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Production getting complicated, oil company heads say Cambridge Energy Research Associates conference hears from ExxonMobil, Total Kristen Hays Associated Press Business Writer
Growth for major oil companies after mega-mergers in the last decade hinges on forays into untapped areas as production declines in mature basins, leaders of two oil and gas companies said Feb. 10.
Rex Tillerson, executive vice president of Exxon Mobil Corp., told about 1,400 executives attending the annual Cambridge Energy Research Associates conference in Houston that frontier areas, such as untapped oil fields in Russia and offshore West Africa, often lack infrastructure necessary to extract crude and transport it to markets.
“New resources are in ever-deeper waters and more difficult environments,” Tillerson said. These include the Caspian Sea, which is icebound for some winter months, and many thousands of feet of water in offshore West Africa.
Such challenges mean oil companies need to work with host countries to invest in improved technology to better reach crude in new geographic locations, he said.
Theirry Desmarest, chairman and chief executive of Paris-based Total, said the string of mega-mergers has helped oil majors cut costs in labor-intensive areas such as refining and marketing and in overhead. The combinations also have helped pump up exploration and production units so they are better positioned to meet challenges of finding new discoveries.
“Even if demand growth in our industry is relatively modest, we need, because of natural declines, to replace about half of today’s production in the next 10 years, so there should be no shortage of projects for a well-placed company,” Desmarest said. Multibillion dollar investments needed in Russian infrastructure He said multibillion dollar investments are on the horizon to develop giant oil fields in Russia to build necessary infrastructure to get landlocked oil to world markets.
“The reserve potential is clearly there, but different companies have different ideas how to best proceed in what is a complex and fast-changing regulatory environment, either by forming alliances with existing Russian oil companies” or by developing other projects, Desmarest said.
Steven Theede, president of Russian oil giant Yukos, said his company’s growth depends on its ability to increase export capacity.
He did not discuss company founder Mikhail Khodorkovsky’s recent incarceration on charges of fraud, tax evasion and embezzlement for allegedly failing to pay millions of dollars in taxes, nor did Theede take questions from reporters.
Foreign investors have watched Russia in recent months after Khodorkovsky’s arrest and the cancellation last month of a major oil tender off Russia’s Pacific coast. Investors have also long complained that Russia needs to improve complicated licensing and natural-resource laws.
James Burkhard, director of the Cambridge Energy Research Associates, said that Russia will be the leader in oil production when its export capacity gets in line with its geological potential.
The incongruence of those two factors “is why we’re seeing production slowing this year relative to rapid growth in 2003,” he said.
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