Today I have the pleasure of hosting Andy Xie.

Andy is an economist who's views are shared quite widely

through different channels. You'll find his views sometimes controversial

certainly always thought provoking and stimulating. The picture today is consumption in Europe

has been coming down for a number of years. In the US, there is slow growth

but not very high. Asia has been driving the growth

for the last few years and that seems to be slowing.

So what's your perspective on growth in the oil consumption

in the context of some economies moving away investment driven

to more consumer-led?

Well, in Chinese energy consumption in the 1990s,

the elasticity to the economy was .5 or so. It was bascically when the ecomony grows

at 7%, energy consumption will rise by about 3.5%

But in the last 15 years it's changed. It's changed to like one to one.

And this is because of the rise of the auto industry

and rise of heavy industry so China has been driving energy consumption.

tremendously.

The people who invested when the oil price

was $150 to produce more oil, it just takes many years

for the production to come around. If you compare this to the iron ore industry

- it also take three or four years for production

to come online if you invest. If you look at what's going on now,

the global demand is stagnant. But the production has gone up.

So what happens? You have price war.

You have to squeeze out high cost producers.

These high cost producers are in China. All these small iron ore mines

have production costs at 100 down to 50 dollars.

Australians or Brazilians they slash prices

and increase production. They cause the Chinese mines to shut down.

So that's how they get the volume going.

So what makes the difference now?

What are the key factors that will allow those companies to be successful?

Strategical advantages - I think that is very important.

I see that emerging economies are developing a consumer economy.

These developing economies used to rely on

exporting to richer economies, and I believe this story is really over.

The rich people are not rich anymore. So they look rich but

they have a lot of debt. So I think that emerging economies have to

balance between investment and consumption. That transition takes five years

but eventually it will happen. It's a slower but balanced growth.

For any company or business it's really the last mile that matters.

So people who own LNG terminals or gas stations would be in a very good position.

That's one way to look at it. The other is access to raw materials.

That still will be interesting. In a business with a very low margin

you have to have a key edge. Look at the steel industry -

it is just several years ahead of you guys.

They have been experiencing overcapacity,

cut throat competition for many years.

When I look at the steel companies in China

people are still profitable. How they can minimize waste and maximise efficiency

is just incredible.

You talked about the human capital.

The oil and gas industry is a cyclical one and we've been recruiting in cycles.

We went through a decade where we recruited a lot,

a decade where nobody recruited.

We're seeing a lot of expertise leave the industry

over the next few years, and a lot of oil companies are

facing a weird transition in the expertise.

Two questions - the first one is

how do you adjust to that transition

in the short term as you lose a critical mass of expertise?

And the second one is - how do you attract new talent in an old industry?

Let's start with the transition in the shorter term.

The HR solution is based on the market.

I think this is very difficult. For an industry like yours,

there is a long gestation. A lot of other industries have a similar nature

It's very difficult to have a market-based HR solution.

The reason is that young people don't like things that are going to take many years.

They are interested in this dot com thing. It's not easy.

They key is to nurture your own people to develop some sort of elite labour force

inside of the company. I think for any large company, if you are

going to have an edge you have got to have a core of your own people who have sense of

ownership of the company.

Andy, thank you very much.

Thanks for having me.