IHS CERAWeek 2015: Exxon Mobil's Tillerson says to “settle in” to lower price environment

4/21/2015

STEVEN McGINN, News Editor

HOUSTON -- Exxon Mobil CEO Rex Tillerson said that industry participants should accept the low pricing environment, as vast new sources of supply—especially in North America—reflect the dramatic transformation in the oil and gas landscape.

Speaking as a keynote speaker at the IHS CERA Week 2015 conference, Tillerson said, "People need to settle in for us to be in a different price environment," for at least a few years.

"In just over a generation, oil and gas production has erased the lines from conventional and unconventional sources of energy, from deep water to shale," Tillerson said. "This transformation is a result of collaboration from across all facets of the industry."

On subject of the current crude oil price decline, Tillerson touched on OPEC's role. "OPEC isn't trying to undermine any particular producer, it's trying to conduct a classic price discovery exercise, which we all need," Tillerson remarked. "My expectation is that oil prices will likely stay low for the next three to four years, and oil companies need to be resilient."

Tillerson said the shale oil producers can learn from the shale gas producers. "About a decade ago, there were 1,200 rigs producing 55 Bcfd of gas. Now it is less than 300 rigs with production at 72 Bcfd, even though the price is at $2.50/Mcf. Significant declines in rig activity did not lead to production declines."

On matters of energy policy, Tillerson called for the swift approval of the Keystone XL pipeline, and admonished U.S. political leadership, saying the ban on crude oil must be lifted.

Tillerson said approval of the Keystone XL would improve U.S. competitiveness, improve U.S. energy security, strengthen our alliance with Canada, and strengthen transparency in the marketplace.

Tillerson touched on the public concern that hydraulic fracturing could contaminate drinking water. Citing industry statistics that there has been no such contamination even after decades of hydraulic fracturing, Tillerson urged, "regulators need to look at the facts and the science. And not simply respond to the noise that's out there."

Speaking about Exxon Mobil's actions in the new pricing environment, Tillerson said, "In a commodities market, what we do before the decline is important. We've reduced capital programs by 12% and have become more selective about investment opportunities that we're undertaking with partners."

IHS CERAWeek runs April 20 to April 24, in Houston, Texas.

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