AS AN OIL INDUSTRY EXECUTIVE, I am often asked how we, as a society, can resolve what is perhaps the central energy-related issue of our time – how to meet the ever-growing demand for reliable and affordable energy while simultaneously addressing environmental concerns.

This is a fundamental question that we face today because energy is central to the lives of all people, providing us with heat, light, motive fuel and electrical power. And there's no doubt that the demand for energy will increase as the world's population grows and developing nations improve their standards of living. Forecasts predict that by 2030 population and economic growth will increase the world's consumption of all forms of energy by about 40 percent from today's levels. North American energy demand is expected to increase by more than 30 percent during the same period.

Petroleum – that is to say, oil and natural gas – is expected to remain the dominant source of world energy until at least 2030 and probably beyond. Petroleum fuels offer a unique combination of properties, including high energy density, widespread availability, and ease of handling and transportation. This gives them an unbeatable competitive edge in many major energy applications, such as transportation, residential and commercial space heating, and industrial processes. Coal, hydro and nuclear power will continue to play a major role, particularly in electricity generation. And while alternatives such as wind and solar power will become more prevalent, they are not expected to account for more than a very small percentage of world energy supply within the next two or three decades. Even at a growth rate of 20 percent a year, which in itself would require major technological breakthroughs and massive investment, alternatives would meet less than one percent of the world's expected energy needs by 2030. However, all forms of energy will be needed.

The challenge for petroleum producers will be to meet this growing demand as conventional oil and gas reserves are depleting. Clearly, we will have to find and produce new reserves. Given that we have identified reserves in the more accessible areas of the world, the likelihood is that new reserves will be in more and more remote regions. Not only will we have to find ways to access and produce this oil, but we must do so in ways that minimize our impact on the environment.

We face a huge challenge. Meeting it will require enormous ingenuity, an all-out effort on many fronts and huge investments of time, capital and resources. The International Energy Agency estimates that the petroleum industry will have to invest (U.S.) $200 billion a year in new development projects if projected demand for oil and gas alone is to be met. The investments required in the area of power generation are even greater.

Yet investing capital is only part of the answer. The key to ensuring a continuing supply of reliable and affordable energy is technology. We must find new and improved technologies for producing energy, for using it efficiently and for addressing environmental concerns. Innovative minds must be turned to this challenge, which ultimately will touch all our lives.

Much has already been done to enable us to use energy more efficiently. For example, new automobile engines today are considerably more fuel-efficient and produce dramatically lower emissions than their counterparts of 30 years ago. But there is room for further improvement, and much work is being done in this area (see "Elegantly Simple").

Major technological advances have also been made to improve the efficiency of home and industrial heating, lighting, air conditioning and appliances such as dishwashers and washing machines. On the industrial front, most manufacturing companies have introduced more energy-efficient machinery and equipment or carefully analyzed and adjusted their processes, if for no other reason than to reduce their energy bills. Technological advancements have also led to increased energy efficiency in the petroleum industry, which is a major consumer of raw energy. Imperial's refineries today are 40 percent more energy efficient than they were 30 years ago, and we are committed to further improving energy efficiency.

Of course, more can, must and will be done to improve energy efficiency. But it is also clear that the projected gap between energy use and energy supply cannot be closed or even narrowed through conservation and efficiency alone. At best, given increasing demand, they can only minimize the widening of the gap. The most critical task will be to find and bring on new sources of supply, including alternative sources, such as wind, solar and biomass, for which technological breakthroughs are essential if alternative energies are to be economically viable on a large scale. In that respect, I would caution that government subsidies for alternative-energy projects that are not commercially competitive are not an appropriate use of scarce financial resources. The market is the best allocator of financial resources.

The challenge for the petroleum industry is immense. In Canada, we are fortunate to have abundant oil and gas resources, but we face a particular challenge because much of that resource base, notably the oil sands of Western Canada, is expensive to produce. To compete effectively for the capital needed, we must develop our resources at the lowest possible cost and with the highest possible efficiency.

There is no question that the industry can rise to the task. We have been providing Canadians, and the world, with reliable and affordable petroleum energy for more than a century, and in recent years despite declining conventional reserves. In fact, as recently as the 1970s, some observers were predicting that oil and gas supplies would run out before the end of the century, yet there are more known oil and gas reserves in the world today than there were then. "The supply of oil will fail to meet increasing demand before the year 2000, most probably between 1985 and 1995, even if energy prices are 50 percent above current levels in real terms," was a statement made at a Massachusetts Institute of Technology workshop in 1977. While oil prices have risen recently, in part as a result of geopolitical events, they have remained remarkably stable over the years.

Again and again, the oil and gas industry has found ways to overcome obstacles, developing innovative technologies as they have been needed. For example, early in my own career, commercial development of the oil sands was considered an uncertain prospect. But the industry persevered, working to develop the technologies that would enable bitumen to be recovered from the oil sands at acceptable costs. Since Imperial's bitumen-recovery operation in Cold Lake, Alta., first went into commercial production, the cost of producing a barrel of oil, excluding energy costs, has been reduced by about one-third. With operations such as Cold Lake and Syncrude, near Fort McMurray, Alta., oil sands production now exceeds one million barrels a day and accounts for more than a third of Canada's total crude oil production.

This would not have been possible without a sustained effort to devise new technologies and techniques for bitumen recovery from the oil sands such as the "in situ" process developed by Imperial to produce bitumen at Cold Lake. And in step with advances in oil recovery have come significant environmentally related innovations. For example, directional drilling techniques at Cold Lake enable clusters of wells to be drilled from a single "pad," or location, dramatically reducing the amount of forest that must be cleared.

In other regions of Canada and around the world, petroleum geologists and geophysicists have made extraordinary advances not only in finding and recovering oil and gas in remote, difficult and environmentally sensitive locations, but also in getting more and more oil and gas out of existing fields and reservoirs at lower and lower costs. New technologies in three-dimensional seismic exploration, reservoir analysis, secondary and tertiary oil recovery, deep-water exploration and production, and undersea pipeline construction are but a few areas in which tremendous advances have been made. Also, petroleum researchers are now working to find new and more efficient ways to transport naturally occurring natural gas liquids and to convert natural gas into liquids to facilitate transportation in order to meet rising demand for cleaner-burning gas for electricity generation.

The key to innovation is to encourage and support innovative research, and I'm proud that Imperial has been a leader in this respect. In addition to research carried out at its own Canadian laboratories, the company sponsors a wide range of energy research programs at Canadian universities and other institutions. For example, the company recently announced that it will provide funding of $10 million over five years to the University of Alberta for an Imperial Oil Centre for Oil Sands Innovation, which will be dedicated to finding ways of developing Canada's vast oil sands in a more efficient, economically viable and environmentally responsible manner. Imperial also participates with Exxon Mobil Corporation in contributing up to (U.S.) $100 million over 10 years to Stanford University's Global Climate and Energy Project (GCEP), which is dedicated to finding new, commercially viable energy technologies that can substantially reduce greenhouse gas emissions.

I believe such partnerships between industry and academia are an important ingredient in meeting the energy challenge we face. I hope that governments and other qualified groups will lend their support and encouragement to this challenge. Governments, in particular, should recognize that the private sector will be the primary driver of new energy technologies and that markets will determine the winners and losers. That means helping to provide a fiscal and regulatory climate that is hospitable to investment and recognizes the risks associated with energy development.

All parties with a stake in our energy future should work together to ensure that Canada invests in developing both new, commercially viable technologies and the skills needed to deploy and manage them. The energy challenge is too large, too important and too pressing for any of us to take a narrow view. Focusing on applying new technologies for both energy supply needs and environmental management is, in my view, the best path forward.

Necessity, they say, is the mother of invention. Necessity is upon us, so let us focus on invention.

Illustration: Mark Tellok