Newly independent ConocoPhillips will expand in North America, CEO says

Fuel Fix ^ | May 9, 2012 | Simone Sebastian

[thackney]

In ConocoPhillips’ first shareholders meting since it unhitched its refinery business, new CEO Ryan Lance said he’s focused on further expanding the company’s position in North American shale and other unconventional fossil fuels.

Much of the $15 billion Lance plans to funnel into capital spending each year will target oil and natural gas operations in the United States and Canada. The Eagle Ford shale in south Texas, the Permian Basin in West Texas and the Bakken shale in North Dakota will be growth priorities, he said.

“With the land ownership and the infrastructure that we have in the United States, it allows our company to secure a position and start developing and rapidly exploiting the assets,” Lance said in a press conference following the shareholders meeting. “We are putting a significant amount of our capital investment in that area and generating very high returns.”

Lance takes the helm at the newly independent oil and gas exploration and production company with ambitious goals to expand production and maintain high dividends. Last week, ConocoPhillips’ refineries, pipelines and chemical plants spun off to form a separate company, Phillips 66.

The global oil and natural gas corporation currently produces about 1.6 million barrels of oil equivalent per day and plans to grow to 1.8 million by 2016, Lance told shareholders.

However, growth in North America will come from crude oil and natural gas liquids.

ConocoPhillips has scaled back its investment in dry natural gas, or methane, as the fuel’s domestic price has plummeted in recent months.

North American natural gas makes up about 24 percent of the company’s portfolio and Lance said its share will decline. However, Lance said he believes growing use of natural gas in power generation, to replace coal, will reignite demand for the fuel. The company is holding on to acreage in gassy areas so it can restart production if prices rebound.

“You don’t invest in North American natural gas today given the price,” Lance said. “But we do believe over the longer term, demand will pick u, prices will improve and then we have the optimality to start reinvesting in that business and ramping up the growth.”

[thackney]

Notice when the place for new investment were mentioned, it was Texas and North Dakota. Alaska was not mentioned; they did not fix their excessive taxes.

[basil]

ping!

[carriage_hill]

If we don’t get rid of 0bummer in November, it’ll all be a moot point anyway for CP and everyone else. There’ll be no exploration or drilling anywhere - it’ll all be shut-down - if he/they get another 4yrs.

[Red Boots]

Notice when the place for new investment were mentioned, it was Texas and North Dakota. Alaska was not mentioned; they did not fix their excessive taxes.

Nor was Colorado, since we have new and ridiculously expensive fracking regulations, thanks to our governor. He was a geologist, so he should know better. Sigh...

[Ben Ficklin]

The amount oil being produced in the US has certainly grown.

Some people like to say Obama did that and some people say Bush did that. The reality is that whatever Bush and/or Obama did or didn't do were merely incidental.

The increase in oil production came about because of two things.

1. Development of high pressure fracing technology
2. Quadrupling of the price of oil from $25/bbl to $100/bbl

Likewise look at the bitumen oil being produced in the Alberta tar sands. When Bush entered office and oil was at $25, the profit on that oil was marginal. As the price and margin gradually increased, oil sands production gradually increased. Now at $100 they are producing so much bitumen oil they need a pipeline.

Now let me connect the dots for you.

The new pipeline to the gulf coast and the new natural gas export terminals on the gulf coast are tied to the completion of the expansion of the panama canal so these products can easily get into the Pacific and onto Asia.

[thackney]

The new pipeline to the gulf coast and the new natural gas export terminals on the gulf coast are tied to the completion of the expansion of the panama canal so these products can easily get into the Pacific and onto Asia.

Europe is closer and very interested in sources other than Russia and OPEC.

[Ben Ficklin]

I don't mean to say that Asia is the only market but it is a sizable market. Look at the deal announced yesterday in which the Japan companies are taking an equity position in both Cheniere's export terminal and distribution chain

OTOH, Cheinere is already diverting their imported gas to Europe.

The gulf coast doesn't have a lock on the asian market. Alaska wants part of it. Canada wants to get their natural gas to the pacific, possibly to WA since they have announced an export terminal there.

[thackney]

I don’t see our export volume in petroleum to be significant over the next couple decades.

In LNG export, competing with Russia and Australia along with transportation distance will keep Europe as a more profitable customer.

[ridesthemiles]

What percentage of this company is owned by Venezuela and Hugo Chavez????

[thackney]

ConocoPhillips? Mostly mutual funds and retirement plans.

[Eva]

CONOCO Phillips is number 5 on the Forbes 500 that was just released.

[Eva]

That might be part of the reason that Obama has opposed the Keystone Pipeline. He wants to see the oil go to China, not Europe, or even our own East Coast, which is becoming more and more dependent on Russian oil, as US refineries shut down at a rapid pace on the East Coast. I hear that Luk oil is now the most common gas station in the Philadelphia area, a city that has had several refineries since the mid 19th century.

[Ben Ficklin]

Fifteen years ago a world nat gas market was based US importing, now it will be based on exporting and being a transportation hub. Once the market is established, it can go any and everywhere. Is Japan going to shut down their nukes. Germany? China? They won't be building nukes in the USA until nat gas gets up to $5.50-$7.50. Windmills, solar and nukes all depend on the price of nat gas.

As for oil/gasoline/diesel, that depends on whether EVs/hybrids penetrate the market or gasoline/diesel is the route. We are exporting record amounts of gasoline and diesel. Or, the rising CAFE standards could be relaxed. Or, methane hydrate technology could be around the corner

[thackney]

Was the Forbes list based upon size prior to split?

It like was as the official spin off of refining was May 1, 2012.

[thackney]

We are exporting record amounts of gasoline and diesel.

Yes, we finally reached our WW2 amounts last year.

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MGFEXUS2&f=M Yes, keep in mind that net export is based upon our import of surplus oil as well as surplus refining capacity.

You speak of a lot of different possible changes. I agree that this market is very hard to predict and can be greatly influenced by many different source.

My original comment to you was based on my opinion I didn't consider the Panama Canal expansion significant to the decision of other projects, particular pipeline or LNG export.

[Eva]

I imagine that it was before the split, but the thinking is that the split is very good for the upstream and not so good for the down stream people. Interestingly, one of companies that have expressed an interest in buying one of the CONOCO Phillips refineries is Walmart. Wouldn’t that set the leftists off in a tizzy? Imagine Walmart, not only selling gas, but refining their own gasoline.

BP has been trying to get out of the downstream end of the business for years but hasn’t been able to sell the refineries. Most of the oil companies would like to do the same thing.

[Ben Ficklin]

For many years the HOVENSA refinery in the Virgin Islands which was co-owned by Venezuela and Hess Oil in New York processed Venezuela crude into transportation fuel and home heating oil used in the northeast. That refinery is being closed because of the enviro upgrades.

A Canadian company owns the Race Trac stations in Tx, Ok, and Ar. Kuwait owns the Q8 stations in Europe. Alon Energy the Iraeli Company owns all the gas stations previously owned by Fina and Total(foreign companies) in Texas and OK. Alon also bought refinery in Big Springs which was owned by Fina who bought that refiney from the old Cosden Oil company

I still remember that for many years Fina stations and Total stations were cheapest place to buy gas in DFW, but when Alon took those stations over the price went up, and Race Trac moved into that area and became the cheapest.

I also remember 1998 when, because the asian economy nose dived, the world price of oil collapsed from $25 to $12 and you could buy gasoline for 65 cents per gallon in DFW.

I also remember how the price of crude and gasoline increased in the oughties until I was paying $3.97 a gallon in June 2008. Then the economy began to collapse and oil and gasoline prices collapsed. Crude fell to $44/barrel and I paid $1.63 per gallon in Dec 2008. Of course the economy gradually improved from that point and oil/gasoline went back up

[Ben Ficklin]

I understand, we will just have to disgree, but I promise not to call you a RINO, globalist, or any other perjorative term.

[Eva]

I think that Alon might be the name of the company that just bought one of the Conoco Refineries, along with a pipeline. I had never heard of them. Part of the push to divest the refineries is because of the Obama administration war on big oil. It’s difficult to bring aging refineries up to current standards. Think about it, some of those refineries in Philadelphia had been on the same site since 1860 something.

I just read that Delta Airlines bought the old Conoco Refinery at Marcus Hook, which I believe used to be SUNOCO.

[Eva]

Sorry, that was bad information about ALON.

Delta Airlines did buy the Marcus Hook refinery, though and there is another deal close for the SUN refinery in Philadelphia that would keep that refinery on-line.

The investors are all crying the blues over the new players in the refining industry. It seems that they are all worried that increased refining capacity will decrease profit margins and throw a curve ball into the futures market.

New players in the refining business could really change the industry, players like Delta, refining their own fuel for themselves and all their partners. They got the refinery for a very low price, too. Walmart refining their own gas would be a big deal, as well.

[thackney]

Marathon spun off their refining about a year or so.

[Ben Ficklin]

Regarding the bringing up to standard aging refineries and aging power plants you need to understand "New Source Review", which was legislation passed by Congress in the late 70s.

On the surface it was very simple, a new plant(new source) is held to a higher enviro standard. But when there were expansions and updating it was all very unclear. Consequently, it was in and out of court so many times it is hard to keep up with. And having different presidents thru out the period made even more complicated. Because of this we see industry not building new refineries but expanding the size of their refineries and expanding their refineries as part of scheduled maintainance.

Eventually, in 2007, SCOTUS made what was considered the final decision regarding New Source Review. Everything was resolved. But Prez Bush didn't want to be the one to enforce it so he punted it next prez. He knew the enviros wouldn't sue him because he would be out of office before the case got to court.

Different companies handled it different ways. Some moved immediately to conform. Some waited until the next prez began to enforce. So when Obama comes in he can't move on New Source Review because Congress is taking up Cap and Trade and his EPA has to deal with CO2 first. But eventually he got around to it in 2010 and everyone is in the process of conforming, except Texas.

In Texas they knew in 2007 that they would be out of conformance when the feds got around to enforcing it, who ever the new prez might be in 2009. But in Texas they wanted to use it as a campaign issue against dem Houston mayor White who they knew would be running for Gov against Perry in 2010. So when Perry won the election Nov 2010 everyone thought that Texas would move to get in conformance, but Perry jumped even harder on the issue in Dec 2010, so everyone knew Perry would be running for Prez even though he didn't declare until the following August.

Anyway, Texas has the case tied up in court and they know that they will ultimately lose in court but they might be able to delay it for who knows how long. And that is irrelevant because almost all of the companies that Perry is supposedly protecting from the EPA have gone around Perry to deal directly with the EPA to get their permits in order. Even the infamously evil Koch Brothers refinery went around Perry to deal directly with EPA.

Its all politics as usual and the GOP is blowing smoke up your rearenski.

So any way, over time and thru various court decisions issue was gradually

[Eva]

The oil companies didn’t need to go around Perry to bring their refineries into compliance. Perry was not trying to stop the refineries from voluntarily improving standards of protection. Many of the refineries were truly in need of improvement and the oil companies knew it. It was better to comply willingly than to wait for a disaster like the one at BP.

[Eva]

Who did Marathon sell their refineries, to?

[thackney]

Who did Marathon sell their refineries, to?

They did the same thing as ConocoPhillips. They did not sell them to someone else; they spun them off as a separate company to sink or swim on their own.

They are now Marathon Oil (NYSE:MRO) and Marathon Petroleum (NYSE: MPC). They are separate stocks with 100% separate employees and management.

http://www.marathon.com/

[carriage_hill]

BF, I’d bet that 90%+ don’t know those facts. I’d also bet that if 0bummer gets another 4yrs, he’s going to direct the corrupt and criminal EPA - if he hasn’t already - to find a way to slow fracking way down or kill it completely, with either new BS regs, taxes, add’l permits; whatever.

[thackney]

Even the smallest Coastal Tankers are going to be a tight fit for passage through the new larger 3rd set of Panama Locks. The problem is the draft (depth).

The corresponding maximum dimensions for vessels that will transit these {new panama} locks are 366 meters LOA, 49 meters in beam and 15.2 meters in tropical freshwater (TFW) draft.

Dimensions for Future Lock Chambers and “New Panamax” Vessels
http://www.pancanal.com/common/maritime/advisories/2009/a-02-2009.pdf

Tanker Size

Class	Length	Beam	Draft	Overview
Coastal Tanker	205 m	29 m	16 m	Less than 50,000 dwt, mainly used for transportation of refined products (gasoline, gasoil).
Aframax	245 m	34 m	20 m	Approximately 80,000 dwt (Average Freight Rate Assessment).
Suezmax	285 m	45 m	23 m	Between 125,000 and 180,000 dwt, originally the maximum capacity of the Suez Canal.
VLCC	330 m	55 m	28 m	Very Large Crude Carrier. Up to around 320,000 dwt. Can be accommodated by the expanded dimensions of the Suez Canal. The most common length is in the range of 300 to 330 meters.
ULCC	415 m	63 m	35 m	Ultra Large Crude Carrier. Capacity exceeding 320,000 dwt. The largest tankers ever built have a deadweight of over 550,000 dwt.

Source: http://people.hofstra.edu/geotrans/eng/ch5en/appl5en/tankers.html

[Ben Ficklin]

The key sentence I just read at EIA says: "However, while many larger tankers will be able to transit the canal after 2014, some ULCC's will still be unable to make the transit."

Source

Key phrase is "some will be unable" which infers that some will be able to transit. However I don't know how many "some" is nor do I know how many ULCC's there are or how many there are relative to other tankers

[thackney]

I like the EIA as a petroleum information source.

But without dimensions to reference, I have doubts about those very general statements.

Cheers.

[thackney]

Can you find a tanker with 100,000 DWT or larger with a draft at 15.2 or less meters?

It seems they are all in the +20 meter range.

http://www.marinedigital.com/en/mall/ship/index.asp?menu_code=ShipSaleList&Fcategory=4&Scategory=0&Tcategory=0

As for ULCC, there are not very many in the world. None of them will fit through the new Panama Locks.

http://www.aukevisser.nl/supertankers/id364.htm

On the list above of the world’s supertankers, including those now out of service, the smallest is the S.R Long Beach at 214,862 dwt. It had a draft of 19.7 meters.

http://vessel-ship.findthedata.org/l/35222/S-r-Long-Beach

I found the Prince William Sound with one of the shallowest drafts of 16.8 meters for 125,925 dwt.

http://vessel-ship.findthedata.org/l/25517/Prince-William-Sound

Can you find any supertanker, or any tanker of at least 100,000 dwt, that has a draft at 15.2 m or less?

http://vessel-ship.findthedata.org/

[Eye of Unk]

Price of gas in Alaska jumped .12 a gallon yesterday, its now $4.37 a gallon.
Fueled my truck at 5am it was $4.25, later in the day its up by 12 cents a gallon. Something is happening.