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International Oil Executive Stress The Need for Changes

Editorial Department

HOUSTON - Changes in store for the energy industry will test oil and gas companies much like the swiftly swaying oil prices of the past two years, a group of international oil executives told their colleagues at Cambridge Energy Research Associates' CERAWeek 2001 energy conference Tuesday.

The executives, speaking at the keynote oil plenary for the conference, said social, environmental, economic and regulatory factors will force changes in the energy industry, most notably as it shifts focus more toward natural gas.

'In the year 2020, we think, in the western world, that 50% of energy needs will be met from gas and renewable (energy sources),' said Jeroen van der Veer, president of Royal Dutch/Shell Group of Cos.' (RD) Royal Dutch Petroleum. 'The oil industry cannot ignore the issue of climate change.'

The panel of executives - which included Vittorio Mincato, chief executive of Eni SpA; Herbert Detharding, chief executive of BASF AG's Wintershall AG unit; and Valery Graifer, chairman of Russia oil company Lukoil - rolled out a seething indictment of mergers, high oil prices and short-term planning as means to impress financial analysts.

'None of our problems can be solved through mega mergers,' Mincato said. '( Large company mergers) have not reduced competition, they have not eased regulation.'

The super-sized oil companies formed by recent mergers such as ExxonMobil Corp. (XOM); BP Amoco Plc (BP) and the upcoming joining of Chevron Corp. (CVN) and Texaco Inc. (TX) are part of defensive maneuvers by the industry, Mincato said, and aren't representative of historical trends.

'The industry has lost its frontier spirit,' he said. 'Preciously because oil and gas remain unique commodities, oil and gas companies must remain unique to everyone else.

'We must have the strength to look beyond the short-term and devise our own strategies for growth (instead of playing to financial analysts).'

Van der Veer echoed the need to switch thinking to long-term goals, stressing the development of sustainable resources that will ease public concerns over environmental issues, reduce reliance on fluctuation oil prices and boost shareholder value for energy companies.

'We need a balanced approach which challenges the view that you can either make money or do more to protect the environment - but you can't do both,' van der Veer said.

European countries won't be able to escape foreign influence on energy prices, Detharding said, even after the expected shift in demand to more natural gas and less oil. And Western Europe could be headed for another energy crunch.

'Despite all efforts, there is an ever-growing need to import gas into Europe from other sources,' he said. 'If you add up all capacities for (gas) transmission that exist or are projected to exist, we'll have a shortage of 2 trillion cubic feet by 2010.'

Outside sources which European countries must tap for gas supplies, Detharding said, include Russia and other areas from the former Soviet Union. But Graifer said his government still needs to make greater strides in order to ensure healthy oil and gas supplies there.

'There are some very positive shifts taking place in our country,' he told the crowd through an interpreter. 'We need to try to create a better climate for our industry.'

Graifer said Lukoil, which is partly owned by the Russian government, is moving toward privatization, but needs to do more than its expected 15% production growth by 2005 in order to attract foreign money.

'We hope we'll be able to improve our legislature and pass laws in the interests of investors,' he said. 'We need to encourage investors and say 'please, sit down to the feast'.'

Copyright (C) 2001 Dow Jones & Company, Inc. All Rights Reserved.

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