Access to oil and natural gas resources has become “extremely difficult,” and where there is access to resources, there is intense competition, ConocoPhillips’ upstream chief said Thursday.
“We are in a challenging business environment,” John Lowe, executive vice president of Conoco’s Upstream division told participants last week at the Bank of America Energy 2007 Conference. “In the 1960s, about 85% of the world’s resources were open. Now it’s the inverse and now there’s access to about 7% of the resources…Everyone is chasing everything, and it’s made it very competitive, and more and more difficult, particularly for resource plays.”
In the United States and worldwide, he said, the energy industry has been slammed by a lack of personnel, higher costs and lower productivity.
“We have lots of cost pressures…and it’s tough to do a plan” based not only on the monetary and access issues but also the public’s expectation for lower energy costs and alternative energy sources.
According to one survey, the Houston-based major was the leading U.S. natural gas producer in the third quarter (see related story). But Lowe said keeping ahead of the curve is a constant task.
The company slashed $1 billion out of its Canadian drilling budget this year after service costs escalated for producers across the board. Service costs across North America have been easing, but Lowe said ConocoPhillips doesn’t think total Canadian gas production will show any strong gains in the short-term. Liquefied natural gas (LNG) imports also aren’t expected to add to the mix in the short-term, he said.
“It’s our view that you are going to see reasonable natural gas prices in the next couple of years…Our long view is that LNG imports have to compete on price, and right now, particularly in the winter months, Asia is going to price LNG out of the U.S. market.”
The United States, will continue to face “significant supply issues because of limited access to resources and difficulties in permitting. We will be challenged to deliver new energy, and all of that comes with increasing environmental demands. We all hear about CO2 [carbon dioxide] emissions, but we think we’ll also be hearing more on water and air emissions as well. We have to do things smarter and more efficiently.”
On U.S. energy policy, Lowe said it was “quite simple. Address supply and demand. Make supply more efficient: to get permits, on resource access open up areas with hydrocarbons that we can responsibly develop…And address the supply side and look at alternatives.” He noted the partnerships that ConocoPhillips has undertaken with academia and research think tanks across the country to find energy alternatives.
ConocoPhillips is working on alternatives to fossil fuels, “but it’s quite clear that oil and gas will be the predominant supply for decades to come.”
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