2014 KPMG Global Energy Conference Recap - Il Sole 24 Orest. KPMG Global Energy Conference Recap May 21 ... U.S. Energy Natural Resources Advisory ... U.S. Energy Natural Resources Advisory Leader, KPMG

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  • Day One

    1 | KPMG

    2014 KPMG Global Energy Conference Recap

    May 2122, 2014

  • 3. Women in Energy Breakfast: Women on Energy Boards How to Develop and Position Yourself for Success

    5. Day One Opening Remarks: From John Kunasek, U.S. Sector Leader for Energy & Natural Resources, and Regina Mayor,

    U.S. Energy & Natural Resources Advisory Leader

    6. General Session I: How New Oil and Gas Supply Is Changing Energy Policy 8. I-A Concurrent Session: Stemming the Retiring Workforce Brain Drain 10. I-B Concurrent Session: Disruptive Technologies Utilities Cant Ignore 12. I-C Concurrent Session: BEPS: The Global Legislative Response to Tax Minimization

    14. Keynote Address: Remarks by Condoleezza Rice, United States Secretary of State (20052009)

    16. II-A Concurrent Session: Data & Analytics: The Smart Way to Enterprise Asset Management

    18. II-B Concurrent Session: New Utility Business Models for the 21st Century 20. II-C Concurrent Session: Cyber Security Evolution: From the Data Center to the Boardroom

    22. General Session II: Daniel Burrus, Founder and CEO, Burrus Research Associates 24. Day Two Opening Remarks: From John Kunasek, U.S. Sector Leader for Energy & Natural Resources, and Regina Mayor,

    U.S. Energy & Natural Resources Advisory Leader

    25. Breakfast Panel: Evolving Opportunities and Challenges in Mexico and Sub-Saharan Africa 27. General Session III: The Development and Future of the U.S. Natural Gas Industry 29. III-A Concurrent Session: Information Strategies for Upstream Effectiveness 31. III-B Concurrent Session: Regulatory Trends That Are Changing the Power Industry 33. III-C Concurrent Session: The Developing Global LNG Market 35. IV-A Concurrent Session: Good, Bad, Ugly, and Good Again JVs in the Energy Industry 37. IV-B Concurrent Session: Meeting the Energy Needs of the New Urban Society 39. IV-C Concurrent Session: Accounting and Reporting Update 41. Keynote Address: Why Not Your Best? NFL Legend Terry Bradshaw, Cohost and Analyst, FOX NFL Sunday

    Contents

    KPMG | 2

  • Day One

    3 | KPMG

    Women in Energy Breakfast Women on Energy Boards How to Develop and Posi-tion Yourself for Success

    As appropriate for a session on leadership, the first event of the 2014 Global Energy Conference was an early morning breakfast for women on their way up in the energy industry. Regina Mayor, national Advisory industry leader for Energy & Natural Resources, KPMG LLP (U.S.), moderated a candid and wide-ranging discussion about board-level recruiting and how women can develop and position themselves for board membership.

    Susan M. Cunningham, senior vice president of Gulf of Mexico, Africa, Frontier Ventures and Business Innovation, Noble Energy, addressed the question of how women should start preparing for possible board membership

    Women in Energy Breakfast:

    Women on Energy Boards How to Develop and Position Yourself for Success

  • Day One

    KPMG | 4

    early in their career. She admitted that she actually did not start with any plans beyond simply learning as much as she could at every level. I was just thirsty. I wanted to learn about everything and get as much feedback as I could. She added that seeing things from her bosss perspective has been a key to her professional development. Their perspective was always different, and understanding the business from their point of view helped me grow.

    Stacy Methvin, independent director, Pioneer Natural Resources, also pointed out the importance of what she termed broadening assignments. Boards are often looking for executives with specific experience, such as HR and executive compensation. Perhaps even more important, she said, is a background that includes responsibility for P&L or the companys strategic direction. They want someone who can run a company or a large division within a company.

    Mary Bass, partner, Spencer Stuart, shared her experience as a recruiter for boards, stressing that boards look for experience but equally important is how executives handle themselves. Its a 24/7 world, and how you behave is critical, whether at the company or at your childs soccer game. People are watching, so act accordingly.

    Panelists agreed that networking and being mentored by other women is critical. In addition, women approached for recruitment should interview the board just as they are being interviewed. This includes talking with the CEO and board members on an individual basis. If the cultural fit isnt there, if you and the CEO dont quite get along, thats an issue you need to think long and hard about, said Methvin. The panelists were also realistic in admitting the obstacles that still remain for women who want to serve on boards. Being the first minority in any situation is not always easy, and that certainly applies to women, said Cunningham. You need to know going in that board membership can be a challengebut thats where the growth is.

    Women in Energy Breakfast: Women on Energy Boards How to Develop and Position Yourself for Success

    You need to know going in that board membership can be a challenge but thats where the [personal] growth is.

    Susan M. Cunningham, Senior Vice President of Gulf of Mexico, Africa,

    Frontier Ventures and Business Innovation, Noble Energy

  • Day One

    5 | KPMG

    Day One Opening Remarks

    John Kunasek, U.S. sector leader for Energy & Natural Resources, KPMG LLP (U.S.), and Regina Mayor, U.S. Energy & Natural Resources Advisory leader, KPMG LLP (U.S.),opened the conference with a discussion of the issues framing the agenda. We are in an unprecedented level of uncertainty and change for the industry, Mayor said, referring to the economic, geopolitical, and regulatory uncertainty that the industry faces.

    Kunasek noted that economic uncertainty comes from a slowing recovery. What you see in recent statistics is that the recoveries are starting to moderate, and theres some uncertainty included in that, he said. Economies at different levels of development are also recovering at different rates, he said.

    Recent events have contributed to increased geopolitical uncertainty. How tensions in the Middle East and between Ukraine and Russia will play out is unknown and a significant risk factor. In addition, economic and political policies in China and Japan could have a major impact on the global economy.

    Kunasek and Mayor stressed that regulatory uncertainty is especially important. Climate change and sustainability, demand for increased access to affordable energy, and responses to the Fukushima Daiichi nuclear disaster in Japan are all contributing to regulatory changes. The possible actions of local regulators are perhaps the most important factor in regulatory uncertainty.

    Given this uncertainty, the fact that we cant predict the future, we would put forward that the new core competence is an organizations ability to anticipate and then respond, Mayor said. She said technology, talent, risk, and delivery are the four things that companies need to get right. Technology is having a significant impact on the industry through the growing use of renewable energy, new technology to access oil wells previously deemed uneconomic, and breakthroughs in energy storage and distributive energy technology.

    Energy companies also face a considerable challenge in the projected talent crisis. While the recent recession delayed many retirements, the industry now faces the confluence of an aging workforce, a significant number of retirements, and a new generation of workers.

    Additionally, a new set of risk factors threatens the industry. Cybersecurity has increased in importance as this risk continues to grow. In the United States, aging infrastructure requires significant investment and has led to an increase in the number of significant power outages as well as increased vulnerability to weather.

    Maintaining the energy delivery system will also be a growing challenge. The global urban population is expected to grow to two-thirds of the worlds population by 2050, and 90 percent of that increase is projected to come from underdeveloped regions.

    While LNG could help in meeting growing energy demand, the global LNG industry will require approximately US $300 billion in investment and North America alone needs an estimated $200 billion

    in investment in pipeline infrastructure.

    There are so many things that are going to change and we would put forward that our ability to anticipate and respond is going to be key.

    Regina Mayor, U.S. Energy & Natural Resources Advisory Leader,

    KPMG LLP (U.S.)

  • Day One

    6 | KPMG

    General Session I: How New Oil and Gas Supply is Changing Energy Policy

    You cant just pick one aspect of free trade and free market and ignore all the other inhibitors to free trade and free market.

    Charles T. Drevna, President, American Fuel & Petrochemical Manufacturers

  • Day One

    KPMG | 7

    General Session I: How New Oil and Gas Supply Is Changing Energy Policy

    The increased supply of oil and natural gas from shale could lead to significant changes in energy policy, as some policymakers have proposed lifting the export ban on U.S. crude oil. John Gimigliano, principal, KPMG LLP (U.S.), led a panel discussion on whether the United States should lift this export ban. Panelists included Lee Fuller, vice president of Government Relations, Independent Petroleum Association of America; Kevin Book, managing director of Research, ClearView Energy Partners, LLC; and Charles T. Drevna, president, American Fuel & Petrochemical Manufacturers.

    Book discussed the economic effects of the export ban. He noted that the United States became a net exporter of refined products in 2011, including increased exports to Canada. He said an additional 1.2 million barrels are going into inventory, and the supply glut on the Gulf Coast has pushed down the price of crude. Book also noted that forward pricing, a diversity of imports, and strategic oil reserves have contributed to a more secure market since the export ban was put in place during the 1960s and 1970s. Were much less concerned now about oil security and much more concerned about optimizing oil economics, he said.

    Fuller said producers are looking at the export ban from the standpoint that there is a certain price where it is no longer economical to keep producing oil. He also noted that the pace at which resources can be developed is dramatically faster than in the past. Fuller said the key is if the oil surplus can be assimilated into the U.S. system and exported to Canada at the same pace. From that structure, its not that this industry sees exports as the primary approach that should be taken to utilize American crude, but, by the same token,

    the desire to have the ability to export that crude when the U.S. capacity is incapable of managing all of it is a necessity that we think is important for the real potential for American production to grow at the pace that has been projected.

    Drevna said there was a misconception that U.S. refineries cannot take any more of the light sweet crude. The problem is that our oil and gas system is turned on its head because of the shale revolution, he said. He argued that the impact of increased U.S. exports on the world economy is unknown. Drevna described a three-legged stool of unprecedented production; the unknown of transportation, supply, and storage capacity; and the developing regulatory system.

    Fuller argued that the ability of refiners to alter their operations to absorb shale was also unknown. He noted that exports of refined products are allowed and asked if refiners would change to produce more naphtha for export. Those types of changes can deal with the volumes, but if the value to the producer isnt high enough to keep production going then its not going to be that valuable from the production standpoint, he said.

    Panelists also discussed how a change to the export ban could happen. Book said the President can modify it by executive order, but he noted that since gasoline prices are not high and the crude glut has not cost jobs, then the political environment does not favor changing the policy. He noted that many politicians from both parties are not in favor of lifting the ban. Overall, all panelists were skeptical of Washingtons ability to act on this matter.

    1.8 million BPD peak to trough change in net products for the U.S.

    Kevin Book, Managing Director of Research, Clearview Energy Partners, LLC

  • Day One

    8 | KPMG

    Citing recent statistics that over 50 percent of the oil and gas professionals will be eligible for retirement by 2016, Zoe Thompson, principal, KPMG LLP (U.S.), set the stage for an in-depth discussion of what the energy industry can do to address the problem of an aging workforce. Barbara Heim, vice president, Human Resources, BG Group, described the problem as primarily a matter of being more proactive in finding the right people with the right technical skills. Weve known this problem was coming for a long time; weve just had our heads in the sand. She pointed out that new hires need

    extensive training to become qualified. In response, the industry must become more flexible in how it develops resources. In the past, we had a checklistfive years at this job and five years at another. Now, companies are deciding to take more risks, and thats healthy, especially with new grads. She said that the key in hiring is ability rather than a specific set of proven skills. I believe that if you hire for intellect, youll be able to train new people very quickly. She cited a company program designed to bring in new grads with the promise of international assignments and continuous recruitment that have both helped meet their hiring goals.

    Concurrent Session I-A:

    Stemming the Retiring Workforce Brain Drain

  • Day One

    KPMG | 9

    Stemming the Retiring Workforce Brain Drain

    Richard D. Bedell, senior vice president, Refining, Marathon Petroleum Company, agreed with Heim that companies should have faith in the learning capabilities of new hires. Recalling his early days at Marathon, he said that the average age at the refinery was 25, so he and other young engineers were able to move up the ranks fairly quickly. Now when his colleagues question whether a new hire is ready for the next le...

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