Under the theme of “The Biggest Opportunity in the World”, a lineup of top-level speakers visited HBS this past Wednesday for the annual Energy Symposium. The event was hosted by the HBS Energy Club, and from the record turnout and record number of speakers it was clear that interest in the subject matter has climbed in lockstep with the increasing price of oil.
True to its theme, the 2005 Symposium reflected the diversity of opportunities in the energy industry. Some of the subjects covered at the Symposium included the complexities of integrating strategy at a firm as huge as British Petroleum, the implications of building energy infrastructure for the economic growth of the developing world, and a sketch of how the U.S. could begin to transition its economy away from oil.
In addition to representatives from energy-focused firms, the presence of speakers from McKinsey & Co, Morgan Stanley, and Boston Consulting Group made it clear that energy as a sector is garnering significant attention from HBS’ traditional recruiters as well.
Atul Arya, Vice-President of Group Strategic Analysis at BP, kicked the event off with a big-picture view of the global energy game. He talked about the challenges of developing strategy in an industry where even a firm worth hundreds of billions of dollars doesn’t control more than a few percent of the market, and in which the development of substitute products such as biofuels or even natural gas requires incredibly huge commitments.
Artis Brown from ExxonMobil followed Mr. Arya’s presentation with a discussion of the increasingly important role that Asia will play in shaping global energy demand. In the next fifteen to twenty years, Mr. Brown predicted that the number of cars and the amount of energy consumed in Asia will catch and then surpass those quantities in the US or Europe.
The next speaker, Reliance Industries’ Executive Director Hital Meswani, described the extraordinary contributions that his firm has made to the growth of India’s energy sector. To provide a sense of perspective, Mr. Meswani described his company’s $6 billion petroleum refinery at Jamnagar as being two hundred times the size of the Harvard campus, and as having made a significant contribution to the GDP of the entire country.
For a change of pace, Nate Glasgow of the Rocky Mountain Institute painted a picture of how the world can successfully transition from an oil-based economy to one that utilizes multiple distributed energy sources. He pointed out that Brazil already gets 25% of the fuel for its automobile fleet from biofuels (liquid fuels made from sugary plants such as corn), and that light-weight technologies which could radically cut our fuel needs are already in use in today’s race cars.
Another hot topic in the energy industry is the increasing investment seen in the global transport of natural gas. For decades, natural gas was produced and consumed in local or regional markets, but with increasing demand it is undergoing a transformation into a global commodity. Mr. Rick Peters, the worldwide leader of the energy practice at BCG, gave an overview of the investments that have already been made to enable that transformation, and predicted an ever-rising tide of global natural gas shipments. It was no surprise to see students in the audience furiously scribbling notes throughout his presentation, considering that a number of oil and gas commodity traders at top firms earned $20 million or more this year in compensation.
Tom Langford, Managing Director at Morgan Stanley, responded nicely to audience interest in the recent drama surrounding the acquisition of Unocal by Chevron. This acquisition made headlines around the world because of the political element that was introduced when a Chinese petroleum company initially led the bidding for Unocal, including Unocal’s North American oil and gas holdings.
Moving away from oil and gas, Thomas Seitz of McKinsey & Company predicted a tidal wave of change in the global electricity industry. In particular, he noted that the US power generation sector is far less consolidated than in other regions around the world. In the wake of legislative changes that were included in the recently-passed federal Energy Policy Act of 2005, that situation may well change in the near future.
Neil Smith, the President and COO of international power plant developer Intergen, capped the evening with an entertaining description of the keys to success when making multi-billion dollar investments in the developing world. It was clear from his history of projects that energy development can represent an important step forward in increasing the standard of living for millions of people.
In short, the afternoon’s presentations made it apparent that the energy sector, though already established as a critical contributor to the global economy, is entering a period of change that will touch every one of us. Across consulting, banking, technology innovation, policy, and operations, the scope and scale of the opportunities are extraordinary.