Referring to the “global perspective” of energy markets, Joe Kaeser, president and CEO of Siemens AG, believes a “tectonic shift” is occurring around the world, and countries and companies alike are on the verge of finding themselves on either side of a massive fault line called “energy transformation.”
“Siemens really is global,” Kaeser said, kicking off his address to IHS Energy CERAWeek 2014 guests and delegates, offering conference participants a sense of how his company views this change, as well as how Siemens is responding and adapting.
Sharing key statistics regarding the manpower and scope of his company, Kaeser said Siemens does business in 213 countries around the world, operating over 300 manufacturing facilities in more than 130 countries. More than 350,000 people work for Siemens worldwide, with as many as 60,000 employees based in the United States.
“That depth of global experience, particularly in the energy sector, points to the same insight — the global economy can change at incredible speed and with incredible impact. That’s what we’re witnessing right now.”
Boardrooms and world capitals, winners and losers
Kaeser stressed the vast influence and power exercised by the global economy, particularly emphasizing three pivotal points, beginning with its ability to reshape conversations occurring “in boardrooms and world capitals.”
“It can also change the way we do business, where we do it and faster than most people imagine,” Kaeser added. “And, it can turn certain winners into sudden losers.”
Referring to Germany, where Siemens is headquartered, Kaeser observed that country has eliminated its nuclear program, is challenged with high natural gas prices and is making “a rocky transition” to renewable energy, which has, in turn, led to a dramatic, unprecedented increase in coal imports.
“That, in turn, has led to higher carbon emissions and higher energy prices for end users,” Kaeser said. “Almost overnight, a country with all the ingredients for innovation leadership is confronted with a new reality.”
Reacting and responding to this “new reality” and “tectonic shifts,” countries all over the world are “clear-eyed about what these energy opportunities and challenges can mean for their future,” Kaeser said, adding the most pressing question is availability, particularly in Middle Eastern countries including Iraq and Libya.
“They have affordable power,” Kaeser reflected. “The question is how do they get it online, not just as an economic opportunity but as a prerequisite for stability?”
Referring to Africa, Kaeser said many of that continent’s leaders are not only thinking long-term but are also recognizing the affordability and availability of cheap power will define their future prosperity.
“That’s why you see countries like Nigeria privatizing their electricity assets, in the hope a private network and private financing will create the infrastructure they need to produce affordable power,” he said.
That equation is totally different for a country like Saudi Arabia, Kaeser added.
“Saudi Arabia has never been concerned about the availability or affordability of power, but increasingly, they are focusing on sustainability, because they recognize the importance of extending the life of their resource advantage,” he said. “That’s why today, you see them working to use sources other than oil to meet domestic demand for energy.
“This is the balance these tectonic shifts demand: finding a way to achieve affordability, availability and sustainability.”
Squeezing oil from a stone
According to Kaeser, no country in the world has been in a more opportune position to achieve said “affordability, availability and sustainability” in recent years than the United States.
“In this regard, it’s clear the United States will most likely become the world’s largest oil and gas producer this year,” Kaeser predicted. “That’s affordability, availability and sustainability all in one.”
Kaeser then called that trifecta of opportunity “a milestone with far-reaching geopolitical implications for other regions.”
He noted the United States is no longer as dependent as it once was on oil and gas imports from foreign countries, especially from countries in the Middle East.
“Today, it’s all about going west,” he added. “The United States is once again the place to be. More and more global companies are seeking to enlarge their footprint here.”
Reverting to his native tongue, Kaeser cited an old German folk proverb, “Aus einem Stein ist es schwer Öl zu pressen,” which, translated roughly, means “You can’t squeeze oil out of a stone.”
“Oh yes, we can, if you let us!” Kaeser said. “I guess the person who coined that phrase never heard of the Marcellus Shale!”
Kaeser then reminded IHS Energy CERAWeek participants of the significance of natural gas in the global marketplace.
“In particular, the shale gas opportunity in the United States is reshaping global economic conditions, or America’s comparative advantage in the context of the global economy,” he said. “When global manufacturing companies apply the new parameters of the global economy, more than ever, they are turning to the United States.”
Kaeser referred to “just a few short years ago” when the expense and volatility of natural gas forced chemical companies to leave the United States.
“Back then, no one was making investments in ethylene crackers in the United States,” he recalled. “Today, they’d be crazy not to.”
Investing in the ‘reindustrial’ age
“I believe we are witnessing, and participating in, the reindustrialization of the United States,” Kaeser said. “And I think it’s fair to say the development of horizontal drilling may have been the biggest shift of balance in the global economy since China joined the World Trade Organization.”
Kaeser said this phenomenon is “obviously exciting and important news” for the United States, but warned equally “tectonic shifts sometimes shift back.”
“The United States still has a lot of questions to answer — questions that will determine how this change plays out over the next two decades,” he forecasted. “For example, there is a big debate underway in the United States about whether to export liquid natural gas, or keep it locally to the source.”
Kaeser also referred to the “even louder debate” about how to transport energy within the United States and around North America once it’s extracted.
“I didn’t come here to weigh in on those debates,” Kaeser qualified. “That’s a decision the American people have to make,” indicating Siemens will be prepared for any outcome.
Kaeser outlined three potential scenarios that could emerge from the LNG debate, and how Siemens might respond.
“If the United States decides to keep most of its new natural gas, we provide technologies that make pipelines unmatched in terms of efficiency,” he said. “If pipelines aren’t developed and rail transportation is the best alternative, we build the most efficient locomotives in the world. And, if the United States decides it is in its best interest to export gas, we provide innovative LNG technology as well.”
Ultimately, Siemens is prepared to meet any challenge it is presented, Kaeser promised.
“We’re ready to go, because we’re on top of the global energy agenda,” he said. “And we believe in the U.S. energy story.”
Regarding challenges facing his company’s own ability to keep up with rapidly advancing technological developments, Kaeser said Siemens has “a great advantage” in its relationships and communications with its customers, which, in turn, helps it to stay current with the ever-evolving needs and challenges of the marketplace. He emphasized Siemens is a company that seeks out these investment opportunities, adding that, due to the United States’ business culture that encourages new opportunities, the United States “is the place to be.”
The United States possesses the knowledge and “the right people in the field of digitalization to drive this transformation of your industry landscape,” Kaeser concluded. “That’s why companies invest here. That’s why we invest here.”
Siemens has invested approximately $25 billion in the United States over the past decade alone, Kaeser revealed.
“We believe the U.S. energy transformation is a once-in-a-lifetime moment. And we have a chance, each of us, to make it our moment,” he said. “And that’s exactly what we plan to do.”
For more information, visit www.ceraweek.com/2014 or www.siemens.com.
