“Everything Is Going To Be OK”
ConocoPhillips Looks Past Crisis Towards Market Fundamentals
While roller-coastering stock markets and widespread financial turbulence have made many people nauseous – if not downright ill – Matt Fox remains unperturbed.
“Everything is going to be OK,” says ConocoPhillips’ senior vice-president of oil sands, reflecting what is either an innate personal serenity or, more likely, the position of most big-time oil sands producers in the face of the headline-grabbing global credit crisis.
Fox claims to have lost no sleep over the wild fluctuations in the oil price, the looming changes on the North American political landscape or even the fact that his own company’s shares had shed upwards of $8 the day of this interview.
“The ones we make in the oil sands are 40-year or 50-year investment decisions, so you have to take a view of that long-term horizon.”
In his 25 years in the industry, Fox has seen the oil price fluctuate, although, admittedly, most of that time it remained quite low and the spikes were never as dramatic as a $25/barrel drop in one day. However, Fox says, volatility is something that itself is factored into big oil’s corporate decision-making and the resulting broader and longer-term perspective leaves them, if not completely serene, calmer than many of their corporate contemporaries.
“I think everyone was surprised at how high prices got and how quickly. I don’t think there is a huge surprise to stand back and see that they’ve fallen almost as quickly as they rose,” says Fox. “This has been a really big spike and we don’t know; is it going to come down and stabilize? Is it going to continue to fall? Is it going to increase? It is just the nature of this business and that this volatility is just something you have to live with.”
Fox points to ConocoPhillips’ Surmont Phase II project, scheduled to begin producing in four years, as an example of how decisions are made and how relatively little bearing today’s stock market conditions have on project plans.
“It is interesting that whenever you ask someone to forecast the oil prices, they’re so anchored on the most recent data, today’s price. They really have to try and see beyond that and try to look at the fundamentals,” he says.
The “fundamentals” underlying construction and production decisions are real economic and political variables expected to span the life of a project. In this case, these include continued demand for crude, the difficulty extracting oil from new resource deposits, environmental considerations and North American energy security.
And for ConocoPhillips and their Surmont Phase II project, those real factors say “full speed ahead.”
“Our feeling is that the fundamentals are such that this oil has to come to market to meet long-term demand,” says Fox.
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