GLOBAL OIL INDUSTRY CHALLENGES FOR 2007

Ten overarching questions influence the future direction of the oil industry. These questions have implications for corporate leaders, investors, government policymakers, and energy users. The oil industry has a long history of adapting successfully to changes in the business and political environments. The answers to these ten questions will set the stage for the next cycle of innovation.

*Changes in the transport sector will drive critical changes in the oil sector. As the automotive sector considers its options for the next generation of technologies-gasoline or diesel hybrids, plug-in hybrids, flex fuel, fuel cells-decisions made by consumers and governments in Europe, the United States, Japan, and China will set the tone. The choices, along with the mixture of fuels to power the technologies, will affect all segments of the value chain.

*Access to opportunity affects all upstream oil companies. Reserves replacement and production growth are critical to company survival, but also difficult to achieve. Host governments are turning to international oil companies for help in economic development, national oil companies (NOCs) are moving outside traditional areas of exploration and production, and service companies are expanding their offerings to NOCs.

*Integration is a central theme for government policies and business strategies. The interplay of climate change concerns, energy security, and agricultural and trade policies is likely to lead to unintended consequences and unexpected business opportunities. This theme of integration extends to the way that upstream oil companies with heavy oil view refinery investments and more broadly applies to links between energy sources and uses.

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