The global oil and gas industry, and US companies in particular, will require four key changes to expedite recovery from the current slowdown in activity, said Ryan Lance, chairman and chief executive of ConocoPhillips. Ryan made his comments while addressing a record-breaking crowd during the opening discussions held at the IHS CERAWeek conference in Houston.
First, the industry needs to streamline the permitting of new infrastructure so produced oil can reach market areas in a more efficient and less expensive manner, he said. Second, governments should open up more government lands to oil and gas exploration and development. Third, governments must create regulations that are smart, transparent, non-redundant, balanced, and are based on science. Fourth, US and non-US countries alike must address fiscal concerns. Oil and gas production taxes can include double taxation, and much of tax policy is detrimental to growth, he said.
“We are living in turbulent times,” Lance said. “At Conoco we call this a tidal wave scenario.” The tidal wave scenario is driving the need for key changes, he said.
“We see a flood of production from innovation that is going on here in the US. We have weak US demand due to renewable fuel standards and car efficiency. And we see weak demand elsewhere around the world due to sub-par economic growth and uncertainty. It’s already swept some of our players away and now many others are treading water.”
As a result of the tidal wave, the US labor market has lost 20,000 energy-related jobs since February, and as many as 100,000 jobs could be lost — many of which pay twice the amount as other sector jobs, said Lance. Also, many energy companies will continue to reduce capex budgets, defer more projects, and continue to reduce costs where possible.
Lance called for the US government to support energy production in a variety of ways. For example, it should increase its efforts to explain energy efficiency and encourage public support for all forms of energy. Also, it should support free trade by treating hydrocarbons like any other globally traded product, he said. In 2016, the US will be in a position to be a net exporter of natural gas, Lance said.
“We’ve shifted the oil market’s center to North America,” he said. As a result, the US should be allowed to export light oil and import heavy oil to balance the nation’s energy needs while serving the needed product slate of US refineries. Overall, Lance predicts that the US will experience a gradual price recovery, but cautions that its leaders and energy sectors must get used to continued price volatility.
Photo: Ryan Lance/OE Staff
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