ConocoPhillips, a U.S.-based exploration and production company, is planning for the worst case scenario when it comes to the oil market situation.
This was stated on Tuesday by the company’s CEO Ryan Lance, during the IHS CERAWeek energy conference in Houston, Texas. He was responding to a question on when the current downcycle would end and when the market would rebalance.
Lance said that it was hard to predict when the market would rebalance, but added that due to various factors, such as the tightening of credit markets, and downgrades by credit rating agencies, and pressure on the oil companies’ balance sheets it was smart to plan for “lower for longer”.
Lance said he’s seen six downturns and five upturns of the market, and the sixth upturn would definitely come, “it’s just that you can’t bet on it coming quickly and rapidly, you’ve got to be prepared for taking a little while longer”.
“We’re trying to drive the portfolio down to as low cost of supply as we can. I don’t know where the prices will go but I know the kind of portfolio that will win in the kind of environment that we’re in, and that’s low cost, low cost of supply, shorter and more flexible cycle times, and a having rich, diverse opportunities set across the globe in order to allocate capital and manage through that,” Lance said.
He said that ConocoPhillips made a difficult decision of cutting deepwater exploration projects.
“That’s gonna be a supply source that’s needed in the world going forward, to satisfy the demand, but we didn’t see that competing in our portfolio on a cost of supply basis.”
Offshore Energy Today Staff