play a role in meeting future transportation energy demands but technology
breakthroughs are required to overcome the scale and cost limitations of today’s options. A new
generation of processes capable of using a more diverse set of biomass feed stocks may be able
to overcome these challenges. Focus should be on achieving the needed technology
breakthroughs, not on subsidizing or mandating the introduction of uneconomic biofuels
components in transportation fuels.
• Hydrogen fuel cell vehicles could be an important alternative for the future but economic
manufacturing, storage and supply of hydrogen all require technological breakthroughs. Any
evaluation of hydrogen needs to recognize the costs and the greenhouse gas emissions
associated not only with its consumption, but also its production and distribution.
Priority Area 4. An integrated approach to tackling Climate Change
KEY POINTS:
• ExxonMobil supports the Commission’s goal of using an integrated approach to reduce
greenhouse gas emissions.
• ExxonMobil believes the following objectives should be included in long-term climate policy:
1. Promote global participation.
2. Encourage more rapid use of existing efficient technologies (in both developed and
developing countries).
3. Stimulate research and development to create innovative, affordable, lower GHG
technologies sooner.
4. Address climate risks in the context of developing country priorities: development, poverty
eradication, access to energy.
5. Continue scientific research to assess risks and identify the appropriate pace of policy
responses.
Efficiency: By using oil and natural gas more efficiently, the life of energy resources is extended
while also reducing costs. A clear example of energy efficiency at work is the 85 cogeneration plants
around the world in which ExxonMobil has interests. Through the simultaneous production of steam
and electricity at these facilities, ExxonMobil provides 3,700 megawatts of power globally, enough for
about seven million average European households. With the latest technology, cogeneration is up to
twice as efficient as traditional methods of producing steam and power separately. In other words,
cogeneration provides for a net reduction of emissions.
As nations have begun to consider other options for reducing GHG emissions, there is a growing
interest in the role technology can play in emissions reduction. For example, the recently announced
Asia Pacific Partnership for Clean Development and Climate aims to promote the use of clean,
efficient technology. The latest G8 statement and the EU-China Climate Partnership also highlight
the importance of using and developing innovative technologies. The focus on technology
development and deployment is supported by the recognition that:

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• More widespread application of existing energy-efficient technologies could significantly reduce
the growth in greenhouse gas emissions from economic progress in both the industrialized and
the developing world.
• Development and deployment of new, energy-efficient technologies can enable lower energy
consumption without damage to economic growth.
• New breakthrough technologies offer the possibility of substantial long-term reductions in
greenhouse gas emissions at lower costs than current technology options.
Carbon Capture and Storage: A technology option that could play a significant role in helping reduce
CO2 emissions from the use of fossil fuels is carbon capture and storage (CCS). This technology
could have a major impact, as it is applicable to any large-emission source of CO2. The IPCC
estimates that these large facilities account for nearly 60% of global man-made CO2 emissions.
Before CCS can be widely deployed on a global scale, it must overcome important challenges. In
particular: 1) CO2 capture from power plants and most other large combustion facilities remains
expensive, and 2) CO2 storage presents technical and regulatory issues associated with ensuring
safe operations and the integrity of the site over the long term. Notwithstanding these challenges, we
believe that CCS represents an important option to address global CO2 emissions.
Technology Choice and CO2 Emissions: If new technologies are to be applied to realize reductions
in CO2 emissions, then conducting a well-to-wheels analysis is important to understand the cost of
various options in terms of euro per tonne of CO2 abated. Applying the lowest abatement cost options
first will maximize impact while minimizing costs.
Priority Area 5. Encouraging innovation: a strategic European energy technology plan
KEY POINTS:
The focus on technology development and deployment is supported by the recognition that:
• The more widespread application of existing energy-efficient technologies could significantly
reduce the growth in greenhouse gas emissions from economic progress in both the industrialized
and the developing world.
• Development and deployment of new, energy-efficient technologies can enable lower energy
consumption without damage to economic growth.
• New breakthrough technologies offer the possibility of substantial long-term reductions in
greenhouse gas emissions at lower costs than current technology options.
Meeting future energy needs, while addressing concerns about energy security and rising greenhouse
gas emissions, will require a diverse range of energy technologies. As technical hurdles are
overcome, the gradual and widening global deployment of new technologies will continue to help
enable a substantive contribution to meeting growing requirements for energy in the coming decades.
ExxonMobil agrees that it is vital to stimulate research and development to create innovative,
affordable, lower GHG technologies applicable for deployment on a broad scale. In this regard, it is
important to encourage more rapid penetration of existing efficient technologies (in both developed
and developing countries).
ExxonMobil worked to establish and is providing $100 million to Stanford University’s Global Climate
and Energy Project – the largest-ever independent climate and energy research effort. GCEP is a
major long-term research program designed to accelerate development of commercially viable energy
technologies that can lower GHG emissions at a worldwide level.
Priority Action 6. Towards a coherent external energy policy
KEY POINTS:
• EU needs to foster with its external partners a favorable global business environment, a
competitive framework in which companies, investors and governments can make realistic and
reliable analyses of risk and reward.
• EU needs to promote, without ambiguity, the need for opening markets, not only to provide more
access for more people to energy and other vital commodities they need, but also to enable
investors and operators to make the most educated and effective decisions on the allocation of
capital.

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• Sustaining economic strength in the energy sector and others requires that we become more
inter-dependent, by diversifying interconnection between supply and demand. Access to energy
must be dealt with collectively.
• EU should promote with its external partners regulatory reforms and positive alternatives to
command-and-control practices.
• EU should keep expanding international trade, to help close the growing gap between net energy
producers and net energy consumers through open commercial circuits, and to eliminate the
premium consumers pay for artificial obstacles.
• EU should keep promoting with its energy partners political and legal stability, reliable institutions
and respect towards contractual agreements (particularly those increasing investment) to marshal
the vast sums required to produce hard-to-access energy resources and to foster the
technological progress needed to keep pace with growing demands, economic and
environmental.
• EU should reinforce its continuous government support to fight bribery and corruption
Sustaining economic growth will require the EU to compete in the global energy market for future
resources. Since we are all contributing to and drawing from the same pool of resources, all nations –
exporting and importing – are inextricably bound to one another in the energy marketplace. If
importing nations, such as those within the EU, diversify their sources of energy, strengthen their
partnerships with exporting nations, and develop and use their resources more efficiently, they will
become less dependent on any one country or region for energy. In addition, by removing barriers to
trade, reducing taxes, and opening markets, importing nations will be in a better position adapt to
disruptions that do occur. Energy unilateralism, including capping the energy mix and imposing trade
restrictions, is ultimately self-defeating.
Governments have a vital role to play in providing access to acreage, opening markets, reducing
barriers to trade and avoiding harmful policies, such as subsidies and regulations that can weaken or
distort energy markets. However, ultimately, the best guarantee of supply security is the
establishment of an effective market framework providing open competition, market pricing and
adequate investment incentives for attracting diverse supplies. The large projects that are
increasingly important to bring new gas supplies to Europe in the future require long-term investment
commitments that at minimum require certainty of access to the market for the duration of the project.
Given the enormous investments involved, potential investors need also to be confident of the sanctity
of their contracts, the recognition of their intellectual property rights and support for the rule of law.

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ANNEX - Charts referred to in the text.
Chart 1, Source: ExxonMobil
Fossil Fuels Remain Predominant in EuropeFossil Fuels Remain Predominant in Europe
0.0
0.4
0.8
1.2
1980 2005 2030
0
3
6
9
12
1980 2005 2030
0
10
20
30
40
50
60
1980 2005 2030
Total Energy Other Energy Wind & Solar
NuclearNuclear
HydroHydro
Biomass,
MSW
Biomass,
MSW
Wind & SolarWind & Solar
OilOil
GasGas
CoalCoal
OtherOther
MBDOE MBDOE MBDOE
0.1%0.1%
1.2%1.2%
1.5%1.5%
0.4%0.4%
0.8%0.8%
1.8%1.8%
0.5%0.5%
0.7%0.7%
10.1%10.1%
10.3%10.3%
Average Growth / Yr.
2000 - 2030
2000 - 2030
2000 - 2030
2000 - 2030
SolarSolar
WindWind
10.3%10.3%
Chart 2, Source: BP PLC
16
europia
- 5,000 10,000 15,000 20,000
Indonesia
Kuwait
Nigeria
Algeria
United Arab Emirates
Venezuela
China
Mexico
Iran
Canada
EU and Norway
Saudi Arabia
USA
Russian Federation
Year 2004 production mboepd
Oil
Gas
The North Sea - Important to Europe
North Sea (UK, Norway, Denmark, Netherlands) represents 91% of EU/Norway production
Source ; BP Stat review 2004
North Sea 4th most
important province

of 11 pages
Chart 3, Source: ExxonMobil
Supply and Demand of Natural Gas in EuropeSupply and Demand of Natural Gas in Europe
Local & Existing Supply / Demand
BCFD
0
10
20
30
40
50
60
70
80
90
2000 2005 2010 2015 2020 2025 2030
EXISTING IMPORTS
LOCAL PRODUCTION
75
5734
New Supply
0
10
20
30
40
50
60
70
2005 2010 2015 2020 2025 2030
BCFD
PIPELINE
LNG

Exxon mobil

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