Oil Firms Innovate for Better Fuel Production

HOUSTON -- With dwindling oil supplies, pollution concerns and the ever-present threat of gas prices soaring again, talk of new and better ways to fuel our cars, heat and cool our homes and power our factories has never been greater.

What's more, the conversation is emanating from the oil companies themselves.

When some of the industry's top executives meet in Houston this week to discuss global energy challenges, finding new and more effective ways to produce oil and gas -- as well as alternatives to fossil fuels -- will dominate.

Why now? The reasons are varied, but increased public and congressional scrutiny of oil companies because of up-and-down gasoline prices and record profits certainly is a factor. The companies' own bottom lines also play a key role: The cost of finding and tapping new oil and gas reserves is on the rise while the worldwide appetite for energy is only getting bigger.

"There's never been as much effort going into technological innovation across the whole energy industry as we're seeing today," said Daniel Yergin, chairman of consulting firm Cambridge Energy Research Associates and author of a Pulitzer Prize-winning history of the oil industry.

At CERA's annual weeklong conference that began Monday, dozens of the industry's heaviest hitters -- including the chairmen of ExxonMobil and Chevron and a top official of the Organization of the Petroleum Exporting Countries -- will discuss topics such as supply and demand and initiatives to develop new sources of energy.

What is generally unknown, said James Mulva, ConocoPhillips' chairman and CEO, is that U.S. oil companies have invested $11 billion in North America on renewable and other forms of energy in the last five years.

Outlining his company's 35-city tour recently, Mulva acknowledged that he and others have traditionally done a poor job of conveying to the public how their businesses operate, the challenges they face and the advances they're making.

Oil companies already are investing heavily in alternatives and new ways to get oil and gas out of the ground.

BP, which earned $22 billion in 2006, plans to spend $8 billion over the next decade developing alternative energy using wind, hydrogen and other means. Shell is testing technology involving drilling holes in fields and inserting electric heaters to gradually heat rock, causing the trapped organic matter -- kerogen, in this case -- to be released as oil and gas.

"I've taken to calling it 'The Great Bubbling,'" Yergin said. "Some of it is going to lead to very major changes."