FRANK INGRISELLI
President, Global Venture Investments LLC

2001 ELECTRIC TRANSPORTATION INDUSTRY CONFERENCE
Sacramento Convention Center, Sacramento, CA.

Thursday, December 13, 2001

Thank you, Bob, and good morning.

I'm delighted to add my voice to those advocating the development of advanced energy technologies, and in particular, electric transportation.

As Bob indicated, the subject is of such importance to me that I've recently changed professional hats so that I could devote the rest of my career to it.

When the programs for this conference first went out, I was listed as President of Texaco Technology Ventures where I guided our company's dramatic expansion into advanced energy-related technologies.

And it is dramatic.

From 1995 to the present, Texaco has invested nearly $3 billion in alternative energy projects, the most important of which is its partnership with Bob's company, Energy Conversion Devices (ECD).

Just about a month ago, I retired from Texaco after 23 very rewarding years, and I established Global Venture Investments, a management consulting group focusing on advanced energy technologies.

As with most life decisions, there was good news and bad news.

The good news is that I recently signed an agreement with ECD to work with them on new business development.

The bad news is that I've discovered there are about as many consultant jokes as there are lawyer jokes.

My favorite is the Malcolm Forbes definition of a consultant:

"Someone who knows enough about something to know how much he doesn't know - and is smart enough not to tell anyone."

Well, I'll try to be smart enough to stick to what I do know…and the short form of what I know is this:

Market forces, geopolitics, greenery, and technology are shaping the future of our industry and propelling it inexorably to hydrogen energy.

Those who don't pursue it will rue it.

That tells the story in a nutshell - the Cliff Notes version.

However, it's a dramatic story that all of us here are a part of and stand to profit from.

The primary market force propelling us to new energy technologies is our increasingly energy-hungry world.

By mid-century, the world's population will have doubled to 12 billion and energy demand will have quadrupled.

How do we meet the soaring energy demands of developing nations without jeopardizing the living standards of the industrial world?

Because 70 percent of petroleum is used for transportation, that's the obvious place to start.
Today's cars burn half the fuel per mile they did three decades ago, and tail-pipe emissions have been dramatically reduced by more efficient engines and catalytic converters.

The trouble is there are more and more cars traveling farther and farther.

There are greater and greater energy demands by more and more people to heat their homes, cool their offices, cook their food, run their machines, or use the Internet.

We have a trillion barrels of oil left to produce worldwide, but at current usage rates, we'll burn 10 percent of that by 2010.

That's a hundred billion barrels in the next 10 years -- the same amount of oil that we've used since time began.

Fortunately, there is growing recognition that continued exclusive dependence on fossil fuels is a one-way ticket to oblivion - just like every other addiction to a habit-forming substance.

The major car and oil companies have finally acknowledged that the internal combustion engine will have significant competition in the 21st century, and accordingly, they need to adjust their business plans and long term strategies to capitalize on this emerging marketplace.

There's a line currently making the rounds in the energy business that sums up their views:

"The Stone Age did not end because the world ran out of stones -- and you can expect the Oil Age to end long before the world runs out of oil."

But there are additional market forces at work that assure an approaching end to our exclusive dependence on oil.

Energy companies are coming under increasing pressure to deliver shareholder value.

The increasing cost, risks, and difficulties of finding vast oil fields in ever more remote corners of the world have not only made a good case for all the mergers we've seen, but has moved these companies towards being not just traditional oil & gas companies, but truly global energy providers.

And that takes us to the second force impelling us towards new energy technologies - geopolitics.
The tragedy of September 11th brought into sharp focus America's increasing dependence on oil imported from the Persian Gulf.

More to the point, it illuminated how that reliance is a major source of America's strategic vulnerability, not to mention international entanglements and national anxieties.

We import nearly 60 percent of our daily oil consumption, up from 47 percent just 10 years ago.

Since the tragedy of 9-11, the need for energy security and energy self-sufficiency has taken on added urgency.

And that urgency has been compounded by growing demands to lessen our dependence on, and our presence in, countries where anti-U.S. sentiment has reached lethal proportions.

The successful energy company over the next 20 years cannot afford to ignore the growing public antagonism to the political and economic costs of draining the earth of hydrocarbons.

That takes us to the third factor driving us towards new energy technologies -- the unmistakable greening of the world.

If you do not agree with those who fear imminent global warming, or those who fear the environmental intrusion of oil exploration, or those who fear the health implications of burning fossil fuels, you are in a distinct minority.

Like it or not, believe it or not, 70 percent of the American people see global warming as a serious threat to their lives and health.

Even though the U.S. recently backed away from the Kyoto Protocol, 165 countries have worked long and hard to chisel out an agreement.

And international pressure surely will force the U.S. to reconsider its go-it-alone stand on Kyoto.

Already, we have the reality of state limitations on automobile emissions, starting with the 2003 model year here in California, which mandates that 10 percent of all vehicles sold must be at or near zero emissions.

However potentially costly that requirement may seem, those energy and automotive companies that put their best and sharpest minds on the task of reducing carbon emissions will be the hands-down market winners.

And that takes us to the fourth factor driving us towards new energy technologies -technological innovation.

Energy and automobile companies have invested billions in advanced energy technologies.

This kind of money tells you that this is no whim, no passing fancy.

These companies are investing in environmentally clean energy solutions for the future that, at the same time, will provide a return to shareholders.

As we all know, Toyota and Honda already have very successful hybrid electric cars on the market, and the "Big Three" are not far behind. I am proud to say that I own and drive every day a hybrid vehicle-it draws a lot of positive attention, and is the envy of my neighbor driving his BMW. When people test-drive my car, they realize that the most "remarkable" thing about the car is that it is so "unremarkable" (just like any other car except cheaper to run and significantly cleaner to the environment).

As more and more companies produce more and more hybrids, prices for these cars (and more importantly for their critical components, i.e., batteries) will drop and profits will rise.
In addition, it is expected that demand for the new "mild hybrid" 36/42 volt battery system will grow dramatically.

As you are probably aware, while at Texaco, we acquired GM's interest in a NiMH battery manufacturing company and have recreated it into a 50/50 venture with ECD. Expansion is underway, and our manufacturing facility in Kettering, Ohio is expected to be fully expanded in the very near term. I will let Bob answer any questions about the future prospects for that company…however; I will leave you with my strong feeling that the future for that company and its NiMH batteries is very bullish.

Several years down the road from these hybrids will be the hydrogen fuel cell.

More than a hundred companies are aiming to commercialize fuel cells for a broad range of applications, not just vehicle propulsion.

Bob Stempel's company, ECD, developed this remarkable disk that, believe it or not, is storing hydrogen in a solid state. This is another technology that ChevronTexaco is investing in with ECD.

It's a technology that promises to overcome a principal hurdle to the commercial use of hydrogen energy - making it practical, economical, and safe to store and transport.

Another big obstacle, in terms of capitalizing on the automotive market, is fuel infrastructure. The world is not yet organized to deliver hydrogen on demand.

But that's not far off either, as suggested by the hydrogen re-fuelling station right here in Sacramento.

And as automobile and energy companies focus more and more on hydrogen energy, we'll see fast-track progress.

The reason that today's conventional cars emit only about 5 percent of the exhaust pollutants of cars 30 years ago is that hundreds of thousands of engineers the world over have been toiling for decades to improve the internal combustion engine.

By contrast, the number of experts currently working to develop fuel cells worldwide is no more than 5,000.

This technology of the future is attracting more and more of the best and brightest among our scientists and engineers.

They and their companies understand that market forces, geopolitics, greenery, and innovation are propelling us to hydrogen energy.

They understand that if they don't pursue it, they will be left at the station after the train pulls out.

It's like the Dilbert cartoon where the boss tells his staff that there's good news and bad news.

He says, "the bad news is that huge companies like ours can't compete against the small, nimble companies on the leading edge.

"The good news is that, at this rate, we'll soon be one of the smallest companies around."

The history of mankind's use of energy is a history of the de-carbonization of fuels.
We've moved from hay and wood to coal to oil to natural gas.

Along the way, the successful energy companies were those in the vanguard of providing the next step up -- the cleanest, most efficient, most cost-effective energy available.

It's time for the next step up to cleaner, more efficient, more affordable, and more plentiful energy for all the people everywhere.

Those who move now will be rewarded by a better bottom line - not just for the companies represented here, but for the people to whom energy translates into a bottom line of health, education, and prosperity.

Thank you.


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