CERAWeek 2014 - Opening Gas Address

IHS Vice Chairman Daniel Yergin kicked off Gas Day by welcoming Siemens President and CEO Joe Kaeser to IHS CERAWeek. In his Opening Gas Address, Mr. Kaeser contrasted the "basket case" of European energy policy with what he deemed as a highly successful US energy policy. He asserted that US achievements in energy production are due to the country's huge advantage in innovation and leadership. Mr. Kaeser claimed that the United States had achieved the difficult combination of energy affordability, availability, and sustainability. He added that the Marcellus Shale had disproved the German proverb, "You cannot squeeze oil out of a stone." Referencing current US debates concerning liquefied natural gas (LNG) exports and energy transport, Mr. Kaeser warned the United States not to miss out on future opportunities to secure the country's "lifeblood of oil and gas." He concluded his remarks by drawing parallels between US innovation and the innovative culture of Siemens. He hailed the US energy transformation as "a once in a lifetime moment" and noted that Siemens' in-country investment of $25 billion reflects the company's positive outlook for the United States' energy future.

In the question and answer session that followed, IHS Vice Chairman Daniel Yergin asked Mr. Kaeser a series of questions concerning energy policy and about Siemens' position in the global marketplace. He asked Mr. Kaeser to discuss his characterization of the "basket case" of Europe's energy policy, and Mr. Kaeser responded by mentioning what he considered to be Germany's misuse of energy subsidies. Mr. Kaeser asserted that German taxpayers have subsidized 400,000 jobs in China, as cheap Chinese-made photovoltaic power modules are increasingly being imported into Europe. He said that the subsidies make as much sense as "growing pineapples in Alaska." Mr. Kaeser went on to say that Ukraine's struggles have served as a "wake-up call" for Europe, given Europe's reliance on Russian gas. He also pointed out the differences between the United States and Europe regarding hydraulic fracturing. According to Mr. Kaeser, fracturing should be revisited in Europe. He said that Europe should have a real dialogue about the risks associated with it rather than simply banning the activity based on assumptions related to these risks.

Dr. Yergin then asked Mr. Kaeser a series of questions about Siemens, including what Siemens' "Industry 4.0" means. Mr. Kaeser explained that Industry 4.0 is the combination of data with product life-cycle management, which allows the company to get the most productivity out of its manufacturing systems.

When asked about Siemens' position in the global marketplace, Mr. Kaeser noted that Siemens' markets are highly differentiated according to the needs and interests of individual countries. According to Mr. Kaeser, some countries are more focused on efficiency and have the capabilities to manufacture large turbines, whereas other countries are constrained for political and economic reasons. He cited China as an example, noting that coal and mining are very important sources of employment for the country's rural populations. He said that this dynamic has prevented China from pursuing gas more strongly in the power sector but sounded an optimistic note about the country's eventual ability to do so.

Finally Dr. Yergin asked about the challenge facing Siemens' ability to keep up with rapidly advancing technological developments. Mr. Kaeser said that his company has a great advantage in its relationships and communications with its customers, which helps Siemens to stay current with the needs and challenges of the marketplace. He reemphasized that Siemens is a company that goes after opportunities, and that the United States "is the place to be" because it has a culture and business environment that drives new opportunities. He concluded by saying that Europe needs to become more opportunistic if it is to continue innovating.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.