Exxon's Boss Is Cool on Green Policies

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It took three decades for the confluence of technology, prices, and political negotiations to bring the project, which started up in October, to the point where it is now producing 250,000 barrels of oil per day. "The problem is the public doesn't see our product as being a result of technological innovation like they do a cell phone or satellite TV" (see BusinessWeek.com, 5/15/06, "Sakhalin Island: Journey to Extreme Oil," and 5/15/06, "Uneasy Island Venture").

Focusing on Technology

Tillerson said he is trying to make Exxon greener. He said changes at company facilities around the world have helped cut Exxon's carbon dioxide emissions by 11 million tons, the equivalent of taking 2 million cars off the road. Tillerson said he's avoiding investing in ethanol plants, because barriers to entry are low, and the industry seems to have no trouble attracting money from venture capital firms and other investors. Instead, Exxon is working with climate-change researchers at Stanford University to come up with new, more complex forms of biofuels, including ethanol made from plants other than corn. There, Exxon can add value through technology breakthroughs, he said.

Asked at the press conference following his speech if he thought energy trading and the money pouring into commodity funds in recent years were having an impact on the price of oil, Tillerson said they were. "I'm always shocked when I hear pension funds are moving into commodities," he said. Tillerson said he figured the "risk premium" associated with trading added between $10 and $15 dollars to the price of a barrel, which should be more like $40 today.

Tillerson said Exxon has spent $210 billion since 1991 on exploring and developing oil fields around the world. That was more than the company earned during the period. In spite of today's high prices, he said the company was maintaining its discipline and making sure projects pencil out even at prices much lower than the present. "In times like these we make a lot of money," he said. "But these times don't last forever and in order to make it through the cycle we have to make sure the investments make sense."

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau .