Good day and welcome to Exxon Mobil 2013 energy outlook conference call. Today's call is being recorded. Statements made today regarding future events or conditions are forward-looking statements. Actual future results could differ due to factors posted on the investor relations section of the Exxon Mobil website. At this time, I will turn the call over to Ms. Sarah Ladislaw. Please go ahead. Are you connecting? Hello. Well, the other lines have gone dead now. And you are live. Go ahead. Sarah Ladislaw - Co-Director and Senior Fellow, Energy and National Security Program at the Center for Strategic & International Studies: Okay, great. Well, this is a wonderful whole new experiment on how man Washington energy experts are getting bit on their own play for a whole minute. But thank you for putting up with that technical difficulty. That was great. Hi, I am Sarah Ladislaw. I am the co-director and senior fellow here at the Energy and National Security Program at the CSIS. We are absolutely delighted to once again be the host for Exxon Mobil's outlook this year for 2013. Its' not only sort of a really important strategic document for Exxon Mobil for sure, but it is certainly one of those critical inputs that we have for the public class policy debate that all of you in the room are engaged in. We have a limited amount of time this morning. So I am going to stop talking very shortly and just introduce both, Ken Cohen, who is Vice President for Public and Government Affairs at Exxon Mobil and Bill Colton who is the Vice President for Corporate Strategic Planning for Exxon Mobil, who are going to do the bulk of today's presentation. As many of you can tell, we have a very large audience on the phone that we will also be facilitating a conversation with when we get to Q&A. So please, I will state the ground rules early and ask then to wait for a microphone, especially if you are on the outside of the room and wait for, and please turn your microphone if you are sitting at the table and state your name and affiliation when we get to the question-and-answer period. But, first I am going to turn it over to Ken, who is going to go ahead and introduce the outlook for this year.

Thank you, Sarah and hello to everybody here and again, this goes to out everyone on the phone, Bill and I are very happy that you could join us today as we give you a high level summary of our 2013 energy outlook, but before we start, some housekeeping. Please note that the outlook contains some forward-looking statements. Actual future conditions, including economic conditions, energy demand and energy supply could differ materially due to changes in technology, the development of new energy sources, political events, demographic changes and other factors that we will discuss today and under the heading "factors affecting future results", in the investors section of our website. The information provided includes Exxon Mobil's internal estimates and forecasts based upon internal data and analysis as well as publicly available information from external sources including the international energy agency and our law department now gives us the good housekeeping stamp of approval to proceed. So, go.

Okay, thanks, Ken, and good morning. I am pleased to be here to share Exxon Mobil's outlook for energy which we are releasing to the public just today. For more than 50 years, this outlook has provided a window for us to the future, a view that we used to help guide our investment decisions and also for meeting, for producing the energy the world needs to meet global energy demand. This year's outlook reveals a number of key findings about how the world will use energy, how much we will need in the future and what types of fuels will make the most sense for consumers. These are questions pondered not only by us but also by consumers and policy makers around the world. Now, the first and most important insight is that the world runs on energy. Energy is fundamental to our way of life and our future prosperity. Energy is essential for everything from heating our homes and hospitals to fueling our cars and powering all the technologies that we depend on everyday and now considered to be necessities. The second critical insight is that the world continues to evolve and expanding population, economically improved living standards, government policies and new technologies are all transforming the energy landscape. We are becoming more efficient and moving to cleaner fuels. At the same time, modern technology is unlocking new resources and making energy more affordable all the while creating new jobs and expanding trade around the world. At Exxon Mobil, every single one of the 80,000 men and women who come to work everyday are focused on the needs of meeting society and consumers and we are just a small part of the technologically advanced global energy industry with millions of people working together in this mission to meet…

Thank you.

Thanks, Bill. So what we will do is take some questions first from those of you here in the room and then we will open it to those on the phone.

Herman Franssen, Energy Intelligence Group. Quickly just say something about your basic price assumption underlying the forecast? Secondly, do you see over time the natural gas prices converging or do you see the continuation of the current gap? Europe about twice as high as the U.S., Asia and both as high as the U.S.?

Well, let me take your first question about oil and gas prices by saying that we won't answer the question but I will say and I hope you can understand that we are not really allowed to talk about prices in kind of a public forum here for legal reasons. But I will say that as we pulled together the outlook, we have to consider the impacts of energy price on economic growth and that we do have embedded in the outlook what we believe are reasonable outlooks for energy prices. I would direct your attention to those who predict oil and gas prices and there is many good sources out there. And the question of gas prices converging around the world, as you know the gas markets have been very regional up to now and I think they will continue to be regional for quite a while. The fact that we can now export gas through liquefying it and LNG does provide opportunities to have some markets begin to approach parity in different parts of the world but that’s very much a long-term prospect.

Next, with oil and gas journal, does the…

(Operator Instructions)

The economics of converting and we find two sectors that look particularly attractive. The first is what I will call fleets. Think of a UPS or a FedEx fleet, where they come home to the same terminal every night and so only have to build the infrastructure one time. You also do not have as much issues in terms of range because you do cut the range of the vehicle a little bit because natural gas has lower energy density. So that makes sense. In fact some people are already starting to do that. The second interesting opportunity is liquefied natural gas for long-haul trucking. Think of these large interstate corridors across the country because you don’t have to build out so many service stations to support those. It's relatively expensive to fit out the trucks for LNG but if you look at the cost savings over time, it looks like it can make sense. We also see it making sense for international marine. So there do seem to be some significant opportunities and we think the market will naturally drive that. One of the great things about this market is that this is all about consumer choice and I think consumers will naturally migrate to whatever fuels make the most sense. We have looked at compressed natural gas for cars and I would just say that the economics of that look marginal. We don’t see that as the first place where we will see gas for transportation really grow but it does work.

Bill, hi, Guy Caruso of CSIS. This follows up for both, GTL, gas to liquids.

Right.

I know Exxon Mobil had planned the project and then did not go. Ultimately, this will sty with that, what's your view as to GTL given this environment that you just described?

Right, and very natural also given the current economics to natural gas and oil to consider using GTL or gas to liquids technology to convert natural gas to oil and a lot of people are looking at that. I would even go on to say this is kind of existing technology because people have done this today. Most prominently Sasol, out of South Africa, has technology that’s has proven to do this. But it tends to involve very high capital costs upfront. I am talking about $10 billion plus and it gets closer to $20 billion to build one of these plants. So you have to be very, very confident that this gap between oil and gas can be persistent for a very, very long time. So in our outlook, frankly, there is only modest volumes of GTL liquids. We do have some because you are seeing some. You can also, for instance, convert coal to gas using the same technology because you can probably know you can gasify coal and then take that gas and convert it to liquid. China is doing, for example. But honestly, they are very modest volumes in the outlook. In fact, there in that story, there are other liquids there in that slide.

You, in your forecast, looked at tight oil as what I thought was fairly modest compared to deepwater. Are you thinking the tight oil is going to be a regional phenomenon, just in North America? What is behind that?

Well, Jim, I would say that basically the answer is yes. It is that, it's still very much early days for tight oil and we just looked at what happened in the Bakken as most people have heard about the production of unconventional oil out in the Bakken and over just six years the production of tight oil increased by a factor of 100. I think the production now is up to 600,000 barrels a day there. So clearly, for that region, we have seen tremendous growth. Now we are our seeing growth in other regions through the U.S. and internationally, there is opportunities also. While the volumes in the outlook may seem modest, its just because, note that at the end of the day, we are only trying to forecast based on what we know today and what the evidence provides in terms of making a reasonable outlook. So is there outside? I would say, yes.

I am Lawrence McDonald and I am here today in a private capacity as a concerned citizen. Since there wasn't any discussion on the report, I would like to offer a brief comment before I pose my question, if I may. I think it is all important to be recognizing the importance of this report with the show up that image of an immensely powerful corporation whose wealth is directly tied to continued high consumption of oil and gas and you project out to 2040. We have a report from the World Bank suggesting that if we continue with business as usual and this is very much a business as usual kind of report, that by 2040 we will cross the 2% threshold which we have runaway climate change. I think it's remarkable that in your disclaimer at the beginning, you suggested a number of things that might change these predictions and all though there were references to emission, there was no reference to the threat of runaway climate change. Exxon, in particular, is under fire and now welcome to my question, but maybe these are best for Ken. I am wondering if you have any comment on the divestiture movements that’s pushing for universities, public pension funds to dump the stock of the company by Exxon but continue to explore for fossil fuels that we will never be able to burn? In particular 70%, more than 70% of the students at Harvard voted to divest firms like yours last month and I am also wondering if you have any comment on the commercial, the parody put out by the Oil Change International that says has Exxon hates your children? Thank you.

Well, thanks for the question. It's not easy being us. I will start with the answer. The challenge that we have is that, as being the world's largest nongovernmental energy company, is to continue to produce the energy that the world runs on, but do it in a way that the world shows, with a lower greenhouse gas emissions footprint. That’s why you see the world is going to continue to run for the next several decades on conventional fuels. We have taken a very large position in natural gas. We are now the largest North American natural gas resource holder and producer. As Bill shows switching from power generation from coal to natural gas has a huge positive benefit in terms of emission reduction. Going forward, and again as our outlook shows, it's all about technology. Its how do we come up, as an industry with new technologies to continue to do two things, produce the energy that runs the world but does so with a lower environmental footprint. That's what all of us here are engaged in doing. I don’t have a comment on the other two items, the activities in the universities or parodies.

Maybe we will go, I think there is still time for a question in the room. Why don’t we to Michael and Ben?

Hi, Michael Martin with Congressional Research Service. My question is kind of a follow on to this. In looking at your study, more gas is being used. Exxon is an integrated oil company. Do you see a change on a company level and for industry to be moving towards more becoming an integrated natural gas company first and an oil company second, by 2040 or somewhere out in the future?

Well, Mike, you know, we get that question a lot about what our business focus is and our business focus remains that, as the outlook shows, remember the main reason we do the outlook is to guide our business planning. As the outlook shows that clearly the world needs both oil and gas for the future, that’s clearly amongst our core competencies. Frankly we have a full plate. Exxon Mobil, just to put this in perspective, over the next five years expects to spend $185 billion pursuing the development of oil and gas that will meet part of the-needs of the world and that keeps us plenty busy. So we have a lot on our plate and so we are really not looking at changing our business model in anyway. We feel that we have plenty to do to meet these needs.

Ben Gamen with The Hill newspaper. I wanted to ask another climate change question. Yesterday, House Energy and Commerce Committee Chairman Fred Upton was asked about Exxon's support for carbon tax. He said he didn’t think it posed a very push. So my question is, is a carbon tax something that Exxon is encouraging lawmakers to adopt or conversely, if it is your view, that look, if there is eventually to a price on carbon, that’s a view that you support but that is not something that you are advocating for? Thank you.

Thanks for your question and its option B. There is two discussions going on and we need to be very clear as to what were talking about. In the context of putting a cost on the use of carbon as a way of discouraging the use of carbon-based fuels, there are range of policy options. If policymakers are going to adopt a measure, a regime to affect or put in place a cost on the use of carbon across the economy, then as we look at the range of options, our economists and most economists would support a revenue-neutral, economy-wide carbon tax as being the most transparent and efficient way of putting in place a cost on the use of carbon If however the question is, we need ways to raise revenue, and you are looking at our industry as a source for revenue, that is not the preferred option. I in fact, it is not even on the first three pages. Put our industry to work, 85% of federal lands, for example, right now off-limits to our industry. The opportunity is there for us to do a number of things just as you watched over the last decade what the industry has done in terms of job creation and wealth creation and natural gas. Put the industry to work. We will generate jobs. We will produce energy and we will produce tremendous amounts of revenue for local, state and federal governments. Far more than could be raised by a revenue neutral carbon tax.

(inaudible).

Correct. Whence the question comes, what is the policy objective? If the policy objective is to raise revenue, not on the table. If the policy objective is to put a cost on the use of carbon to discourage its use then we believe that a revenue neutral carbon tax should be very much on the table.

(inaudible).

Okay, we still have a lot of questions in the room but I think we will try and move to the phone. Okay? Do we have some questions coming from the phones?

Yes, we have a question from Barbara Shook, Energy Intelligence Group.

Good morning to you all. My question deals first with export of natural gas. First, do you see export to Mexico by pipeline growing and how many U.S. Gulf Coast LNG exports do you see besides your own golden tap?

Barbara, thanks for joining us today and I would be happy talk about gas exports. This has been a hot topic recently and in fact I hope that many of you have had the opportunity to see the report that was just released last week by the Department of Energy that very comprehensively looks at the improvements in economic performance enabled by the export of liquefied natural gas from the U.S. I would say, Barbara, that the volumes that they are talking about there in the report are reasonable volumes. I would direct people to that report and others. One of the points they make there and its consistent with a lot of other studies say that while the exports of LNG look attractive, they will also have to compete with other sources of liquefied natural gas being provided around the world. So these volumes very much have to compete with other sources. So the amount of volumes will really be set appropriately by the marketplace as people compete for these markets and we expect of that, it will be a significant market for the U.S. and that it will be good for the economy.

How much is it significant?

Well, I think the DOE was talking about 10 billion cubic feet per day over the long term. I am not going to say that’s a specific number that we are using but it’s a good example of a reasonable estimate.

Okay, fine.

(inaudible), I think there is time. I think we have got two more questions on the bell.

Our next question comes from Clifford Krauss with New York Times.

Just wanted to follow up on the LNG question. It is in two parts. What are the hurdles that LNG providers face, the important ones? Then, what impacts do you see U.S. LNG exports having on the world gas market?

Clifford, we had a hard time hearing you. You were asking about the impacts of LNG exports and what hurdles we see?

Yes, the impacts to the world and hurdles that the industry faces here in the U.S., going forward.

Well, I would say that the main hurdle right now is we just need to get regulatory approvals. It is interesting, most people understand that increased exports is a good thing for the economy which is fine and I think that is what the report said last week. It was that free trade is good. I always like to say this is not really a new idea. Adam Smith first explained this quite well 200 years ago. It is probably the one thing that almost all economists will agree to, that more trade is good for any economy. But at the same time, we understand that policymakers need to get their minds around this and to make sure they are comfortable with it. So we are hopeful that economics will prevail. In terms impact on the global markets, I would say it is really minimal. Again the LNG markets is a large market today. It is expected to be much larger in the future. You see LNG volumes in Asia-Pacific, for instance, growing by a factor of three in the future and so, the U.S. LNG exports will just be a part of that large market.

Okay, one final question on the phone.

Our next question comes from Gary Gentile with Platts.

Speaking with exports for a moment, you mentioned you see North America becoming a net exporter of oil and oil products down the road. I was hoping you could break that down in terms of exports from Canada, the United States and Mexico and specifically do you envision that the policy will change in the United States down the road to allow the U.S. to actually become an exporter of oil?

Well, yes, when we talk about and our balance is here just to remind everyone we looked at North America balances. So it did include Canada the U.S. and Mexico. It's a big and diverse market. Obviously you have net exports coming across the border from Canada. So that’s probably the preliminary driver of those balances. And yes, we would hope that again policymakers would see the wisdom of allowing exports which, just like exports of any other product would be good for the U.S. economy.

I would add to that, since we are in D.C., it seems in bipartisan term, speaking in terms of independence, you will note that we did not use that term its by the time we think in terms of energy security that is improved for North America as a result of increased supplies of energy the technology is enabling. The term independence implies isolationism, trade protectionism and of course it's self defeating. So I just wanted to make sure people understood in what we were saying.

Perhaps, one final question, if I might just because I don’t want to get lots on the shuffle. Both in the headline issue for the world energy put up by the IEA and then also your outlook and since we are in Washington, something that actually seems to be actually come out the hill the other day, efficiency. You have a good deal of efficiency gain within your outlook. Are those along the lines of traditional psychological progress? Is that policy driven? Where does that growth come from and what are some of the sub elements to that theme?

Sarah, the improvement that come from efficiency is actually not a new thing. The reality, as you look back in time, energy efficiencies continue to improve progressively over many, many years. So it's not a new trend. In some ways, it's actually accelerating in some industries like, when you think about automotive efficiencies, they are actually on a much faster pace going forward than they have been historically. One of the things that is striking about efficiency, is that you to see it in every single sector. You see it in industrial processes. You see it in appliances that you buy for your home. You see it an industrial and residential designs. Some of that’s driven by government policies, things like efficiency standards for appliances is a good example. So we are very supportive of what we call cost-effective efficiency standards because at the end of the day, we want to make sure it makes sense for consumers. One of the great things about efficiencies is again economics works pretty well here. People see the value of saving the cost of energy and then it naturally drives people to more efficient uses of energy over time.

Well, one these days we get back, crowded rooms like this, we are trying to be efficient with your time. So we will try and let you all go, but I just wanted to thank both you and Bill and thanks for coming here to present this as you. As you can see, these outlooks are great batter for very current public policy discussions and commercial discussions. So we thank you for being here. Please help me in thanking them.

That does conclude today's conference. We do thank you for your participation.