Innovations in Energy Technologies

Nazeer A. Bhore

Exxon Mobil CorporationOctober 11, 2011

Panel on

Energy Technologies: From Discovery to Deployment

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ExxonMobil Research and Development

• Decades of breakthrough technology experience sustained by senior management support

• Commercial successes and high quality spin-offs to base program

• Systematic, documented process for step-change in innovation

“We pursue research into proprietary

breakthrough technologies that will not

only enhance existing business, but

provide step changes in the Corporation’s

competitive position.”

Rex Tillerson

Chairman and CEO, Exxon Mobil Corporation

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ExxonMobil’s Process to Manage for Innovation

• Ensure high-quality results without stifling innovation

• Early engagement of technology users

• Regularly determine whether to continue, redirect or stop

Decision toDevelop

Decision toCommercialize

Ready forApplication

DeploymentPlans

Decision toPursue

SelectOpportunity

Decision toInvestigate

• Strategic fit with business needs

• Alignment on incentives and commercialization plan

• Commercial readiness• Commitment to first application

• Idea generation • Technical feasibility • Technical readiness Research

Business

Structured Innovation Process to:

Technology DevelopmentConcept Development Commercialization

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ExxonMobil Technology Management System

Technology DevelopmentConcept Development Commercialization

Idea

Generation

Gate A

Expand

Options

Gate B

Lead

Selection

and

Definition

Gate C

Pre-

Development

Assessment

Gate 1

Development

Gate 2

Validation/

Pioneer

Application

Gate 3

Commercial

Launch

Gate 4

Broad

Deployment

TechnologyManagementSystem

• Seven Technology Gates – for breakthrough technologies, typically takes 1-2 years between gates – a few stages may require more time depending on program complexity

– Overall time scale of research and development is 10-20 years for step-out technologies

– Timelines from initial commercial deployment to broad industry deployment depends on capital stock turnover, e.g. cell phones 1-3 years, cars – 10-15 years, power gen – 30-50 yrs

• Fail-early – Fail fast

– If probability of passing each Gate is 70%, overall probability ~ 8%; Cost move up exponentially

– If a concept is not attractive, you’d want to find it as early as possible

– Multiple “valley-of-death” are designed in the system

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Technology Development

• Technology development is long and unpredictable

– Sometimes driven by science and technology developments in other unrelated areas

• Unpredictability does not mean technology development is unmanageable

– Technology management system is used to manage the unpredictability

– Requires a portfolio approach; Learning from failure advises future projects

• Extent, pace, and source of future cost reduction cannot be precisely predicted

– Unconventional gas – current low costs were not expected a few years ago

– Batteries – 5x energy density increase in two centuries – another 15x increase to equal gasoline

• Technologies are likely commercialized in higher value segments before they are used in

lower value segments

– Lithium ion batteries – cell phones > power tools > hybrids > electric vehicles

– CCS – NG separation/EOR > Power plants/storage > Refineries/storage

– Butanol: Bio-n-butanol – displaces chemical n-butanol > fuel additive > neat fuel

• Technology evolution typically crosses national boundaries but government funding is

frequently driven by desire to create national competitive advantage, E.g. Li-ion battery

– Lithium ion batteries concept, Whittingham, Exxon Corporate Lab, NJ in 1970s

– Anode – Yazimi – France/ Cathode – Goodenough – Texas, USA in 1980s

– Separator Film, Exxon and Mobil Affiliate, Tonen in Japan in 1980s

– Li-ion use in consumer devices, cell phone use, Sony in Japan in 1990s

• Global widespread technology adoption is driven by long-term economic fundamentals

• Market driven selection of the solutions will ensure longer-term viability

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History of Li-ion batteries

0

500

1000

1500

2000

2500

M cells/Year

77

79

82

84

86

88

90

92

94

96

98

'00

'02

'04

'06

Year

Invention of microporous

PE separator

by Exxon and Mobil Affiliate

In Japan (Tonen)

Tonen Separator used in world’s first consumer LIB

Applications: Cellphone, laptop, camcorder, digital camera, power tool, ebikes,…

Early Exxon Li-ionBattery at EV show

Chicago, ‘77

Since 4Q’09 Lithium Ion Battery Separator films are produced and marketed by Toray Tonen Specialty Separator Godo Kaisha, a joint venture in which ExxonMobil has a 25% interest.

Tonen - Toray JV formed

HEVHEVEVEV

ElectrovayaElectrovaya’’ss MayaMaya--300300

220 Ah14 Ah1 Ah 4000+ Ah70 Ah

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Early-Use – CO2 Capture for Sub-surface Injection

LNG 5 MCFDBlack

Canyon

Processing

Facility

Black

Canyon

Processing

Facility

AGIAGI

H2O

Wellfield

Shute

Creek

Gas-Treating

Facility

LaBarge

Shute

Creek

Gas-Treating

Facility

LaBarge

CO2 230 MCFD

Helium 4 MCFD

Methane 115 MCFD

LNG 5 MCFD

Shute Creek, Wyoming

ExxonMobil Shute

Creek Gas Plant CO2 Compression

CO2 Metering

Gas Composition

65% Carbon dioxide

22% Methane

7.4% Nitrogen

5.0% Hydrogen Sulfide

0.6% Helium

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technologies for fuel productionshorter-term• energy efficiency• flare reduction• cogeneration

longer-term• second generation bio-fuels• Carbon Capture and Storage (CCS)

Technologies for Light Duty Transport

well-to-wheels basis

crude recovery

crude transportation

crude refining to products

product storage & transportation

retail site

gasoline vehicle

Production 20% GHG/mile

technologies for consumers’ use of fuelshorter-term • conventional vehicle technology improvements

• advanced vehicles – hybrid, advanced diesel, CNG

longer-term• breakthrough vehicles – fuel cell, PHEV/EVs, HCCI

Source: U.S. Basis - WTW Study, Argonne National Lab, 2005

Consumers’ use 80% GHG/mile

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Synthetic/Alternative FuelsSynthetic/Alternative FuelsSynthetic/Alternative FuelsSynthetic/Alternative FuelsENERGY SOURCES

ENERGY CARRIERS

syngas

Fisher-Tropsch

Gasific

ation

MTG

Petroleum Gasoline, Diesel

NG

Coal

Biomass

Others (e.g. Nuclear, Wind)

Diesel

Methanol

Gasoline

DME

CNG

LNG

Ethanol

Mixed Alcohols

Hydrogen

Electricity

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Transportation Technology Summary

• Three tranches of vehicle-fuel technologies – Cost-Effectiveness Seriatim

– Conventional > Hybrids~ Diesel ~ CNG > PHEV ~ EV ~ FCV

• Deployment of efficiency improvement of conventional vehicles to continue

– Emerging vehicles and fuels are niche segments until cost-effective

available conventional vehicle technologies are fully implemented

• EV/PHEV segment in US driven by CARB ZEV mandate and subsidies

• NG in transport driven by high crude/low NG price and subsidies

• Liquid fuels supply will be supplemented by unconventional oils and first gen

biofuels in next two decades; potential for next gen biofuels beyond

• Given the uncertainty in technology evolution, R&D on a portfolio of solutions is

required

– Advanced Biofuels; Battery Technologies; Novel Combustion Concepts

– Hydrogen and Fuel Cell Vehicles; Unconventional Oil Production

– Wild cards: hydrogen carrier, KIOR process, carbon fibers, etc.

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• Input

– Spends

– # of people

• Output

– Patents

– Technology Pipeline

• Outcomes

– Value Generated

– Value/Cost

Energy R&D Metrics

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Many analyst claim Oil and Gas Industry does not spend enough on R&D – based on SEC R&D spending data.

Are the SEC metrics comparable among industries?

Private Sector Energy Industry R&D

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Comparison of GM and EM SEC R&D spend

GM R&D from 2008 10-KResearch, Development and Intellectual Property

In 2007, we incurred $8.1 billion in costs for research, manufacturing engineering, product engineering, design and development activities related primarily to developing new products or services or improving existing products or services, including activities related to vehicle emissions control, improved fuel economy and the safety of drivers and passengers in our vehicles. We incurred costs of $6.6 billion and $6.7 billion for similar company-sponsored research and other product development activities in 2006 and 2005, respectively.

GM’s SEC 10-K filing is Research and Other Product Development Activities

- R&D includes activities well into development cycle of existing products per PFC Energy

- R&D dominated by product development and produces an “absolute standard” – no change in product size from R&D to commercial

ExxonMobil SEC 10-K filing is Research and Development expenses is described as:Affiliates of ExxonMobil conduct extensive research programs in support of these businesses. We have a wide array of research programs designed to meet the needs identified in each of our business segments.

Research is typically process research and the scale is different at R&D vs commercial stage. This typically excludes:

- Commercial projects with new technology or new projects or product based on existing technology

- Exploration expenses, not typically counted in R&D, are analogous to product development in auto companies

- PFC Estimates that if oil companies included Exploration Expenses in their R&D, Oil company R&D would be 3-5% of revenues instead of <1% in the base

If EM used a broader definition of research similar to GM then almost the entire Exploration Company budget would be included in R&D per PFC Energy

Source: PFC Energy, “R&D: Some Inconvenient Truths”, July 2007

SEC R&D reporting basis are not comparable across industries

GM

EM

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Although technology has been the key to the large increase in unconventional gas production, the current metrics used to gauge industry R&D do not capture this development

Unconventional Gas

• This large increase in unconventional gas is attributable to significant advances in the use of horizontal drilling and well stimulation technologies and refinement in the cost-effectiveness of these technologies.

• The top shale gas companies in the US that have played a key role in the development of technology and the production of unconventional gas (Devon, EOG, Chesapeake) do not list R&D spending in their SEC filings (Based on publicly available annual 10-K statements)

– Most of the research is field-based, not pilot or lab-based

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Keys to Success for Innovation at ExxonMobil

• Establishing focus - Maintaining “constancy of purpose”

• Fostering creativity and innovation

• Maintaining partnership between technology and business

• Ensuring alignment and accountability